The world’s largest investment fund, BlackRock, operates in a very discreet manner, but its influence on our reality is enormous. Recently, BlackRock has also become extremely active in Ukraine
To describe the phenomenon of the company managed for years by Larry Fink, a little historical background is needed. Since times unknown, the most influential figures in the world of big business have been bankers and industrialists. Even on the occasion of the previous financial crisis, one could see firsthand how influential Goldman Sachs is which, at a time when others were going bankrupt or tottering in their posts, came through the meltdown with dry feet, in which its former employees, employed in both the Bush and Obama administrations, were instrumental.
Passive investment elites
Banks are still very important, of course, as are the big tech companies and their over-ambitious CEOs, but over the past decade or so, a whole new trend can be observed, elevating entirely new entities and personalities to the very top. These elites are investment companies, huge in their size, which specialize in managing financial assets. Their area of business has become incredibly profitable mainly because after the recent financial crisis of 2007-2008, central banks began to pursue extremely loose financial policies. Financial debauchery thus caused real inflation to rise to even higher levels, and with it came an even greater need than before to escape it by making appropriate investments in the stock market. Companies such as BlackRock, Vanguard and State Street have found a near-perfect remedy for this pressing need, offering the so-called passive investment model to a wide audience.
This new model of investing is as bold and simple in concept as it is sophisticated in execution. A host of mathematicians and stock market practitioners have been pondering over its development for several decades. They all searched for the perfect formula that would enable the best returns in the stock market based on mathematical formulas. The result of their collective search was astonishing, as it eventually turned out that in the long run you have to commit funds to all the most popular companies and assets included in the major stock market indices. At first, almost no one believed that such a trivial procedure could bring such great profits, but the dizzying career of passive funds has meant that today no one doubts it anymore. Today, the majority of all capital in the US are already invested in passive funds.
From loss to billion-dollar gains
The career of BlackRock’s CEO is a perfect illustration of the incredible growth of a new segment of the financial world. Back in the 1980s, Larry Fink worked at traditional investment bank First Boston. Because of his background and keeping to himself, his group of friends at the time called his colleagues “little Israel.” In 1986, the young Californian’s promising career was interrupted by a $100 million loss, for causing which Fink found himself sidelined. At the time, the young banker was said to have sworn to himself that he would do everything possible to prevent such a huge loss again.
Mathematics and computers were to come to his aid. Larry Fink crusaded a group of colleagues and specialists known for their high analytical skills and set up a new investment fund from scratch, which in time took the name BlackRock. The centerpiece of the new entity became the Alladin analytics program. Developed consecutively for nearly 40 years, today it is a powerful algorithm that processes a huge amount of financial data from all over the world. The computers at BlackRock’s disposal perform 200 million calculations every week, constantly assessing the risk of individual financial operations. Even the U.S. government and central bank are constantly using the services of the world’s largest investment company. Today, it is widely believed that there is no better tool for instant credit rating than the program created by Larry Fink and his army of programmers and mathematicians.
For the first 20 years of its existence, BlackRock did not stand out in any particular way for its size, but with the merger with Merrill Lynch Investment in 2006 and the acquisition of Barclays Global Investors in 2009, it has rapidly become a giant managing nearly $4 trillion in assets. Last year these assets reached $10 trillion, and are now worth exactly half of the entire U.S. GDP (by comparison, Polish funds currently manage about $64 billion in assets).
Conceptually simple, but based on a sophisticated programming apparatus, the model for investing money has brought BlackRock a huge number of clients. By managing trillions of dollars, Larry Fink and his company have thus gained an equally enormous impact on reality as a whole. BlackRock today owns an average of 7% of each of the 500 companies listed on the S&P 500 index, bringing together the most resilient companies from across the United States (together with Vanguard and State Street, they own as much as 21%). BlackRock owns shares of entities from all over the world, including, of course, Poland (State Treasury companies, among others). Although a minority stake does not yet give the right to decide the fate of individual companies, there is no other entity in the world today with capital involvement in such a large number of ventures.
Architects of left-wing radicalization
The fundamental impact that BlackRock has on economic life is that entities from all over the world are forced to ingratiate themselves to the company, because as a wholesale buyer and holder of assets it has a significant influence on the valuation and financial health of companies. As a declared supporter of the Democratic Party and a supporter of progressivist ideas, Larry Fink has not failed to take advantage of his position and has become one of the main architects of the ongoing radicalization of corporate and financial circles. The BlackRock CEO is a proponent of the recently fashionable concept of stakeholder capitalism, according to which companies must actively engage in various social projects, such as support for the LGBTiQ community, the fight against global warming, or the fight against racism. His preferred model of a social device is best reflected in the ESG reporting that BlackRock has been pushing for years, forcing companies to adopt increasingly radical demands transforming them into the vanguard of the leftist revolution.
It wouldn’t even be an exaggeration to say that it’s entities like BlackRock that have had a greater impact than Big Tech on the fact that the corporate world, and in its wake the entire global culture, has scored such a huge left turn in recent years. Having concentrated so much of the market in their hands, the world’s largest investment firms have managed to push neo-Marxist adherence in both business and the public sector. The whipping up of political hysteria has a profound business rationale in this case, since the big investment companies have already been constructing special “socially responsible” funds for years, for the use of which they charge higher commissions. Perhaps never before in history has a mechanism been constructed that so perfectly exploits social radicalism for financial purposes.
However, there are growing indications that the best days and the entire segment specializing in passive investing are over for BlackRock. The unprecedented influx of investor money was linked to a period of economic boom, during which too many people came to believe that investments under the sign of sustainable development and pumping money into companies echoing wokeism were ventures with a bright future. While the great stock market crash ending the era of abundance has not yet occurred, passive funds have seen a marked outflow of assets in 2022 (for the first time ever), and more and more experts are pointing to the simple fact that the business model adopted by BlackRock has some significant limitations. Passive investing can only be successful if a sufficiently large number of other investors invest capital in an active – that is, traditional – way. If everyone wanted to invest funds as passive funds do, it would eventually lose its meaning. On top of this, the recent collapse of Silicon Valley Bank, which financed many “green” projects, has clearly demonstrated that the whole intricate construction of a sustainable business is slowly starting to fall apart.
BlackRock and similar entities are also becoming increasingly challenged by active opposition from right-wing circles. Florida Governor Ron DeSantis withdrew more than $2 billion his state held in Larry Fink’s company last December. The states of Louisiana, Utah and South Carolina, among others, have done the same in recent months. For conservative Americans, BlackRock and its policies have recently become a true symbol of all the pathological conditions plaguing the economy and pushing it in a very dangerous direction. It is noteworthy, however, that unlike DeSantis, Donald Trump has so far refrained from making strong statements against Larry Fink and his financial empire. In many ways, the times of his presidency have been supremely prosperous for BlackRock.
Business in Ukraine
BlackRock has also recently become extremely active on the Ukrainian front. Larry Fink has already managed to hold several talks with Volodymyr Zelenskiy since the beginning of the war, and delegations of company executives have also visited Kiev. The two sides are working on a huge investment plan to ultimately build a new Ukraine, almost from scratch. According to Fink, post-war Ukraine will be a true global “beacon of capitalism” and a recipient of major investments from around the world. The BlackRock CEO’s words are certainly not empty, as he, like few others around the globe, has a real say in how money is spent. Fink valued the cost of rebuilding Ukraine at around $750 billion, which from his perspective is not that exorbitant a sum. And even if lifting Ukraine from the rubble will not be widely perceived as a venture worth that much money, one can be sure that BlackRock will skillfully use its globe-trotting experience in persuading the world to invest in much less profitable projects.
The actions of the world’s largest investment company are a natural extension of US government policy, as evidenced by the successive favors mutually rendered by the two parties. The federal government and the U.S. central bank regularly enlist BlackRock’s help in handling various stimulus packages or bailout acquisitions made with taxpayer money. After the recent collapse of Silicon Valley Bank, the task of “cleaning up” after all the turmoil fell to Larry Fink’s company. BlackRock, on the other hand, has recently become the perfect refuge for many former politicians and central bankers from around the world. No other financial entity today enjoys such favor with politicians or has such extensive connections.
Larry Fink, although he manages far greater sums of money than George Soros, Bill Gates or Mark Zuckerberg, does not regularly try to present his plans to make all of humanity happy in front of the cameras. His presence in the media is much more discreet, which doesn’t change the fact that he constantly influences our reality in ways that are difficult to overestimate. The importance of his company, which goes far beyond the financial world itself, is most evident in the recent scandal over the consumer boycott of Bud Light beer, whose manufacturer used transgender influencer Dylan Mulvaney in its advertising campaign. One of the former executives of the manufacturer, the Belgian firm Anheuser-Busch, later suggested outright that companies today are under tremendous pressure to promote wokeism precisely because of big investment firms. It is they and the ESG reporting mechanism they are pushing that bear the main responsibility for the fact that the world seems to be turning more and more on its head.
Probably few observers of the financial markets a century ago – or even half a century ago – would have been able to predict that the advancing technological sophistication of stock market investing would be accompanied by the triumph of such extremely intellectually primitive ideas and socially radical currents. The case of BlackRock, however, shows that with the most perfect analytical and computer tools at one’s disposal, one can simultaneously promote wokeism and environmentalism in their most destructive variant for humanity.
In January 2020, Larry Fink, in his annual letter to the company’s clients entitled “Fundamental Transformation of the Financial World,” announced to the whole world that “climate risk is an investment risk.” This meant no less than that henceforth financial resources were to be distributed even more than before according to a zero-carbon key. The reality of the modern world, unfortunately, is that the will of the head of the world’s largest investment company means more than the decisions of many heads of state, which is probably why we have witnessed an unprecedented acceleration in the implementation of the green agenda over the past few years.
If it can be any consolation, it is worth noting only that in this year’s letter Larry Fink has clearly moved away from aggressively pushing ESG and sustainable business principles, focusing more on financial risk issues. Could it be that a wokeist and environmentalist thaw is upon us?
This article was published in July 2023 in Do Rzeczy magazine.