WEBVTT 00:00:00.000 --> 00:00:03.419 Welcome to the debate. Today we are standing 00:00:03.419 --> 00:00:06.040 at the foot of a mountain, a mountain that casts 00:00:06.040 --> 00:00:10.359 a shadow over the entire global economy. We're 00:00:10.359 --> 00:00:12.300 attempting to wrap our arms around an entity 00:00:12.300 --> 00:00:15.099 so massive that it, well, it almost defies traditional 00:00:15.099 --> 00:00:18.179 categorization. We are talking about Blackstone 00:00:18.179 --> 00:00:22.960 Inc. As of September 2025, this firm manages 00:00:22.960 --> 00:00:27.140 $1 .2 trillion in assets. To give you a mental 00:00:27.140 --> 00:00:30.109 model for that scale, If Blackstone were a country, 00:00:30.350 --> 00:00:34.270 its GDP would rival Spain or Indonesia. They're 00:00:34.270 --> 00:00:36.549 the landlord to the world, the logistics network 00:00:36.549 --> 00:00:38.850 for your packages, the owner of your genetic 00:00:38.850 --> 00:00:42.929 history through Ancestry .com, and the financier 00:00:42.929 --> 00:00:46.149 behind the AI revolution. It's a staggering concentration 00:00:46.149 --> 00:00:50.409 of influence. And, you know, I think it's just 00:00:50.409 --> 00:00:53.289 impossible to have this conversation here in 00:00:53.289 --> 00:00:56.750 February 2026 without acknowledging the atmosphere 00:00:56.750 --> 00:00:59.729 we're operating in. We're less than a year removed 00:00:59.729 --> 00:01:02.189 from the tragedy at their Manhattan headquarters 00:01:02.189 --> 00:01:06.489 in July 2025. The loss of four lives, including 00:01:06.489 --> 00:01:10.230 senior managing director Wesley Lepotner, casts 00:01:10.230 --> 00:01:14.549 a very long, very somber shadow over this discussion. 00:01:14.709 --> 00:01:18.189 It was a horrific event that I think pulled back 00:01:18.189 --> 00:01:20.950 the curtain on the intense, high -pressure stakes 00:01:20.950 --> 00:01:23.849 at the absolute center of the financial universe. 00:01:24.109 --> 00:01:27.090 It was a tragedy that shook the entire industry. 00:01:27.689 --> 00:01:30.209 But, and this is crucial to our analysis today, 00:01:30.450 --> 00:01:32.909 it also demonstrated the sheer institutional 00:01:32.909 --> 00:01:36.250 permanence of the firm. Despite the shock, the 00:01:36.250 --> 00:01:39.109 machinery of capital allocation, it didn't stop. 00:01:39.349 --> 00:01:41.650 And that brings us to the central tension we 00:01:41.650 --> 00:01:44.269 need to resolve today. Is Blackstone the ultimate 00:01:44.269 --> 00:01:47.290 engine of economic efficiency? A necessary force 00:01:47.290 --> 00:01:50.069 that stabilizes housing, saves distressed companies, 00:01:50.310 --> 00:01:52.430 and builds the infrastructure the future needs? 00:01:52.629 --> 00:01:55.629 Or is it, as you've argued in the past, a systemic 00:01:55.629 --> 00:01:58.659 risk? a force that commodifies human necessities 00:01:58.659 --> 00:02:01.659 and extracts value while society bears the cost. 00:02:01.879 --> 00:02:06.500 I think framing it as efficiency is a euphemism. 00:02:06.560 --> 00:02:11.060 I view Blackstone as the apex predator of hyper 00:02:11.060 --> 00:02:14.620 -financialization. When an entity controls $1 00:02:14.620 --> 00:02:19.599 .2 trillion, the line between investor and market 00:02:19.599 --> 00:02:24.199 manipulator just evaporates. My position is that 00:02:24.199 --> 00:02:27.180 Blackstone represents a model where the drive 00:02:27.180 --> 00:02:29.900 for yield leads directly to ethical failures, 00:02:29.979 --> 00:02:32.560 from child labor in their portfolio companies 00:02:32.560 --> 00:02:36.120 to the distortion of housing markets. They privatize 00:02:36.120 --> 00:02:39.240 the massive gains, but the risks? The risks are 00:02:39.240 --> 00:02:41.879 socialized. They land on the workers, the tenants, 00:02:42.060 --> 00:02:44.560 and the public. I understand why that narrative 00:02:44.560 --> 00:02:46.840 takes hold. It's a popular one in the media. 00:02:47.199 --> 00:02:49.680 But I believe it fundamentally misunderstands 00:02:49.680 --> 00:02:52.219 the function of private equity. Blackstone is, 00:02:52.259 --> 00:02:55.020 well, it's a masterpiece of modern finance because 00:02:55.020 --> 00:02:57.419 it enters voids where traditional banks and governments 00:02:57.419 --> 00:03:00.840 cannot or will not go. They deliver the returns 00:03:00.840 --> 00:03:03.599 that pension funds, firefighters, teachers, public 00:03:03.599 --> 00:03:06.479 servants rely on to stay solvent. They drive 00:03:06.479 --> 00:03:09.219 innovation in real estate and technology. They 00:03:09.219 --> 00:03:11.960 don't just extract. They optimize. They create 00:03:11.960 --> 00:03:15.139 value in chaos. Value creation is the slogan 00:03:15.139 --> 00:03:17.719 on the website. But we need to look at the methodology. 00:03:18.319 --> 00:03:21.060 Because the origin story is often told as a hero's 00:03:21.060 --> 00:03:23.439 journey. But the mechanics of how they got here? 00:03:23.599 --> 00:03:25.780 Well, they tell a very different story about 00:03:25.780 --> 00:03:28.379 how that value was actually created. The origin 00:03:28.379 --> 00:03:31.020 story is actually the best evidence of their 00:03:31.020 --> 00:03:33.599 competence. You have Stephen Schwartzman and 00:03:33.599 --> 00:03:36.000 Peter Peterson leaving Lehman Brothers in 1985. 00:03:36.560 --> 00:03:38.719 They didn't start with an empire. They started 00:03:38.719 --> 00:03:42.460 with $400 ,000. In today's money, that's barely 00:03:42.460 --> 00:03:45.180 over a million dollars. It was a shoestring operation. 00:03:45.879 --> 00:03:48.080 Their insight, and this is the key takeaway for 00:03:48.080 --> 00:03:49.740 anyone trying to understand their dominance, 00:03:49.939 --> 00:03:52.759 was realizing that advisory work wasn't enough. 00:03:53.060 --> 00:03:55.520 They were originally just giving advice on mergers, 00:03:55.599 --> 00:03:58.900 but after the 1987 crash, they realized that 00:03:58.900 --> 00:04:01.439 to really control the outcome, they needed skin 00:04:01.439 --> 00:04:04.300 in the game. They needed to move from being advisors 00:04:04.300 --> 00:04:07.860 to being owners. Skin in the game sounds noble, 00:04:08.039 --> 00:04:11.819 but let's translate that into what actually happens. 00:04:12.430 --> 00:04:15.110 Moving into a merchant banking and private equity 00:04:15.110 --> 00:04:18.050 model meant they could take control of companies, 00:04:18.310 --> 00:04:20.930 strip them of their assets, load them with debt 00:04:20.930 --> 00:04:23.149 to pay themselves dividends, and then sell them 00:04:23.149 --> 00:04:26.910 off. They survived the 1987 crash and the 2008 00:04:26.910 --> 00:04:30.009 crisis not just because they were smart, but 00:04:30.009 --> 00:04:32.850 because the model is by its nature designed to 00:04:32.850 --> 00:04:36.250 be extractive. They buy a company, squeeze the 00:04:36.250 --> 00:04:38.990 lemon until it's dry, and then toss the rind. 00:04:39.149 --> 00:04:41.430 See, you're describing the classic corporate 00:04:41.430 --> 00:04:44.550 raider stereotype of the 1980s, which is, frankly, 00:04:44.670 --> 00:04:46.569 it's a caricature of the black stone we see today. 00:04:46.730 --> 00:04:50.750 The core thesis is buy it, fix it, sell it. The 00:04:50.750 --> 00:04:53.410 fix it part is where the work happens. Look at 00:04:53.410 --> 00:04:56.629 the Hilton Hotels deal in 2007. This was a $26 00:04:56.629 --> 00:04:59.970 billion leveraged buyout at the absolute peak 00:04:59.970 --> 00:05:02.790 of the market. When the 2008 crash hit, everyone 00:05:02.790 --> 00:05:04.970 said Blackstone would go bust. They said Hilton 00:05:04.970 --> 00:05:07.730 was dead. But Blackstone didn't strip it. They 00:05:07.730 --> 00:05:09.910 restructured the debt. They improved operations. 00:05:10.189 --> 00:05:12.730 They expanded the brand globally. By the time 00:05:12.730 --> 00:05:14.670 they took it public again, they had made a profit 00:05:14.670 --> 00:05:17.569 of $14 billion. That isn't asset stripping. That 00:05:17.569 --> 00:05:19.930 is operational excellence. Hilton is the success 00:05:19.930 --> 00:05:22.029 story they put on the brochure. I'll give you 00:05:22.029 --> 00:05:24.329 that. It was a home run. But we have to look 00:05:24.329 --> 00:05:26.870 at the failures to understand the systemic risk. 00:05:27.269 --> 00:05:29.350 Let's talk about Southern Cross Healthcare in 00:05:29.350 --> 00:05:32.680 the UK. This is a textbook example of financial 00:05:32.680 --> 00:05:35.600 engineering gone wrong. Blackstone bought this 00:05:35.600 --> 00:05:38.339 nursing home operator. They then executed a strategy 00:05:38.339 --> 00:05:41.500 called Opco -Propco. And for the listeners who 00:05:41.500 --> 00:05:43.279 aren't finance majors, we need to break that 00:05:43.279 --> 00:05:45.579 down because it's the secret sauce of extraction. 00:05:46.060 --> 00:05:49.319 It is a standard real estate strategy. You separate 00:05:49.319 --> 00:05:51.480 the operating company from the property company. 00:05:51.639 --> 00:05:54.579 It unlocks value in the real estate. They sold 00:05:54.579 --> 00:05:57.079 off the actual buildings, the real estate assets, 00:05:57.399 --> 00:06:00.879 to realize immediate profit. Blackstone pockets 00:06:00.879 --> 00:06:03.740 that cash. Then the nursing home business, the 00:06:03.740 --> 00:06:06.879 Opco, had to pay rent to use the buildings it 00:06:06.879 --> 00:06:10.480 used to own. When the economy turned, Southern 00:06:10.480 --> 00:06:12.839 Cross was crushed by these unsustainable rent 00:06:12.839 --> 00:06:17.180 burdens. The company collapsed in 2011. 31 ,000 00:06:17.180 --> 00:06:19.860 elderly residents were left in limbo, unsure 00:06:19.860 --> 00:06:22.319 if they would have a bed to sleep in. Blackstone 00:06:22.319 --> 00:06:24.800 had already exited the investment by then, claiming 00:06:24.800 --> 00:06:27.339 they left it in good shape. But they set the 00:06:27.339 --> 00:06:30.170 timer on the bomb. That is the difference between 00:06:30.170 --> 00:06:33.529 optimization and extraction. Southern Cross was 00:06:33.529 --> 00:06:36.009 a complex failure with plenty of blame to go 00:06:36.009 --> 00:06:38.430 around, including subsequent management decisions 00:06:38.430 --> 00:06:41.730 made long after Blackstone left. But you're focusing 00:06:41.730 --> 00:06:45.170 on a single deal from, what, 15 years ago? To 00:06:45.170 --> 00:06:48.470 understand Blackstone's impact today, in 2026, 00:06:48.730 --> 00:06:51.029 you have to look at real estate. It's their largest 00:06:51.029 --> 00:06:53.870 asset class. And the narrative there isn't about 00:06:53.870 --> 00:06:56.750 traps. It's about spotting macro trends before 00:06:56.750 --> 00:06:59.540 anyone else. Or cornering markets so effectively 00:06:59.540 --> 00:07:01.420 that you dictate the price. Let's look at the 00:07:01.420 --> 00:07:04.720 facts. After the subprime crisis in 2008, the 00:07:04.720 --> 00:07:06.920 U .S. housing market was, I mean, it was radioactive. 00:07:07.560 --> 00:07:10.139 Banks wouldn't lend. Builders wouldn't build. 00:07:10.680 --> 00:07:13.480 Blackstone stepped in and bought $5 .5 billion 00:07:13.480 --> 00:07:16.360 worth of single -family homes. They provided 00:07:16.360 --> 00:07:18.839 a floor for the market. They stabilized neighborhoods 00:07:18.839 --> 00:07:20.899 that were being hollowed out by foreclosure. 00:07:21.019 --> 00:07:23.060 If they hadn't stepped in with that capital, 00:07:23.240 --> 00:07:25.240 the recovery would have taken a decade longer. 00:07:25.769 --> 00:07:28.350 I simply don't buy the white knight narrative 00:07:28.350 --> 00:07:30.889 on housing. They didn't stabilize neighborhoods 00:07:30.889 --> 00:07:33.810 for the families. They stabilized asset prices 00:07:33.810 --> 00:07:36.850 for their investors. By purchasing single -family 00:07:36.850 --> 00:07:40.329 homes on that scale, an industrial scale, they 00:07:40.329 --> 00:07:42.930 fundamentally changed the nature of housing. 00:07:43.189 --> 00:07:45.709 They turned it from a place where families build 00:07:45.709 --> 00:07:48.750 equity into a financial asset class for global 00:07:48.750 --> 00:07:51.709 capital. They created a permanent renter class. 00:07:51.970 --> 00:07:53.870 And look what happened in Fredericksburg, Denmark 00:07:53.870 --> 00:07:56.819 in 2019. Blackstone's partners started buying 00:07:56.819 --> 00:07:59.360 up apartments and the backlash was immediate. 00:07:59.620 --> 00:08:02.319 The locals realized that the renovations were 00:08:02.319 --> 00:08:05.139 just a pretext to jack up rents and displace 00:08:05.139 --> 00:08:07.959 long -term tenants. The public outcry was so 00:08:07.959 --> 00:08:10.600 severe they had to withdraw. People don't want 00:08:10.600 --> 00:08:13.480 their homes optimized by a private equity firm. 00:08:13.720 --> 00:08:16.279 Denmark has a very specific regulatory environment 00:08:16.279 --> 00:08:19.540 and Blackstone pivoted. That is the sign of a 00:08:19.540 --> 00:08:22.040 smart allocator. They didn't just sit on housing. 00:08:22.600 --> 00:08:24.959 They saw the e -commerce wave coming before the 00:08:24.959 --> 00:08:27.480 pandemic. They built Link Logistics by acquiring 00:08:27.480 --> 00:08:31.519 GLP's US portfolio for $18 .7 billion. They essentially 00:08:31.519 --> 00:08:33.740 own the physical backbone of the internet, the 00:08:33.740 --> 00:08:36.299 warehouses where your goods sit. And now, they're 00:08:36.299 --> 00:08:39.580 doubling down on AI, the acquisition of QTS Realty 00:08:39.580 --> 00:08:42.600 Trust for $10 billion in 2021, and the massive 00:08:42.600 --> 00:08:44.799 deal for AirTrunk in Asia Pacific in September 00:08:44.799 --> 00:08:49.200 2024 for over $16 billion. This isn't rent -seeking. 00:08:49.379 --> 00:08:51.600 This is capital -intensive infrastructure building. 00:08:52.059 --> 00:08:54.279 Who else has the dry powder, the cash on hand 00:08:54.279 --> 00:08:55.879 to build the data centers the modern world runs 00:08:55.879 --> 00:08:58.480 on? The infrastructure argument is your strongest 00:08:58.480 --> 00:09:00.679 point. I will grant you that. Without the data 00:09:00.679 --> 00:09:03.700 centers, the AI boom stalls. But we need to talk 00:09:03.700 --> 00:09:05.919 about the stability of the vehicles holding these 00:09:05.919 --> 00:09:08.120 assets. You mentioned their resilience, but we 00:09:08.120 --> 00:09:12.100 saw cracks in late 2022 with the Blackstone Real 00:09:12.100 --> 00:09:16.100 Estate Investment Trust. A $125 billion fund? 00:09:16.500 --> 00:09:20.110 The flagship? Exactly. And what happened? On 00:09:20.110 --> 00:09:23.049 December 1, 2022, they had to restrict withdrawals. 00:09:23.070 --> 00:09:25.509 They gated the fund. Too many investors wanted 00:09:25.509 --> 00:09:27.549 their money back at the same time. This reveals 00:09:27.549 --> 00:09:30.590 a fundamental liquidity mismatch. They're marketing 00:09:30.590 --> 00:09:32.950 these funds to wealthy individuals as stable 00:09:32.950 --> 00:09:35.029 semi -liquid investments. But the underlying 00:09:35.029 --> 00:09:38.090 assets, warehouses, hotels, data centers, are 00:09:38.090 --> 00:09:40.750 illiquid. You can't sell a casino or a warehouse 00:09:40.750 --> 00:09:43.190 complex overnight. When you slam the gates shut, 00:09:43.330 --> 00:09:45.529 it shatters the illusion of stability. It tells 00:09:45.529 --> 00:09:47.929 the market, you can check in, but you can't check 00:09:47.929 --> 00:09:50.629 out. I completely disagree with that characterization. 00:09:51.049 --> 00:09:53.909 The gating mechanism is a feature, not a bug. 00:09:54.070 --> 00:09:56.909 It's a safety valve designed precisely for those 00:09:56.909 --> 00:09:59.710 moments. If Blackstone were forced to sell premium 00:09:59.710 --> 00:10:02.809 assets like the Bellagio in Las Vegas or those 00:10:02.809 --> 00:10:05.909 QTS data centers in a fire sale just to meet 00:10:05.909 --> 00:10:08.570 a temporary panic and redemption requests, that 00:10:08.570 --> 00:10:10.970 would destroy value for the investors who stayed. 00:10:11.230 --> 00:10:13.909 By restricting withdrawals, they preserve the 00:10:13.909 --> 00:10:16.370 integrity of the portfolio. And look at the result. 00:10:16.879 --> 00:10:19.299 They navigated the storm. They're back on offense. 00:10:19.600 --> 00:10:22.440 Look at the Soho retail deal in November 2024, 00:10:22.879 --> 00:10:25.600 buying four buildings for $200 million. They're 00:10:25.600 --> 00:10:27.679 betting on a retail resurgence when everyone 00:10:27.679 --> 00:10:31.259 else is scared. That is the definition of a contrarian 00:10:31.259 --> 00:10:34.019 value investor. They didn't buckle. They doubled 00:10:34.019 --> 00:10:37.980 down. They are contrarian, certainly. But my 00:10:37.980 --> 00:10:40.679 concern is always the human collateral of this 00:10:40.679 --> 00:10:43.539 efficiency. We have to discuss the operational 00:10:43.539 --> 00:10:46.440 realities inside the companies they own. When 00:10:46.440 --> 00:10:49.139 the mandate from headquarters is maximize yield, 00:10:49.440 --> 00:10:51.919 safety and ethics often get cut from the budget. 00:10:52.080 --> 00:10:54.279 We cannot have this debate without talking about 00:10:54.279 --> 00:10:58.220 Packer Sanitation Services, Inc., or PSSI. I 00:10:58.220 --> 00:11:01.000 suspected you would bring this up. It is a dark 00:11:01.000 --> 00:11:03.580 mark, admittedly. It's more than a dark mark. 00:11:03.679 --> 00:11:07.139 It's a moral failure. PSSI is a slaughterhouse 00:11:07.139 --> 00:11:09.960 cleaning firm owned by Blackstone. An investigation 00:11:09.960 --> 00:11:12.220 by the US Department of Labor found more than 00:11:12.220 --> 00:11:15.779 100 children, minors, some as young as 13, working 00:11:15.779 --> 00:11:18.460 illegally in these facilities. They were working 00:11:18.460 --> 00:11:20.960 overnight shifts with caustic chemicals, suffering 00:11:20.960 --> 00:11:23.620 chemical burns. This wasn't one rogue manager. 00:11:23.879 --> 00:11:26.580 This was systemic enough that PSSI paid a $1 00:11:26.580 --> 00:11:29.759 .5 million fine. It was a horrific situation. 00:11:30.320 --> 00:11:33.519 There is no defending child labor. But we have 00:11:33.519 --> 00:11:37.659 to be precise about liability and intent. Blackstone 00:11:37.659 --> 00:11:40.519 owns hundreds of companies. They are not making 00:11:40.519 --> 00:11:42.399 the shift schedules in a slaughterhouse in Grand 00:11:42.399 --> 00:11:45.139 Island, Nebraska. They aren't hiring the janitorial 00:11:45.139 --> 00:11:48.259 staff. When this came to light, they acted decisively. 00:11:48.379 --> 00:11:50.879 They paid the fines, they fired local management, 00:11:51.059 --> 00:11:52.980 and they implemented zero tolerance compliance 00:11:52.980 --> 00:11:55.460 measures. But that is the investment thesis. 00:11:55.799 --> 00:11:59.039 The thesis is aggressive cost cutting. When you 00:11:59.039 --> 00:12:02.299 demand 20 % returns from a low margin, dirty 00:12:02.299 --> 00:12:04.779 business like industrial cleaning, You create 00:12:04.779 --> 00:12:06.980 an environment where managers feel forced to 00:12:06.980 --> 00:12:09.700 cut corners to hit their numbers. It's the same 00:12:09.700 --> 00:12:13.399 pattern we saw with Motel 6 in 2018. That chain 00:12:13.399 --> 00:12:15.759 was owned by Blackstone. They were caught providing 00:12:15.759 --> 00:12:18.379 guest lists to ICE, Immigration and Customs Enforcement 00:12:18.379 --> 00:12:21.019 without warrants. They turned their own hotels 00:12:21.019 --> 00:12:23.759 into a dragnet for deportation. They settled 00:12:23.759 --> 00:12:28.159 for $19 .6 million. These aren't glitches. These 00:12:28.159 --> 00:12:30.559 are the predictable outcomes of a culture that 00:12:30.559 --> 00:12:33.159 prioritizes the extraction of data and value 00:12:33.159 --> 00:12:35.740 over human rights. I think you're connecting 00:12:35.740 --> 00:12:39.019 dots that don't necessarily form a line. The 00:12:39.019 --> 00:12:41.940 Motel 6 issue was a specific failure of policy 00:12:41.940 --> 00:12:44.480 that was corrected. But if you want to judge 00:12:44.480 --> 00:12:47.000 the portfolio by its social impact, you have 00:12:47.000 --> 00:12:49.259 to look at the other side of the ledger. You 00:12:49.259 --> 00:12:52.559 can't just cherry -pick PSSI and ignore Spanx. 00:12:53.039 --> 00:12:57.929 Spanx? Yes. In October 2021. Blackstone took 00:12:57.929 --> 00:13:01.929 a majority stake in Spanx, valuing it at $1 .2 00:13:01.929 --> 00:13:05.389 billion. But here's the nuance. The deal was 00:13:05.389 --> 00:13:08.450 prepared by an all -female investment team from 00:13:08.450 --> 00:13:11.590 Blackstone, and they installed an all -female 00:13:11.590 --> 00:13:14.750 board of directors. That is progressive corporate 00:13:14.750 --> 00:13:17.909 governance in action. Or look at the energy transition. 00:13:18.289 --> 00:13:21.669 You mentioned environmental concerns, but Blackstone 00:13:21.669 --> 00:13:24.070 is one of the largest investors in green energy. 00:13:24.460 --> 00:13:29.019 In 2022, they made a $14 billion deal with Emerson 00:13:29.019 --> 00:13:31.720 Electric for climate technologies. They're pouring 00:13:31.720 --> 00:13:34.659 billions into the grid updates required to decarbonize. 00:13:34.779 --> 00:13:37.679 You can't ignore the billions flowing into climate 00:13:37.679 --> 00:13:40.539 solutions just to focus on the operational failures 00:13:40.539 --> 00:13:42.639 of a cleaning company. I'm not ignoring them, 00:13:42.779 --> 00:13:45.539 but I am questioning the accumulation of power 00:13:45.539 --> 00:13:48.480 that allows them to play both sides. And that 00:13:48.480 --> 00:13:51.200 brings us to the most, well, dystopian element 00:13:51.200 --> 00:13:55.230 of their portfolio, data. In 2020, Blackstone 00:13:55.230 --> 00:13:59.870 acquired Ancestry .com for $4 .7 billion. It 00:13:59.870 --> 00:14:02.250 was a consumer technology play. It's a subscription 00:14:02.250 --> 00:14:04.730 business with high retention. It's a cash cow. 00:14:04.909 --> 00:14:08.230 It's a genetic database. This gives a private 00:14:08.230 --> 00:14:11.149 equity firm, an entity designed to maximize profit 00:14:11.149 --> 00:14:14.509 above all else, access to the DNA of millions 00:14:14.509 --> 00:14:17.610 of people. There are ongoing class action lawsuits 00:14:17.610 --> 00:14:20.590 regarding genetic privacy. When you combine that 00:14:20.590 --> 00:14:23.299 with their history and security technology, like 00:14:23.299 --> 00:14:26.460 the acquisition of Vivint, or educational software 00:14:26.460 --> 00:14:29.440 like Cvent, you start to see a picture of an 00:14:29.440 --> 00:14:32.139 entity that knows your biology, your movement, 00:14:32.220 --> 00:14:34.779 and your behavior. I think that's a leap into 00:14:34.779 --> 00:14:38.000 science fiction. Ancestry is about family trees, 00:14:38.080 --> 00:14:40.419 not surveillance. Blackstone bought it for the 00:14:40.419 --> 00:14:42.779 same reason they invested in Bumble, the dating 00:14:42.779 --> 00:14:45.620 app, or Oatly, the oat milk brand. They're chasing 00:14:45.620 --> 00:14:48.259 consumer trends. The genetic data is subject 00:14:48.259 --> 00:14:51.440 to strict... privacy laws. Blackstone is a financial 00:14:51.440 --> 00:14:53.940 fiduciary. They're not in the business of selling 00:14:53.940 --> 00:14:56.220 DNA to the highest bidder. That would destroy 00:14:56.220 --> 00:14:58.559 the value of the asset. They're in the business 00:14:58.559 --> 00:15:00.960 of generating cash flow, not building a police 00:15:00.960 --> 00:15:03.899 state. But they are unregulated in a way that 00:15:03.899 --> 00:15:07.720 traditional banks are not. And the scope is widening. 00:15:07.740 --> 00:15:10.039 They're moving heavily into credit and insurance. 00:15:10.500 --> 00:15:13.940 Look at the deal with AIG in 2021 to manage a 00:15:13.940 --> 00:15:16.600 huge chunk of their life and retirement portfolio. 00:15:17.279 --> 00:15:20.399 That's a $2 .2 billion investment for a nearly 00:15:20.399 --> 00:15:23.799 10 % stake. They're becoming a complete financial 00:15:23.799 --> 00:15:27.059 ecosystem. If they fail or if their algorithms 00:15:27.059 --> 00:15:30.000 get it wrong, it's not just a bad quarter for 00:15:30.000 --> 00:15:32.820 shareholders. It's retirement funds, it's housing 00:15:32.820 --> 00:15:35.299 markets, it's life insurance policies. And that 00:15:35.299 --> 00:15:38.639 is exactly why their scale is an asset, not a 00:15:38.639 --> 00:15:42.059 liability. In a volatile world, you need large, 00:15:42.139 --> 00:15:44.759 well -capitalized players who can absorb shocks. 00:15:45.519 --> 00:15:49.039 Look at the financial results for 2024. Revenue 00:15:49.039 --> 00:15:53.740 was $13 .23 billion. Net income was $2 .44 billion. 00:15:54.100 --> 00:15:57.279 They have nearly 5 ,000 employees managing over 00:15:57.279 --> 00:16:00.000 a trillion dollars. That is incredible efficiency. 00:16:00.679 --> 00:16:03.899 Even after the shooting in July 2025, a moment 00:16:03.899 --> 00:16:06.960 of profound institutional trauma, the firm demonstrated 00:16:06.960 --> 00:16:10.139 resilience. They continued to operate. They completed 00:16:10.139 --> 00:16:12.740 the acquisition of Warehouse REIT in the UK just 00:16:12.740 --> 00:16:16.139 two months later in September 2025. This engine 00:16:16.139 --> 00:16:19.019 doesn't stop, and that reliability is what pension 00:16:19.019 --> 00:16:22.000 funds depend on. That engine doesn't stop, but 00:16:22.000 --> 00:16:25.539 it consumes everything in its path. You mentioned 00:16:25.539 --> 00:16:28.779 the UK acquisition. They're also buying airports 00:16:28.779 --> 00:16:33.100 now. A 22 % stake in AGS airports in March 2025. 00:16:33.659 --> 00:16:36.019 They're buying holiday resorts like Butlins and 00:16:36.019 --> 00:16:38.440 Hamilton Island. They're buying sandwich shops 00:16:38.440 --> 00:16:41.580 like Jersey Mike's. As they grow, the accountability 00:16:41.580 --> 00:16:44.960 dilutes. When you own everything, you are responsible 00:16:44.960 --> 00:16:47.940 for everything. But somehow when things go wrong, 00:16:48.019 --> 00:16:51.399 like at PSSI or Southern Cross, it's never the 00:16:51.399 --> 00:16:53.659 parent company's fault. It is a structure designed 00:16:53.659 --> 00:16:55.740 to immunize the capital from the consequences 00:16:55.740 --> 00:16:58.019 of its own demands. It's not about avoiding fault. 00:16:58.159 --> 00:17:00.940 It's about managing complexity. No organization 00:17:00.940 --> 00:17:03.200 with a trillion -dollar footprint is going to 00:17:03.200 --> 00:17:05.740 be free of operational challenges. The question 00:17:05.740 --> 00:17:09.240 is, is the net impact positive? I argue yes. 00:17:09.500 --> 00:17:12.220 They saved Hilton. They are building the data 00:17:12.220 --> 00:17:14.160 centers that will host the future of computing. 00:17:14.440 --> 00:17:16.839 They provided liquidity to the housing market 00:17:16.839 --> 00:17:19.559 when banks were paralyzed. Without that capital, 00:17:19.700 --> 00:17:23.460 the economy stagnates. And I argue that the net 00:17:23.460 --> 00:17:25.980 impact is a distortion of what markets should 00:17:25.980 --> 00:17:29.019 be. Housing should be for living, not a yield 00:17:29.019 --> 00:17:31.720 vehicle for a REIT. Healthcare should be for 00:17:31.720 --> 00:17:34.859 healing, not for sale leaseback schemes. The 00:17:34.859 --> 00:17:37.160 alternative investment model creates a layer 00:17:37.160 --> 00:17:39.880 of abstraction between the owner and the consequence. 00:17:40.569 --> 00:17:42.670 I see your point about abstraction, but without 00:17:42.670 --> 00:17:44.990 that capital, many of these industries would 00:17:44.990 --> 00:17:48.390 simply collapse or fail to modernize. The financialization 00:17:48.390 --> 00:17:51.529 you fear is often just the modernization of capital 00:17:51.529 --> 00:17:53.829 structures. I suppose it is where we fundamentally 00:17:53.829 --> 00:17:57.349 disagree. I see a structure that incentivizes 00:17:57.349 --> 00:18:00.869 short -term gain over long -term social health. 00:18:01.130 --> 00:18:04.349 We can marvel at the $43 .5 billion in total 00:18:04.349 --> 00:18:07.029 assets on their own balance sheet or the trillions 00:18:07.029 --> 00:18:09.650 they manage for others. But the cost of that 00:18:09.650 --> 00:18:12.029 wealth is the erosion of public accountability. 00:18:12.569 --> 00:18:15.630 Whether it's pricing people out of homes or compromising 00:18:15.630 --> 00:18:19.049 privacy, the model externalizes risks to society. 00:18:19.529 --> 00:18:22.009 And I would argue that with great scale comes 00:18:22.009 --> 00:18:24.730 complex challenges, certainly, but capital allocation 00:18:24.730 --> 00:18:28.089 is a necessary function of a complex global economy. 00:18:28.690 --> 00:18:31.410 Blackstone provides the returns that secure retirements. 00:18:31.450 --> 00:18:33.869 It identifies undervalued assets and improves 00:18:33.869 --> 00:18:37.170 them. It is a necessary engine. As Blackstone 00:18:37.170 --> 00:18:39.730 continues to grow, acquiring everything from 00:18:39.730 --> 00:18:42.390 Jersey Mike's to Australian islands, the line 00:18:42.390 --> 00:18:45.650 between financial firm and global power isn't 00:18:45.650 --> 00:18:48.289 just blurring. It's practically gone. And perhaps 00:18:48.289 --> 00:18:50.970 that is the reality of the 21st century economy. 00:18:51.369 --> 00:18:53.630 We are leaving it up to the listener to decide 00:18:53.630 --> 00:18:57.069 if that power is in safe hands. Indeed. Thanks 00:18:57.069 --> 00:18:59.390 for listening to The Debate. Until next time.