Tim Cook of Apple, Sundar Pichai of Google, Elon Musk, Jeff Bezos, the President of the United States. When you think of the people controlling the world, these names come to mind.
But the truth is while these people have a significant influence over our lives, four companies secretly control the world, and only a handful of people hold significant power in those companies. These are the people who have the potential to change your life for better or worse without you ever realizing what’s happening.
I made a video talking about how BlackRock controls the world. Unsurprisingly, they are one of the four companies we’ll discuss today. Altogether, these four companies manage almost $24 trillion worth of assets. They have the most influence over the United States’ monetary policy and operate with very little oversight, which means they’re free to do almost anything they want.
And their power doesn’t end in the United States. These companies also own a significant state in the vast majority of European companies that are listed on the U.S. stock exchange.
Now, you might think this is an exaggeration. How can four companies control so much wealth? But it’s true, and the information is available once you look for it. From the largest retail stores like Walmart and Home Depot to transportation companies like GMC and Boeing, pharmaceutical companies like Merck, Pfizer, and Johnson & Johnson, and media companies like Disney, Viacom, News Corp, NBC, CBS, Time Warner and AT&T.
They influence the banking system as they’re involved in EVERY decision made at the largest financial institutions like Bank of America, JP Morgan, Goldman Sachs, and Citigroup.
In the United States, the U.S. Federal Reserve, the country’s central banking institution, has board members who represent these four investment firms. Global financial institutions like the International Monetary Fund and the World Bank are influenced heavily by these companies.
So, who exactly are these four companies?
The largest of the four companies, BlackRock, was founded in 1988 by Larry Fink. Like the other three firms, BlackRock is a fiduciary, which means that a person has placed trust in them to act in their best financial interest. BlackRock does this primarily through mutual funds, collections of assets that invest in stocks, bonds and other securities like real estate. BlackRock currently has 70 offices in 30 countries around the globe and holds $10 trillion in assets. The company is currently worth $20 trillion, which is half of the U.S.’s Yearly Gross Domestic Product (GDP), which is the measure of value created by a country by producing goods and services.
The other three companies are Vanguard, State Street, and Fidelity Investments. Vanguard manages $7.6 trillion in assets and is the world’s largest issuer of mutual funds. At the end of 2022, it had 203 U.S. funds and 227 international funds, which served its 50 million investors. Vanguard’s founder, John Bogle, created the first index investment fund in 1976, now known as the Vanguard 500 index fund. You might be wondering the difference between an index and a mutual fund. An index fund is a type of mutual fund that is passively managed as opposed to other mutual funds, which are actively managed. So, when Bogle invented this index fund, he created a formula to track returns on the market and invest accordingly.
State Street is owned by Vanguard now but is the second-oldest continually operating U.S. bank. Its predecessor, Union Bank, was founded in 1792. State Street manages $3.9 trillion in investment assets. Along with Vanguard and BlackRock, it is one of the prominent three index fund managers that dominate corporate America.
Fidelity Investments manages $4.3 trillion in assets. It was founded by Edward Johnson II in 1946 and has remained a family-owned and operated business ever since. Fidelity was the first major American finance firm to market mutual funds to everyone via mail and door-to-door sales. Before they opened their doors, the mere idea of investing had been reserved for wealthy individuals.
Hearing that alone, you might be wondering what exactly is wrong with these companies. They all sound like industry pioneers who have done incredible to stay in business for so long. And while that is entirely right, it’s only half the story.
To figure out the other half, let’s start with what these companies TELL us they do. Each of these firms helps everyday people invest their money. Whether you’re a multi-millionaire or an hourly worker looking to create a small investment fund for your family, they have helped democratize investing.
And, often, investing with them can seem like a good idea, especially lately. Because in today’s world, we’re not just worried about making money; we’re concerned about making money and helping move our society forward.
That’s where ESG investing comes in. ESG, which stands for environmental social governance, is a type of investing that considers social and environmental factors. So basically, what is the company you’re investing in doing about environmental issues like climate change? All of these four firms advertise their commitment to ESG.
As you would expect, some people have mocked these firms’ stance on ESG, calling it ‘woke investing.’ In response, companies like BlackRock have responded by saying, ‘It’s not woke, it’s capitalism’. The way they see it, climate change poses a risk, so investing in companies that further the effects of climate change is also a risk. On the flip side, investing in companies trying to mitigate that risk is good business.
To give them all credit, they’ve put their money where their mouths are. In 2021, Vanguard, BlackRock and State Street successfully shook up the board of Exxon Mobil by installing new members who promised to take on climate change. And Blackrock let the state of West Virginia, a huge coal producer, pull out of the investment firm due to their pledge to invest in net-zero companies.
But when you peel back the curtain, it’s not as wholesome as these firms would like to make it sound, especially when it comes to ESG investing. Every single one of these companies is about as hypocritical as they get.
Vanguard, specifically, praises its own ESG investing while also owning $86 billion in coal companies, making it the world’s largest investor in the industry.
Blackrock is the world’s top investor in fossil fuels and deforestation, war profiteering and doing business with human rights violators.
Look no further than BlackRock’s deal with the Chinese government. The firm became the first company to have access to China’s vast mutual fund market, followed by Fidelity. This left many skeptics wondering, what did they promise President Xi Jinping? With this deal, these two companies will be pouring more and more money into Chinese companies, which are primarily controlled by the Chinese government, a growing adversary of Western democracies.
Even more controversial are the firms’ investments in Russia.
All of these companies had assets invested in Russian companies. Once the war broke out in Ukraine, they all responded, at least publicly, by freezing those investments or pulling out of them altogether. Whether or not those assets will stay out of Russia long term is questionable. Regardless, years and years of investments from these four companies undoubtedly helped fund Putin’s invasion of Ukraine.
No matter how you slice it, these companies are riddled with conflicts of interest.
In Ukraine, BlackRock is one of the leaders trying to advise the country on rebuilding once the conflict is resolved. This may seem benevolent, but not all that glitters is gold. In reality, BlackRock is simply capitalizing on a war that their funds helped finance so they can make even more money by being one of the pioneers of “the new Ukraine.”
Fidelity’s problems are closer to home than the others.
The Johnson family, which founded and runs Fidelity, also runs a venture capital arm that competes with Fidelity’s investments, which means the family benefits while Fidelity investors get a crappy deal.
For example, from 2011 to 2012, F-Prime Capital, the family’s venture capital arm, invested $11 million in Ultragenyx Pharmaceutical Inc. before it went public. This investment prevented Fidelity’s mutual funds from making the same play because, if it did, it would have violated U.S. securities laws. So, the family-owned fund got the better stock value while the public funds, which invested in the company at a higher rate, got screwed.
Essentially, these companies, which have immense power and control in our world, tell us a manicured PR statement about what they’re doing. But, in reality, the story is much more complicated and problematic.
None of their success would be possible without the various proprietary technologies they’ve developed to help their investing strategies.
The prime example is BlackRock’s Aladdin technology, which began the trend of using technology to minimize the risk of investing. It manages $20 trillion in assets and predicts the outcomes of every single investment while getting information and personal data on everyone who knowingly or unknowingly gave BlackRock their money.
This technology, and others like it, are perfect for investors. They’ve helped to lower the cost of managing the investment while improving returns.
This type of technology is what makes companies like BlackRock and others grow. It gives them an edge. It allows them to apply their investing strategy company-wide. It will enable investors to diversify their portfolios more effectively.
Technologies like this democratize investing, allowing anyone of any level of wealth to benefit from a sound investment strategy.
That is why over 80% of all assets invested over the last decade have gone to these four companies.
But at what cost?
And if these companies continue to revolutionize, advance their technologies, and control more and more investor assets… then what?
We are at risk of ownership concentration. If BlackRock, Vanguard, Fidelity and State Street continue increasing their influence over the biggest companies across every industry, competition will decrease. They will be competing with themselves, which isn’t competing at all.
This leads to less consumer choice and higher prices. We can see this already happening in the airline industry. Over the last 14 years, airfares have increased by as much as 7% because there is less pressure to compete. BlackRock and Vanguard are among the five largest shareholders of the three biggest operators. While will they reduce prices?
But this isn’t just about the companies. It’s about the people who run and own them. The people who make the decisions, pull the levers and hold so much power you can’t imagine.
Let’s start with Larry Fink, founder, chairman and CEO of BlackRock. He started out at a New York-based investment bank, where he rose to manage the firm’s bond department. Unfortunately, his career there ended when he lost his department $100 million after an incorrect prediction about interest rates. This led him to focus his next venture on investing and risk management, and BlackRock was born. He founded the firm in 1988 and grew it from a $5 million to $8 billion value in just five years.
Abigail Johnson, CEO of Fidelity Investments, didn’t grow the company she leads from the ground up. She’s the granddaughter of Fidelity’s founder, Edward C. Johnson II. She started as an analyst and portfolio manager at the company before being promoted to the president of Fidelity’s Asset Management division. In this position, in the early 2000s, like a juicy episode of the TV series Succession, Johnson unsuccessfully attempted to remove her father as CEO over disagreements about how to lead the company. It wouldn’t take too long for her time to come, though. As in 2014, she was named CEO.
State Street CEO Ronald P. O’Hanley has ties to Fidelity, having previously served as the president of asset management and corporate services there before entering his current role. The world of finance is smaller than we think.
And Vanguard, uniquely, is owned by its clients. Or, instead, by the funds they invest in. Its president and CEO, Mortimer J. Buckley, started his career as an assistant to the company’s founder, John Bogle. Bogle, the guy who essentially invented the index fund, may not like the direction his business is going in. He’s warned of ownership concentration, saying that too much money is in too few hands.
Undoubtedly, asset management has made Mr. Bogle a very wealthy man. But perhaps he sees beyond that wealth. Maybe he understands the power he and others like him have over every industry they invest in and every investor who entrusts them. He may be issuing a warning to us all, but it’s not one we are likely to be able to do anything about.
Because these four companies are just too influential, our global financial system, meant to empower individual investors, has empowered a select few individuals instead. So, while we get distracted by celebrities’ faces on the front of magazines or flashing by in our social media doom scrolls, these company leaders are behind the scenes, pulling the levers, secretly deciding the financial future of our world… whether we like it or not.
The worst of them all is BlackRock; watch this video next to understand why.
