Welcome back to the deep dive. Today we are we're
conducting what I can only describe as an autopsy
of the modern global economy. And I don't use
that phrasing lightly. We're looking at an organism
that has grown so large and so integrated into
the fabric of our daily lives that it's effectively
become invisible. Just by virtue of its ubiquity.
It's the classic fish and water problem, right?
You don't notice the water. Yeah, you don't.
It's everywhere. It's the environment you exist
in. Exactly. We are talking about Blackstone.
And before we go any further, because I know
a solid 40 % of our listeners just pictured the
wrong company logo in their heads, we are not
talking about BlackRock. No, we are not. Though,
as we're going to unpack later, that confusion
is actually a very interesting, and for one founder,
a somewhat painful piece of financial history.
I can imagine. But yes, today's episode. What
about Blackstone, the private equity giant? Giant
feels like an understatement. It feels like calling
the Pacific Ocean a large body of water. I was
looking at the numbers from September 2025, just
a few months ago. Assets under management, over
$1 .2 trillion. It's a number that doesn't really
mean anything. It's so big. To put that in perspective
for you, that is larger than the GDP of most
countries on Earth. Most countries. It's larger
than the GDP of Saudi Arabia. Yeah. It is larger
than the entire economic output of Switzerland.
I mean, if Blackstone were a country, you would
have a seat at the G20. And the premise of today's
deep dive is really to answer the question, how?
How do two guys, Stephen Schwartzman and Peter
Peterson, start with just $400 ,000 in seed money
in 1985? Just $400 ,000. And end up owning, well,
basically everything. And by everything, we are
being hyperbolic. We mean the house you might
be renting, the hotel you stay in for your vacation,
the dating app you swipe on. The song that's
stuck in your head right now. The song stuck
in your head, the sandwich you eat for lunch.
And very possibly the data center that is processing
this audio file and streaming it to your device
as we speak. It is a wild, wild trajectory. We
have a lot of ground to cover from, you know,
the leveraged buyout boom of the 1980s to the
AI data center wars of 2026. Right. But I want
to start with the why. Why does a company like
this even exist? What is the fundamental mechanism
here? Because to the average person, private
equity is just a buzzword. It is. And it usually
implies layoffs and corporate raiders. And that's
the reputation, certainly. And look, it's not
always an undeserved one. Yeah. But at its core,
a firm like Blackstone is an arbitrage machine.
They find gaps. Gaps in the market. Gaps in the
market. They find assets that are undervalued
or mismanaged or maybe just too complex for the
public stock markets to really understand. And
they take them private. Away from the public
eye. Exactly. They fix them or financialize them,
depending on how cynical you want to be. And
then they sell them or take them public again
for a massive profit. So let's go back to the
beginning. 1985, the era of Gordon Gekko, big
shoulder pads, the Reagan boom. Schwarzman and
Peterson decide to strike out on their own. Now,
these weren't two scrappy kids in a garage inventing
a computer, right? I cuckles. Far from it. No,
this is really important to understand about
their origin. They were financial royalty from
day one. They came from Lehman Brothers. Both
of them. And not just as analysts. Peter Peterson
had been the chairman and CEO of Lehman. He was
formerly the Secretary of Commerce under President
Nixon. I mean, this guy was the establishment.
He knew everyone. He had the Rolodex to end all
Rolodexes. He could get anyone on the phone.
And Schwarzman, what was his role? Schwarzman
was the younger, hungrier shark. He was Lehman's
head of M &A mergers and acquisitions. So you
effectively have the statesman and the shark
teaming up. The ultimate inside -outside combination.
I found this little nugget in the research fascinating.
The name Blackstone, it sounds so solid, right?
It's so institutional. Like it's been carved
into a building for 100 years. Exactly. Like
it's been around since the 1800s. But it's actually
a cryptogram, isn't it? It's a bit of clever
wordplay, yeah. It's a combination of their names.
Schwarz is the German word for black. Okay. And
Peter, or the Greek root, Petros, means stone.
Blackstone. Blackstone. Blackstone. There you
have it. That is just... It's so clever. It's
almost like a superhero alter ego name or a secret
society. Well, it certainly sounds better than
Schwarzman and Peterson, which might have sounded
a bit too much like a law firm or, you know,
an accounting practice on a quiet street somewhere.
Right. They wanted something that projected strength,
stability, power. But despite the clever name
and the lean in background, they really struggled
initially. Which is surprising to me. You'd think
guys with that kind of resume, a former chairman
of Lehman, would have investors lining up around
the block to give them money. You would think.
Their plan was to get into the private equity
business, basically doing leveraged buyouts or
LBOs. But back in 85, they had a credibility
problem. Neither of them had ever actually led
a leveraged buyout before. Can we just pause
and define that properly? leveraged buyout because
that is the engine of this whole story. And I
want to make sure everyone is on the same page.
Sure. Let's use a real estate analogy because
it's the most relatable for most people. Imagine
you want to buy a house that costs a million
dollars. You put down $200 ,000 of your own cash
and you borrow the other $800 ,000 from the bank.
That's leverage. You are using debt. to amplify
your buying power. Okay, that's the standard
mortgage. I get that. Now imagine doing that
with a company. You want to buy a company for,
say, a billion dollars. You put in $200 million
of your investor's money and you borrow the other
$800 million. But here is the trick, and this
is the magic and the danger of the LBO. What's
that? You don't take on that debt yourself. You
put that $800 million in debt on the company
you just bought. Oh, so the company now has to
pay off the loan that was used to buy it in the
first place? Precisely. The company pays for
its own acquisition. If it works, you, the private
equity firm, make a massive, massive return on
your small slice of equity because the debt did
all the heavy lifting. And if it fails? Well,
the company goes bankrupt because it can't service
the debt you loaded onto it. You might lose your
$200 million, but the company is destroyed. And
that's why people hate LBOs. It puts this immense
pressure on the company to cut costs, fire people,
start spending on research and development just
to service that debt. Correct. And in 1985, potential
investors looked at Schwarzman and Peterson and
said, look, you guys are brilliant advisors.
You're smart. You know how to tell other people
what to do. But you've never actually run one
of these. You've never had skin in the game.
Why should we give you our money? So they got
rejected. Repeatedly. The story goes they sent
out 488 prospectuses. 488. Yeah. And they got
rejected by almost every single one. It was a
really humbling experience for two guys who were
used to being masters of the universe. So they
had to pivot. This is the fake it till you make
it phase or maybe the do what you know to survive
phase. It's the do what you know phase. They
went back to their bread and butter. Advisory,
mergers and acquisitions. Basically, hire us
and we will tell you who to merge with and how
to structure the deal. And this kept the lights
on. It did more than that. It started building
their reputation. And in 1987, they advised on
the merger of E .F. Hutton and Shearson Lehman
Brothers. That was not a small deal at the time.
No, it was a huge Wall Street story. And the
fee reflected that. That one deal netted them
a $3 .5 million fee. Which, in 1987 money, is
a serious war chest. That's enough to keep the
office running for a very long time. It gave
them credibility. And it gave them breathing
room. But then, history threw them a curveball.
The universe handed them a gift. Wrapped in a
total disaster. October 1987. Black Monday. Black
Monday. Wait, usually a market crash kills a
fledgling finance company. I mean, the Dow drops
22 % in a single day. Panic in the streets. How
on earth did Black Monday help them? The timing
was just uncanny. Just before the crash, they
were finally, after all those rejections, trying
to raise funds for their first real private equity
fund. It was tough going. Still. Still. But they
managed to get the commitments to close the fund
right before the chaos. So when the market crashed
that October, stock prices plummeted. Suddenly,
everything was on sale. And Blackstone is sitting
there with a fresh pile of cash. A huge pile
of what they call dry powder. They were ready
to go shopping while everyone else was panicking
and trying to sell. It's the classic counter
-cyclical strategy. Buy when there's blood in
the street. Precisely. In the aftermath of the
crash... All these big institutional investors
looked around and said, OK, the stock market
is terrifying. We need someone who can go in
and buy whole companies at these bargain basement
prices. And Blackstone finalized their fundraising.
And who backed them? The big players. We're talking
Prudential Insurance, Nikko Securities out of
Japan, and the General Motors Pension Fund. And
Nikko Securities actually bought a piece of Blackstone
itself, didn't they? They did. That was a huge
vote of confidence. In 1988, they bought a 20
% interest in Blackstone for $100 million. $100
million. So that values the entire firm at $500
million, just three years after starting with
$400K. Yeah. It's intense growth. It was a massive
validation of their model. It allowed them to
recruit heavy hitters like David Stockman from
the Reagan administration. They were building
a machine. But while they were growing, there
was this other partnership forming in the background.
And this leads to one of the biggest what ifs
in modern financial history. Oh, I know what
you're talking about. The one that got away.
The BlackRock connection. Yes. In 1987, Blackstone
partnered with a guy named Larry Fink to found
BlackRock. Initially, it was just a financial
management arm operating under the Blackstone
umbrella. So just to be clear, at one point,
Stephen Fortzman and Larry Fink, who are probably
the two most powerful men in finance today, were
in the same office working for the same team.
They were. They were colleagues. Larry Fink had
been a star at a bank called First Boston, but
he had blown up. He lost $100 million on a bad
interest rate bet. He was kind of radioactive
on Wall Street. So he was looking for redemption.
Desperately. Schwartzman saw his talent, gave
him a desk and some capital to start a bond management
business. But they were very different people,
weren't they? With very different ideas about
finance. Fundamentally different philosophies.
Schwartzman is the quintessential private equity
guy. High risk, high reward, active management,
buying companies, stripping them down, selling
them for parts or fixing them up. Taking big
swings. Taking huge swings. Fink, on the other
hand, wanted to build a risk management machine.
He was obsessed with it after his own. blow up.
He was focused on fixed income, on safety, and
eventually on passive investing. Very, very different
mindsets. And that friction eventually led to
the split. It did. By 1994, there was a dispute
over compensation and how much equity ownership
the BlackRock team should have. It got pretty
contentious. And Blackstone decided to sell its
stake in BlackRock to a company called PNC Financial
Services. And what was the sale price? $240 million.
Okay, $240 million is a lot of money. Especially
in 1994. But considering what BlackRock is today.
Considering that BlackRock now manages something
like $10 trillion. Yeah. Ouch. Stephen Schwartzman
has gone on record calling it his heroic mistake.
His worst business decision ever. That has to
sting. Every single time he sees Larry Fink on
the cover of a magazine or speaking at Davos,
he must just twitch a little bit. You have to
imagine so. But, you know, it's not like Blackstone
did too badly for themselves, obviously. While
BlackRock went on to dominate the world of passive
asset management and ETFs, Blackstone doubled
down on private equity. And crucially, they began
expanding into other sectors. Like hotels. I
noticed in the timeline that in the early 90s,
they started buying up all these hotel franchises.
Ramada, Howard Johnson, Days Inn. That was a
key move led by a partner named Henry Silverman.
This is so important because it really foreshadowed
their massive pivot to real estate later on.
They weren't just buying anonymous industrial
companies to strip them for parts. They were
buying operational businesses. Exactly. Specifically.
in hospitality. They were learning how to run
things, how to manage a brand, how to deal with
customers, not just how to buy and sell a balance
sheet. So they're building this portfolio, surviving
the 90s, the dotcom bubble bursts and they get
through that. And then we hit the 2000s, the
era of the buyout boom. This is where things
start getting really, really big, right? The
scale just shifts dramatically. Yeah. We enter
the era of what was called the club deal. Explain
that to me. A club deal. It sounds like a VIP
section at a discotheque or something. Less disco,
more debt. A club deal is when multiple private
equity firms team up, they form a consortium,
to buy a company that is simply too massive for
any single firm to swallow on its own. So it's
like the Avengers of capitalism. Or the Legion
of Doom, depending on your perspective. Take
the 2005 buyout of a software company called
SunGuard. That was an $11 .3 billion deal. Too
big for one firm. At the time, yes. So you had
Blackstone teaming up with Silver Lake, Bain
Capital, KKR, Goldman Sachs. Basically a who's
who of Wall Street. Why do it that way? Is it
just to share the risk? It's to share the risk
and, frankly, just to pool enough capital to
make the purchase. But these deals became very
controversial because investors in the PE funds
didn't always love them. They'd say, wait, I
gave money to Blackstone and KKR to compete with
each other for the best deals, not to collude
and buy a company together. It feels like it
reduces competition. It does. If all the potential
bidders just team up, it keeps the final price
down for them, but maybe it shortchanges the
shareholders of the company being bought. And
they did more of these, right? Like the Freescale
Semiconductor deal. $17 .6 billion. That was
the largest tech buyout ever at the time. But
the real crown jewel, the deal that absolutely
defined this era for Blackstone, was Hilton.
The Hilton Hotels deal in 2007. Yes. Blackstone
acquired Hilton Hotels for $26 billion. All cash.
$26 billion. And the timing of this, this was
mid -2007, right before the 2008 financial crisis.
I mean, literally at the peak of the market.
In the industry, this is often cited as the high
watermark of that pre -crash LBO boom. They bought
it at a huge premium when asset prices were at
an all -time high. When the crash hit in 2008,
it looked like an absolute company -killing disaster.
Everyone must have thought they were going to
lose their shirts. I mean, if you or I bought
a hotel chain in 2007, we would have been bankrupt
by 2009. Many, many were. But this is where Blackstone's
strategy and, frankly, just having incredibly
deep pockets came into play. They didn't panic
and sell at the bottom. They held on. They held
on. In 2010, they went back to the lenders and
restructured the massive amount of debt on the
company. They convinced them to give them more
time and better terms. Because the lenders would
rather get paid later than have Hilton go bankrupt
and get nothing. Precisely. Blackstone then poured
money into the properties. They improved operations.
They expanded internationally. They held on for
years. They waited out. They waited it out and
improved the asset while they waited. Eventually,
when the economy recovered, they took Hilton
public again. And it became one of the most profitable
private equity deals in history. They netted
a profit of something like $14 billion. That's
the difference, I guess. If I buy a house at
the top of the market and the market crashes,
I'm in trouble because I can't make the mortgage.
If Blackstone does it, they just they rewrite
the mortgage. It's an oversimplification, but
yes, they have the leverage and the scale to
negotiate with lenders in a way that you or I
simply do not. And speaking of negotiating, we
have to mention the equity office acquisition.
That was in 2006. This one is even crazier in
terms of tactics and timing. Oh, this is the
bidding war, right? A massive one. Blackstone
wanted to buy. equity office properties, which
was one of the largest owners of office buildings
in the entire U .S. Another big real estate player,
Fornato Realty Trust, jumped in and started a
bidding war, which drove the price up and up
and up. Blackstone eventually won. They won,
but they paid $39 billion for it. At the time,
the largest LBO in history. $39 billion for office
buildings right before the office market crashed
and the concept of remote work started to percolate.
That sounds like a disaster waiting to happen.
It would have been a complete catastrophe if
they had held on to all of it. But here is the
genius or the luck of it. They closed that deal.
And immediately started selling off pieces of
the portfolio. Immediately? Like the same day?
Practically. They had deals lined up before they
even owned it. They flipped about half the portfolio
within weeks and months. They sold the big trophy
buildings in New York, in Boston, in Seattle
to other investors at peak 2007 prices. So they
effectively offloaded the biggest risk to other
people right before the music stopped. Exactly.
Before the crash. Yeah. If they had held all
of that prime expensive real estate through 2008
and 2009, it might have dragged the entire firm
down. Instead, they sold the expensive trophy
assets and kept the more boring suburban office
parks that had higher yields and less risk. The
timing is just, it's incredible. It feels like
they had a crystal ball. Or they just had a very
good sense that the market was overheating and
it was the perfect time to sell some risk to
the public. Which brings us perfectly... To their
own IPO. June 2007. Again, literally months before
the world economy completely falls off a cliff.
They went public, raising over $4 billion. Stephen
Schwartzman and Peter Peterson cashed out a significant
portion of their personal stakes right at the
absolute top of the market. It was the ultimate
ringing the bell moment. It fundamentally changed
the firm. They were no longer just a private
partnership accountable to a few big investors.
They were a public company with shareholders
to please every single quarter. So. The crash
happens. 2008 is a complete mess. But Blackstone
survives. And then starting around 2009, they
pivot. And this pivot is what really leads us
to the Blackstone we know today. The post -crisis
era is fascinating. While everyone else was licking
their wounds and deleveraging, Blackstone went
shopping. They focused heavily on distressed
assets. And the biggest distressed asset class
in America by far was housing. This is the part
of the story that I think people feel the most
visceral connection to. They started buying single
family homes. On an industrial scale. This is
where the narrative shifts from Wall Street sharks
eating each other to Wall Street sharks eating
Main Street. Right. The foreclosure crisis is
in full swing. Millions of Americans are loosing
their homes. Housing prices are at rock bottom.
And Blackstone looks at this and sees the single
biggest distressed asset opportunity in history.
They founded a subsidiary company called Invitation
Homes. They went into markets that were hit the
hardest, like Phoenix, Atlanta, all over Florida
and California. And they weren't just buying
a few houses here and there. No. They had teams
buying them on the courthouse steps. They were
buying them in bulk from banks. They spent roughly
$5 .5 billion buying around 50 ,000 single -family
homes. 50 ,000. And instead of flipping them,
their strategy was to rent them out. Yes. They
totally institutionalized the landlord business.
Before this, being a landlord was a mom -and
-pop thing. You know, you owned two rental units,
maybe five. Blackstone built a massive technological
platform to manage 50 ,000 homes efficiently,
using algorithms for maintenance requests, rent
collection, and, crucially, for pricing. Pricing.
That's the key word there. Because when you own
that much of the rental stock in a particular
neighborhood or city, you have a lot of power
over rent prices. A tremendous amount of power.
And this is where the controversy explodes. Critics,
including the United Nations later on, argued
that by buying up so much of the available supply,
they drove up prices for regular people trying
to buy a first home. And then by maximizing rents
with their algorithms, they squeezed tenants.
They turned the American dream of homeownership
into a monthly subscription service paid to a
private equity firm. That is the cynical but
not entirely inaccurate take. Blackstone would
argue they renovated tens of thousands of dilapidated
homes, they professionalized the rental market,
and they provided high -quality rental stock
at a time when banks weren't lending to anyone
to buy a house. They'd say they provided a vital
service. It's all a matter of perspective, I
suppose, but it definitely marks a shift. Blackstone
is now squarely in the consumer business. They
aren't just buying companies anymore. They were
buying the literal infrastructure of daily life.
And not just houses. Theme parks. Right. In 2009,
they bought Bush Entertainment, that's SeaWorld
and Bush Gardens, for $2 .9 billion. And they
bought Merlin Entertainment, the company that
owns Legoland and Madame Tussauds wax museums.
They bought them twice, actually. They owned
them back in 2005, sold them, and then bought
them back again in 2019. They really like Legos.
Or more accurately, they really like the steady
recurring revenue of families looking for experiences.
But if you look at the portfolio expansion from,
say, 2010 to 2020 you see this very clear move
toward consumer brands and technology they bought
ancestry .com in 2020 for 4 .7 billion which
raises some eyebrows doesn't it a private equity
firm owning the genetic data the dna of millions
of people. It definitely raised a lot of privacy
questions at the time. But from a pure investment
standpoint, it's a brilliant business model.
It's a subscription service with a massive proprietary
data moat. They also invested in Oatly, the oat
milk company. Which is huge for a while. They
bought a majority stake in Bumble, the dating
app. And they bought Spanx. Spanx. And I read
that the Spanx deal was handled by an all -female
investment team at Blackstone, which was a big
deal. It was. And they set up an all -female
board of directors for Spanx as well. It's a
very clear signal that they were trying to modernize
their image and tap into markets that traditional
male -dominated finance had perhaps overlooked
or undervalued in the past. So we've moved from
these boring industrial buyouts of the 90s to
oat milk, dating apps, and shapewear in the 2010s.
Exactly. moved into owning culturally relevant
brands. But as we move into the 2020s, specifically
the last few years leading up to today in 2026,
the strategy shifts again. It becomes what I
call the everywhere strategy. This is where the
numbers get truly astronomical. We're talking
about the modern era, 2021 to now. The post -candemic
world. Blackstone went on a shopping spree that
makes the 2007 boom look modest by comparison.
Let's talk about real estate first because they
didn't stop with houses. They went for, well,
everything else. Hotels and hospitality again
in a big way. They acquired Crown Resorts in
Australia for $6 .6 billion. They bought the
Cosmopolitan Hotel in Vegas, then sold it for
a huge profit. They did a sale -leaseback deal
for the famous Bellagio. And student housing.
I remember this one making headlines. April 2022.
They bought a company called American Campus
Communities for nearly $13 billion. $13 billion.
With that one deal, they effectively became the
landlord for tens of thousands of college students
all across America. But the biggest real estate
play, and this is the one that really positions
them for the future, is data centers. This is
the AI boom play. This is everything. Let's unpack
this, because when I think Blackstone, I think...
physical buildings. I think hotels and offices.
I don't think artificial intelligence. But you
cannot have AI without immense physical infrastructure.
You know, Chad GPT, Claude, Gemini, they don't
live in the cloud. That's just a marketing term.
Right. They live in massive servers. Those servers
need to live in massive windowless buildings.
They generate an incredible amount of heat, so
they need industrial scale cooling. They consume
gigawatts of electricity. So the cloud is actually
a very large, very hot, very expensive warehouse.
house. A series of them, yes. And Blackstone
saw this coming years ago. In 2021, they acquired
a data center company called QTS Realty Trust
for $10 billion. But the real monster deal was
just recently, in September of 2024, the acquisition
of AirTrunk. AirTrunk. It sounds like a luggage
company, but it's not. Far from it. It's a massive
data center platform in the Asia -Pacific region,
Japan, Australia, all the key markets. The enterprise
value of that deal was over 24 billion Australian
dollars. That is a staggering amount of money
for server farms. But think about the demand.
Every time you use an AI assistant or stream
a 4K movie or use any cloud computing service,
that data has to live somewhere physically. By
owning the data centers, Blackstone is owning
the physical backbone of the entire digital economy.
It's the 21st century equivalent of owning all
the railroad. It is precisely that. If you are
Amazon or Google or Microsoft, you are in an
arms race for AI dominance and you need capacity
now. You don't have time to build it all yourself.
So you go and lease it from Blackstone. And while
they are building the digital railroad of the
future, they are also buying your lunch. Chuckles.
The sandwich strategy. OK, let's talk about the
sandwiches, because this is the part that feels
so random at first glance, but obviously isn't.
It's part of a very specific, very deliberate
strategy. In 2024, they bought Tropical Smoothie
Cafe. They invested in a company called Seven
Brew, which is a fast growing drive through coffee
chain. And then the big one that completed just
last year, January 2025, they bought Jersey Mike's
Subs. So why sandwiches? Why coffee? Why is the
master of the universe buying a sub shop? Because
of cash flow and resilience. Think about the
economic environment of the last two years. High
inflation, rising interest rates, a lot of volatility.
What is the one thing people don't stop doing?
Eating. They eat. And specifically, in tough
times, they trade down. Maybe you don't go to
the expensive steakhouse, but you will still
buy a $12 sub. It's a recession -resistant business.
And it fits into this broader theme of investing
in things people need or habitually use. And
it's a franchise model. Right. Which means they
aren't actually running the stores. Exactly.
Blackstone isn't in the back making the sandwiches.
They're collecting the royalties and franchise
fees from the thousands of franchisees who do
the hard work. It's a steady, predictable royalty
stream. Just like the music catalog they bought.
Hypnosis. Right. July 2024. They won a bidding
war to buy Hypnosis Songs Fund. Now, through
a company, they rebranded as Recognition Music
Group. They own the rights to the catalogs of
Justin Bieber, Shakira, Neil Young. So let's
trace the dollar here for a second. Let's say
I wake up in a house that's owned by Invitation
Homes. That's Blackstone. I check a dating app.
Bumble Blackstone owns a major stake. I drive
to work and listen to a Justin Bieber song on
the radio. Blackstone gets a tiny cut. I grab
a Jersey Mike sub for lunch. Blackstone. I go
home and watch Netflix, which is streaming its
data from an air trunk data center Blackstone
again. You are living from morning to night inside
the Blackstone ecosystem. It's almost a modern
company town model, but on a global invisible
scale. And looking at their financials, it's
clearly working. The numbers are undeniable.
As of their 2024 reports, their revenue jumped
to over $13 billion. Net income nearly doubled
to $2 .77 billion. And as we mentioned at the
start, assets under management hit $1 .33 trillion
in 2024 and crossed $1 .2 trillion by September
2025. They are the largest alternative investment
firm on the planet. By a very significant margin.
They operate on four main pillars. Real estate,
which is the biggest chunk of private equity,
hedge funds, and credit. It's a massive diversified
machine designed to generate returns in almost
any market condition. But, and there is always
a but, when you get this big and this powerful,
you can't own everything without stepping on
some toes. Or, in some of these cases, causing
very real, very tangible harm. No, you absolutely
cannot. And Blackstone has faced a series of
significant and disturbing controversies, particularly
in recent years. We have to talk about the dark
side of this relentless efficiency. The one that
really, really sticks with me because it's so
horrifying is the child labor scandal at PSSI.
Packers Sanitation Services, Inc. This is a company
owned by Blackstone. They provide third -party
cleaning and sanitation services for slaughterhouses
and meatpacking plants. A gruesome, dangerous
job to begin with. One of the most dangerous
jobs in America. In 2023, the Department of Labor
found that over 100 children, some as young as
13, were working illegally for PSSI. We're talking
about kids working overnight shifts, cleaning
back saws and skull splitters with caustic industrial
strength chemicals. Yes. There was a report of
a student at a middle school who fell asleep
in class and had visible acid burns on his hands
and knees from his shift the night before. That
is just dystopian. How does a sophisticated multi
-trillion dollar firm like Blackstone let this
happen in one of its companies? Blackstone's
official defense was that they were horrified
and they didn't know. They're in a tower in Manhattan.
They aren't on the ground in Nebraska hiring
people. They said PSSI had its own local management.
Blackstone immediately settled the case. PSSI
was fined $1 .5 million, and they implemented
new, stricter hiring protocols. But critics of
the industry point out that this is a structural
problem, right? It's a feature, not a bug, of
the model. Critics argue that the private equity
model, which demands relentless efficiency and
ever -increasing profit growth, creates a pressure
cooker environment. Local managers are told to
cut costs and keep the line moving no matter
what. Hiring undocumented minors who are desperate
for work is a cheap, tragic way to do that. It's
that complete disconnect between the boardroom
in New York and the slaughterhouse floor in Nebraska.
We just demand the returns. We don't tell you
how you get them. Exactly. And we saw a different
version of this same kind of operational disconnect
with the Motel 6 scandal. Right. This was a few
years back, 2018, 2019. Motel 6, which was Blackstone
owned at the time, admitted that some of its
locations were giving their daily guest lists
to agents from IC Immigration and Customs Enforcement
without warrants. So people were checking into
a motel thinking they had a reasonable expectation
of privacy. And the motel staff was essentially
tipping off immigration authority. if they had
Latino sounding names. That's effectively what
was happening. They ended up settling lawsuits
for nearly $20 million combined. But the reputational
damage was significant. It raised these really
serious questions about privacy and civil rights
within these massive corporate structures. And
then there's the housing controversy. We talked
about them buying up houses, but it's not just
about ownership. It's about how they act as landlords
on a massive scale. The United Nations actually
condemned their practices in a formal report.
A UN special rapporteur accused them of contributing
to the global housing crisis by buying up so
many properties, which inflates rents, and then
engaging in aggressive eviction tactics. And
this wasn't just in the U .S. No, the report
cited specific issues with a company they owned
called Southern Cross in the UK and apartment
blocks in Denmark. It was a global issue. And
even their own investors got spooked by the real
estate holdings recently. The Bright saga. Yeah.
Bright is their massive non -traded real estate
investment trust for wealthy individuals. In
late 2022, investors started getting very nervous
about the commercial property market and they
tried to pull their money out. And there was
a run on the fund. A huge run. There were so
many withdrawal requests that Blackstone had
to invoke its right to limit them. They call
it gating the fund to prevent a collapse. Which
is terrifying if you're an investor. You're told
your money is safe and then you say, I want my
money back. And they say, sorry, you can't have
it right now. It eventually stabilized, but it
showed that even a giant like Blackstone isn't
immune to market panic. Real estate is fundamentally
illiquid. You can't sell a skyscraper in an afternoon
because Mrs. Smith from Ohio. once or $50 ,000
back. And as we talk about the company's recent
history, we can't ignore the tragedy that happened
just last year in the summer of 2025. Yes, it's
a very somber and terrible note in their corporate
history. In July of 2025, a gunman named Shane
Devon Tamura entered Blackstone's global headquarters
at 345 Park Avenue in Manhattan. This sent absolute
shockwaves through the entire financial community
and the city. It did. Four people were killed.
And among the victims was Wesley LaPatner, who
was a senior managing director and the CEO of
that massive real estate fund we were just talking
about, Bright. It's just a stark, awful reminder
that behind these trillions of dollars and massive
global portfolios, there are actual human beings.
Absolutely. It was a tragic, senseless event
that really shook the firm and the whole industry
to its core. So we've looked at the history,
the massive deals, the sandwiches, the data centers
and the very serious controversies. When you
step back and you look at Blackstone today in
February of 2026, what do we actually see? I
think we see something that's evolved beyond
being just an investment firm. It's a state within
a state. Blackstone doesn't just move money around
anymore. They own the core infrastructure of
our daily lives. Food, shelter, data, music.
And it highlights this massive shift from public
markets to private equity. That's such a key
point. When a company is public, listed on the
stock market, there are all sorts of disclosure
requirements. You can see the books. They have
to file quarterly reports to the SEC. You have
some transparency. But when Blackstone takes
a company private, like they did with so many
of these huge acquisitions, that transparency
just vanishes. It goes away. So huge sectors
of our economy, housing, student accommodation,
data centers, logistics are moving into this
black box where we, the public, can't really
see how they're being run. So that brings us
to the so what for the listener. Why does this
matter? Right. Why should the person listening
to this care other than it being a kind of mind
boggling business story? Because it affects them
directly. Every day. Because you interact with
Blackstone almost every single day, and you probably
don't even know it. Your rent might be determined
by their algorithms. The long -term privacy of
your genetic history on Ancestry is in their
hands. The data centers powering your AI tools
are theirs. It's really about control. It is.
I mean, at what point does investment become
control? If a single firm owns the rights to
your genetic history, the songs stuck in your
head, the house you want to rent, and the sandwich
you eat for lunch, who is watching the watchers?
Especially now that they are literally building
the physical backbone of the future economy with
these data center deals? Exactly. They are making
enormous, multibillion -dollar bets on the future
of humanity, what we will eat, where we will
live, and how we will compute. And right now,
by almost any measure. they are winning that
bet. From $400 ,000 and a clever cryptogram name
to $1 .2 trillion and the keys to the kingdom,
it is a wild ride. It certainly is. So final
question, is Blackstone good or bad? Or is that
just the wrong question to ask? I think it's
the wrong question. Blackstone is efficient.
It is perhaps the ultimate expression of modern
capitalism. It exists to seek yield. If the highest
yield is in curing cancer, they will invest in
life sciences, and they are doing that. If the
highest yield is in squeezing an extra $50 a
month in rent from a family, their model will
compel them to do that, too. It is an amoral
machine. And it is up to the rest of us and our
regulators to decide where the guardrail should
be. Exactly. The machine will not stop itself.
Well, on that cheerful note, I'm going to go
check my dating app. order a sandwich and listen
to some music. And I'm going to try very hard
not to think about who gets the transaction fee
for each of those things. Good luck with that.
It's almost unavoidable at this point. That's
all for this week's Deep Dive. We'll see you
next time.