The chairman and CEO of BlackRock topped the Power 100 list in 2016. Here, Worth looks back at Laurence Fink’s path to power, the power play that landed him in the top spot and where he is now.
What We Said Then
Path to Power: Raised in Van Nuys, Calif., Fink earned a BA and MBA from UCLA. He headed to New York to join First Boston, where he helped create the mortgage-backed securities market and at 31 became the youngest managing director in the firm’s history. But he went from “a star to a jerk,” he told Vanity Fair, when in 1986 he failed to predict the direction that interest rates were heading and his department lost $100 million. Fink was let go quite publicly, an event that would haunt him, though he later blamed the loss on a failure to understand risk. Determined to break with the past and perfect the art of risk management, he formed BlackRock in 1988 with $5 million in credit from Stephen Schwarzman’s Blackstone Group. The two parted ways contentiously in 1994—BlackRock already had $20 billion in AUM—and Fink would use a combination of organic growth and canny acquisitions to build his firm into the world’s largest asset manager. When financial markets melted down in 2008, Fink found himself the last man standing on Wall Street thanks to rock-solid financial footing and unparalleled specialization in risk management. Receiving no-bid contracts because BlackRock was seen as the only option, Fink took over management of $130 billion of Bear Stearns and AIG assets and oversaw the $5 trillion balance sheets of Fannie Mae and Freddie Mac on behalf of the U.S. government.
Power Play: At the end of March 2016, BlackRock’s AUM were $4.74 trillion, roughly $1 trillion more than the federal budget and more than the GDP of Japan, Germany, the UK, France or India. BlackRock’s assets, in fact, are greater than the GDP of any nation in the world with the exceptions of China, the U.S. and the combined European Union. And its assets are growing: Investors poured $1.54 billion into the company in the second quarter of 2016 alone. BlackRock stock is trading near all-time highs with a market cap of around $61 billion while the world’s 20 biggest banks lost $465 billion in market value in the first half of 2016. ETFs and obsessive risk management may not be sexy, but even small decisions by the firm can have massive global impacts. BlackRock, for instance, told investors in September that it would start looking at climate change and political action around it as part of its risk management processes. And ETFs have risen in prominence over the last decade as active investing has suffered profound market shocks, positioning BlackRock, with its expertise in the area, as one of the most trusted institutions on Wall Street. It’s this trust that regulators, lawmakers and the Street place in Fink and BlackRock that makes him powerful. But he wields his power quietly; longtime observers have characterized him as “the Wizard of Oz,” reworking capitalism from behind the curtain. Fink, especially since the financial crisis, has been pushing for executives to take longer-term views, promoting stability and reducing global risk, two things that fundamentally benefit BlackRock and its clients. In February, he sent a letter to the executives of the S&P 500, calling on them to “invest in long-term growth.” Fink is also reportedly behind much of Hillary Clinton’s Wall Street policy, particularly her embrace of long-termism. And that influence could be institutionalized come the new year: Fink is said to be on a very short list of potential Treasury secretaries in a Clinton administration.
Where Fink is Now
Larry Fink is now 66, and the press has been buzzing with reports about his potential successors. Yet although specific names keep cropping up, it remains a challenge to think of BlackRock without Fink, and not just because he cofounded the firm and helped build it into its status as the world’s largest asset manager but, because he continues to play such a proactive and, yes, visionary role. At a point when many CEOs are pondering their legacy, Fink continues to push change at BlackRock, warning employees about the pressures the asset management business faces, initiating layoffs to prepare the firm for change, and pushing BlackRock to be more consumer-facing. “We need to be willing to reimagine every aspect of the firm and how we manage it,” Fink wrote in a January memo reported on by Institutional Investor. “Nothing should be off the table.”