This is the new episode of our meaningful conversation. This is a series where we talk with influential people about business, but also about personal motivation and what happened in their careers. And today I have the honor to be here with Larry Fink, Chairman and CEO of BlackRock. Larry, very warm welcome to APG and we're looking towards our atrium. What do you think? Do you like it?
Well, first of all, Ronald, thank you for inviting me. Thank you for our partnership. It's great. You know, our partnership is quite meaningful for BlackRock because it's been one of our first relationships in the Netherlands. And your atrium, it's quite special. I would imagine it brings people back into the office.
It does. It does. People like it. Yeah. And we are lucky today is a sunny day in the Netherlands. It's not always sunny in spring in the Netherlands.
No, I'm blessed. It is gorgeous today.
What I would like to ask you as a first question is going back a little bit towards founding BlackRock roughly 37 years ago. Is that correct? And what happened? What made you do it? And maybe of course this is a long time but maybe you could talk a little bit about your entrepreneurship. That is something we of course admire and maybe in Europe we could see a bit more of what happened. What are your lessons? What were important decision points? Could you tell us a bit about that?
Yeah, I think so much of the foundation of BlackRock was really based in my experience in my first career when I was at First Boston, which then became Credit Suisse, which is now part of UBS. But a very successful career at First Boston. But my career ended after about 11 years there because of the failure of risk management by me. And I tell everybody BlackRock was created from the ashes of my career and the ashes became the fertilizer of BlackRock. As I said, my career at First Boston ended sooner than I ever imagined it to be because I was the youngest managing director ever. I was on the executive committee and then we had a loss. We lost money in one quarter in 1986 and we had no idea the risk we were taking. And then it took me about a year and a half to think about what would I do next. I stayed within First Boston during that period of time, but then I determined that what the world could use is an asset manager that was based on investment technology. And in 1988 no one cared about investment technology, but 25% of the employees who came and joined the firm when we started the firm were more technologists. And from the very early days we focused on how can we develop better analytics to understand the risk we're taking on behalf of clients. And it was that foundation that gave us, I would say, the differentiation as a startup company to win clients' approval, to win clients' trust, to start an asset management company from scratch with no history, no reputation. But it was the basis of having that technology and investment technology that really differentiated ourselves. And actually within our first full year of being in operation, we were able to win a sizable amount of money and from that we continued to reinvest into investment technology to the point where we built the Aladdin system. And it was all based on my failure, not based on success, but it was based on the knowledge that having better analytics, better technology, and can you do that in a way that's functional, that allows the organization to flourish. You know, so many people have built technology that became, in my mind, almost a governor and restricted growth. You know, when I talk about risk management to people now, I talk about risk management allows you to take more risk, more educated risk. Most people think about risk management means you're containing or controlling risk. You're not. You don't ever contain risk. You identify risk and once you have better analytics to understand the risk you're taking, you could ask a question: can I take on more risk? Will I be paid for that additional risk? If not, let's reduce our risk. And it created in my mind a culture. And so now 37 years later, I think embedded in BlackRock is this risk culture of understanding your risk every day, every moment, and having one common technology platform across every asset category, one common technology platform across every place where we work. So in all 35 countries where we have offices and we manage money, and we're able to then have a comprehensive risk analysis on behalf of each and every client. And we have that as an overall enterprise and it allowed us to really differentiate ourselves. And I would say today, 37 years later, it is one of the most profound differentiating facets of BlackRock versus any other asset management company in the world.
You remind me of a predecessor of mine, also CEO of asset management, who wore this t-shirt where on the front it said 'I love risk' and on the back it was 'because we can manage it'. And that's how you talk about it. And one would say talking about entrepreneurship is that then still not a bit of a contradiction? Like saying well you did enter into many takeovers and that is risky business, isn't it? Or is that also something you managed and controlled?
Well, I would say if you ask some of the organizations that just came on board to BlackRock like GIP, the leadership of GIP would say what makes BlackRock special today is that we still have this entrepreneurial culture. We are still led by that spirit. We have 21,000 employees worldwide. So we're quite large, but we still have that spirituality of trying to keep it small and try to keep it current. But it was because of a risk management platform that we were able to then successfully integrate these companies. And we've had a great track record from our first acquisition was in 2004. And what really transformed BlackRock was when we acquired Merrill Lynch Investment Management in 2006. We went from just a fixed income bond manager to a global investment firm with offices in 25 countries at that time. So we went from basically a US-oriented organization to this international organization in one acquisition. And it was through the technology platform but also through the spirit of having only being in one business, asset management. You know, we acquired Merrill Lynch Investment Management that was part of a big global enterprise and when we acquired BGI which was part of Barclays, the employees who came on board felt they were the whole ecosystem of BlackRock was in the same business that they were in, in the investment management world. And since then as we acquired other organizations whether we acquired a technology company to help us with Aladdin or we acquired a private credit manager in terms of HPS or infrastructure manager like GIP, I believe the spirit of the organization is very linked. The one other thing I would say, Ronald, in every acquisition we ever did, in the first months of conversation, price and valuation was never discussed because price and valuation is pretty easy to determine. The real question culturally is: is there a common view? Is there a common understanding? Can the cultures of the two organizations integrate? Because we all believe if we're going to serve our clients well, we have to represent our clients as one firm. We cannot represent ourselves as five different firms. That's a failure. That means we're making it more difficult for the client. So the key for every acquisition is saying the sum of the acquisition is going to turn into one organization with one culture with one technology platform. That does not mean we don't have different brands. We keep some of the brands that we have acquired because we believe that's a good additive brand. In infrastructure, we have kept a GIP brand for infrastructure and in fact BlackRock had 50 odd billion dollars in infrastructure assets on behalf of our clients already. That team is now called GIP, a part of BlackRock. So we have multiple brands and probably the most iconic brand of BlackRock is iShares and we believe that's a good thing but it's still under one technology platform, one culture, global principles never change. We have to do what we have to do under one common philosophy. And to me that's why I believe we've had a good history of integrating organizations. And also we've had great success in building BlackRock and expanding it whether it's geographic expansion or product expansion but it's still under this one domain.
You think culture is stronger than differences in approach, private versus capital markets, active versus passive? It can all work under the same culture? Or is... and most people did not believe that.
No. Well, at least it's a question mark. I'm not... I believe it. We have... so I always, I'm always informed by my clients. Okay. Everything, even my CEO letters are really just paraphrasing what my clients tell me all year round. So everything is through my client meetings. And it was very clear even when the marketplace did not appreciate and disagreed with our acquisition of BGI in 2009. They said there's a passive culture and an active culture and can never be married. And I said why not? Our clients use passive. Our clients use active. Why can't we provide them a comprehensive solution using passive and active strategy? Well obviously that worked. What we have witnessed over the last 10 years, clients are interchanging public markets and private markets interchangeably. If they believe that you're being paid adequately for the illiquidity, you're going to invest more in private market. If the private market demand is so great that the spread between privates and publics are too narrow, people are going to be reallocating back into the public markets. So, everything we do is through the lens of a client. And if we could have a comprehensive conversation with our clients across a spectrum of passive and active, across the spectrum of private markets and public markets, then we could provide a differentiating conversation with our clients and we could work with our clients across the whole spectrum of investing. Our clients have to think about how do you blend active and passive. Our clients also work on this concept of how do you blend public markets and private markets and can we then provide that comprehensiveness to connect with our clients more. And I believe that is a differentiating factor that BlackRock has beyond... there's no other asset management company in the world that can do that. And if you overlay investment technology with Aladdin, you know, you think about how we integrate all that together. And it's when we work with our clients, we have clients who have Aladdin on their system. They are using us for passive. They're using us for private markets and they're using us for public market. And we provide a better service, a more comprehensive service at lower fees because of comprehensiveness of the relationship. And so it's a win-win for BlackRock and our clients.
In the recent stakeholder letter, the chairman letter, you talk about making private available for a broader product, the democratization of private investments. And we always think well pension funds are a way to do that. If you look at the Netherlands, we have like 2,000 billion euros in pension assets and only 200 billion in direct investments. So access to those investments is possible via pension funds. But you talk about it and I think we talked about it before when we met in a different way coming up with ways to make that private asset classes available to a broader public. Is that what you have in mind?
