You wake up to the sound of the alarm on your iPhone.
Annoyed that you couldn't get more sleep, you grudgingly unlock your phone to see what's
going on in the world.
There's an email from Amazon telling you that your package has been delivered.
You force yourself out of bed to get the package.
It's some Johnson & Johnson medicine you ordered the night before.
The wonders of overnight shipping, you think to yourself.
You glance across the room to see the clock, it's 8 a.m., and you have to be at work by
9!
Flustered, you open your Microsoft computer to answer some work emails before getting
dressed.
There's no time to cook breakfast, so you'll just grab something at Mcdonald's on your
way to work.
What if I told you that every single company you just interacted with in the first hour
of your day is heavily influenced in large part by one company - BlackRock.
Now I'm sure you've heard all about BlackRock.
There are dozens of videos here on YouTube that talk about how it's the company controls
the entire world.
But the reality is far less glamorous.
Here is why everything you've heard about BlackRock is wrong.
Before we talk about that, let’s talk about data.
Every time we browse on the internet, companies collect an insane amount of data from us,
information which is then sold to data brokers, who in turn sell it to the highest bidder
or just lose that information in data breaches.
According to a report from the Identity Theft Resource Center, there were 68% more breaches
in 2021 than in 2020, and that number is only going up.
A few months ago my friend got an email telling him that his information was released in a
data breach from a company he had never heard of before.
And right after, he started getting personalized email ads from shady companies.
This is how scammers are able to figure out your phone number, name and even your address.
The good news is that you can get these data brokers to delete the information they have
about you.
Sadly, to do it manually could take years.
This is why I love using the sponsor of today’s episode, Incogni.
All you have to do is create an account and grant them the right to work for you.
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Back to our story.
BlackRock is an investment firm that controls a huge number of shares in some of the largest
companies in the world.
They have a total of $10 trillion in assets across the globe.
That's an amount equal to half of America's total gross domestic product - controlled
by just one company.
It's easy to dismiss such a powerful company as all-out evil.
But the truth is, BlackRock doesn't own these companies or even own shares of these companies.
Their clients own the shares.
BlackRock simply manages them.
That's not to say that BlackRock doesn't have any influence on these companies.
They definitely do.
Because they control such an incredible amount of their stock, it's possible that companies
want to keep in BlackRock's good graces, so they don't pull their investments.
Now, while BlackRock might not be the evil company some people try to make them out to
be, the truth is, there's still something very shady about them—their hypocrisy.
BlackRock was founded 34 years ago by Larry Fink.
He grew the company from $5 million in value to $8 billion in just five years - primarily
by managing money invested by large institutions like pensions, university endowments, and
substantial fortunes invested by the uber-rich.
Today, Fink serves on the Council on Foreign Relations and the World Economic Forum, commanding
the attention of business tycoons and political leaders around the globe.
And his company is on the cusp of consolidating so
much power it could, essentially, control the world.
The 2008 financial crash turned out to be an incredible opportunity for BlackRock.
It secured an uncontested contract to control many of the banks that had collapsed.
That gave Larry Fink, who was already incredibly wealthy, even more power.
And a direct line to the American government.
The same thing happened in 2020, during the early days of the pandemic, when the government
called in BlackRock to protect the Federal Reserve from financial fallout.
Periods of economic uncertainties like these were key to BlackRock's rise to power.
As the famous saying goes, "With great power comes great responsibility."
And BlackRock would like you to think they are being responsible.
In the summer of 2020, while the world was angry about the murder of George Floyd, BlackRock
came out with a statement saying that companies had to serve a social purpose and that they
would be giving every company an ESG, or environmental, social, and governance, score.
Companies that promised more diversity in hiring and leadership or offered environmentally
friendly policies and technology received higher scores than companies that didn't.
Although this concept has been around since 2004, BlackRock became the loudest proponent
of ESG investing in 2020.
And, in all honesty, it worked.
Before this statement, ESGs were mentioned in fewer than 1% of earnings calls.
But by May 2021, that number rose to around 20%, and it has since remained the fastest-growing
segment in the asset management industry.
People are more concerned about the environmental and social impact of companies.
This is a good thing, right?
Socially responsible companies get the upper hand?
In an ideal world, yes.
But we all know that the world we live in is far from ideal.
While there has been some positive improvement, the main result of BlackRock's ESG statement
has been a massive surge in companies participating in practices like greenwashing - pretending
they're more sustainable, diverse, or responsible than they really are.
It's also exposed the hypocrisy of BlackRock itself.
Because while it claims to champion ESG investing, the company remains the world's largest investor
in fossil fuels and war-profiteering, and maintains a pretty friendly relationship with
human rights violators.
And it's not just BlackRock, the second largest investment firm in the world, Vanguard, is
guilty of the same technique.
Promoting ESG investing on the one hand, but on the other, unwilling to stop investing
in oil and gas or pull out of companies with questionable human rights practices.
We see this time and again from BlackRock.
They do something that seems like they're moving in the right direction in the eyes
of the public, but behind the scenes, they're unwilling to tamper with their investments,
even if it's for the greater good of society.
Take climate change, for instance.
BlackRock says that "climate risk is investment risk," meaning that investing in companies
that aren't creating policies to help address climate change is a risky move.
In 2021, BlackRock actually did do something about this - by helping shake up the board
of Exxon Mobil and installing new members who promised to take action on climate change.
Previously, the oil and gas behemoth was responsible for 2% of the world's emissions.
Now, there are new self-imposed mandates to help reduce that over time.
This is a great move by the company, no doubt.
But the fact that it's still the world's single biggest investor in fossil fuels makes this
feel more like virtue signaling than actually trying to make meaningful change.
The hypocrisy doesn't end there.
As mass shootings continue to end lives in the U.S., BlackRock has spoken out against
gun violence and said that gun manufacturers should do more to protect the lives of the
American people.
But who's the largest investor in gun manufacturers?
You guessed it…
BlackRock.
The investment firm holds a 16% stake in Sturm Ruger (Sterm Roo-ger), 15% in Vista Outdoor,
and significant percentages of other manufacturers just like them.
BlackRock says it talks to these companies about improving safety, but so far, it's unclear
whether there's been any actual policy change.
Outside of America., BlackRock's "U.S. Aerospace and Defense fund" has billions of dollars
invested in major weapons contractors worldwide, like Lockheed Martin, Raytheon, and General
Dynamics.
They're supporting these companies that get huge Pentagon contracts and use taxpayer money
to engage in violence and war around the globe.
Often, these weapons are supplied to foreign governments in the name of 'peace'.
Like Saudi Arabia, which received weapons from the U.S. government and used them to
indiscriminately attack civilians in Yemen during years of civil war.
Funding this spread of war and an increase in nuclear weapons shows that BlackRock constantly
skirts its own commitment to human rights.
So does its engagement with authoritarian governments.
BlackRock is officially the first global asset manager to have access to China's mutual fund,
leaving critics wondering… what did Fink promise Chinese President Xi Jinping (Shee
JinPing) to allow him access to the Chinese Communist Party's funds?
To be fair, BlackRock isn't the only investment company out there looking to do business with
China.
But because of its widespread power, it's been the most successful in gaining a foothold
in the controversial territory, which is surprising, especially for a U.S. company.
This power has also made it a major player in the war in Ukraine.
As we saw in China, despite its emphasis on ESG investing, BlackRock has a tendency to
overlook human rights in favor of monetary gain.
It's been investing in Russia's most prominent companies for years.
The British pensions that BlackRock controls alone have contributed $630 billion to Russia.
After Russia's annexation of Crimea (Cry-Mee-ah) in 2014, a precursor to what would become
the now more than yearlong war in Ukraine, BlackRock reconsidered some of its investments
in Russia.
But just one year later, it was back to being among the top shareholders in the country's
biggest corporations.
Even when it became clear that Russian President Vladimir Putin was planning an invasion last
year, BlackRock didn't budge.
Like most other Western firms, it did, eventually, pull assets out of Russia once the war started,
but think about all the money it flooded into Russia over the years.
Money that the authoritarian government controlled, and used, in its expansion mission that led
to this deadly war.
All of this begs the question- How did one company gain this much global power and influence?
Well, it started with technology.
BlackRock's business is built on ETFs or exchange-traded funds.
An ETF contains diversified investments to reduce an investor's risk.
Rather than buying stock in a single company, you're investing in a fund that buys stocks,
commodities, and other securities.
This practice proved to be very lucrative for BlackRock and its investors thanks to
a portfolio management software it created in 1998 called Aladdin.
Aladdin predicts the possible outcome of every investment and collects information and personal
data on everyone who has ever knowingly or unknowingly given BlackRock money.
This allows the software to predict how likely it is that a specific investment will fail.
Eventually, this technology put Fink and BlackRock on top, making the company the go-to firm
for ETF investing, which keeps getting more and more popular.
Global ETF assets could explode to $25 trillion by 2025, meaning trillions more for BlackRock.
But we don't need to wait until 2025 to see the effects of the power BlackRock has.
Right now, BlackRock oversees assets worth 10% of the entire world economy.
Companies like Fox, Comcast, and Disney have to consult with BlackRock before they make
major moves since it has such a large share of their ownership.
BlackRock and other large firms like Vanguard are the biggest investors in global giants
like Google, Facebook and Amazon.
This level of ownership creates an anti-competitive environment.
You feel this in the prices of airplane tickets.
BlackRock and Vanguard are among the five largest shareholders of the three biggest
airline operators - which means that there's very little incentive to lower prices in order
to compete with each other.
This level of ownership consolidation reduces consumer choice and raises prices.
It also means that eventually, a handful of powerful people at these investment firms
could wield more power than the executives at the companies they own shares in.
Even Jack Bogle, who founded Vanguard, says that this kind of ownership concentration
is bad.
Too much money in the hands of too few will not work out well for the global economy.
There are solutions that governments could put in place to stop these companies from
gathering this much influence.
Things like not allowing funds and ETFs to vote as shareholders in companies.
Or creating ownership caps that would dictate how much of a company can be owned by a single
entity.
Laws can be passed limiting how much influence an investment firm can have in the companies
they're invested in, even if that influence is intended to be benevolent, like with the
ESG.
But how soon could any of this happen?
Because BlackRock and Vanguard are less than a decade away from managing $20 trillion in
assets.
That would upend the asset management industry and intensify the already staggering ownership
consolidation of the world's largest companies, sending prices through the roof.
One of the biggest problems with this system of business is that the more money BlackRock
manages, the lower its fees for investors.
So we end up in this cycle where the best way to invest our money today creates a potentially
catastrophic environment for our money and our society tomorrow.
Unfortunately, most people don't have the luxury of looking that far ahead.
What looks good in the short term is all that matters.
And that is how BlackRock thrives.
It hopes you'll overlook its hypocrisy around the environment, diversity, and human rights
because it puts out statements about being a responsible company.
Its future hinges on its investors not caring about these things.
The problem is that many of its investors don't even know they're investors.
They're simply part of a pension fund or an endowment that BlackRock manages.
There are smaller funds that do support ESG investing without conflicts of interest.
And there are options, like managing our own shares, that help us avoid the moral pitfalls
of large companies like BlackRock.
But much like how most of us couldn't live without Amazon's next-day delivery for our
last-minute essentials, using these large, flawed companies is just easier.
Over the past decade, the public has become more and more critical of what massive companies
do and say.
As that magnifying glass emerged, BlackRock made sure that its messaging about making
the world a better place was heard and publicized.
BlackRock's hypocrisy won't end.
Its public image versus private actions will, most likely, always conflict with one another.
But as consumers and investors, it's our responsibility to know what's happening.
Taking them at their word is the easier option, but that's exactly what BlackRock is betting
you'll do.
That's how they've gotten this far.
This is the same ignorance that allowed banks and governments to drown us in debt.
Click on the video on your screen right now to find out more.