Larry Fink: Career Lessons from BlackRock's CEO
[12 mins] Humility is being able to admit that you were wrong. It’s not always easy. But if you can’t admit you’re wrong, you can’t grow.
“Success and failure both require humility – knowing there are limits to your knowledge and your abilities.
Humility is being able to admit that you were wrong. It’s not always easy. But if you can’t admit you’re wrong, you can’t grow.”
— Excerpt from Larry Fink’s commencement address at UCLA in 2016.
Good day, my readers! 🫡
Larry Fink's journey to the pinnacle of Wall Street is a remarkable tale of resilience and vision.
After suffering a significant trading loss that led to his departure from First Boston, Fink refused to be defined by failure.
Instead, he co-founded BlackRock and built it into a powerhouse that now manages over $10 trillion in assets.
His ability to overcome setbacks and seize opportunities during crises has established him as a transformative figure in finance.
Today, I present 3 lessons that we can all learn from Larry Fink.
Enjoy! 🙂
What to expect 🔎
Early Beginnings — Unlike other Wall Street titans, Larry was a very ordinary child. He wasn’t an outstanding student. He didn’t excel at sports.
First Boston — He went from CEO-in-waiting to outcast. As fast as he became a rising star, he was just as quickly ousted from the limelight.
BlackRock — From an ordinary childhood devoid of remarkable achievements, Larry Fink rises to become the undisputed king of Wall Street.
Lessons you will learn 📚
Success does not require exceptional beginnings.
Success and failure require humility. It’s not always easy to admit that you were wrong, but if you can’t admit it, you can’t grow.
After the rain, the sun will reappear. There is life. After the pain, the joy will still be here.
Early Beginnings
Larry Fink was born on November 2, 1952.
He grew up in Van Nuys, a nondescript neighbourhood in Los Angeles’ San Fernando.
His father owned a shoe store while his mother was an English professor at California State University’s Northridge campus.
Unlike other Wall Street titans such as Jamie Dimon or Stephen Schwarzman who showed signs of brilliance from an early age, Larry was a very ordinary child.
He wasn’t an outstanding student. He didn’t excel at sports. He didn’t have musical talents.
He was bang average to say the least.
He was forced to help out at his father’s shop — a chore his more gifted sibling was exempted from.
His father had probably thought it would be wise to have Larry start helping and learn a thing or two as a back-up plan for his future.
Larry drifted into a political theory degree at UCLA. Aside from some basic economics, he did no business studies until his senior year.
On a whim, he decided to enroll in graduate-level real estate courses, which ignited a newfound passion for the field.
This decision proved to be transformative. ✨
It not only solidified his interest in finance but also laid the groundwork for his subsequent pursuit of an MBA at UCLA's Anderson School of Management, where he specialized in real estate.
Larry graduated with his bachelor's degree in political science in 1974 and went on to earn his MBA in 1976, marking the beginning of his journey into the financial world.
He stumbled in his final interview with Goldman Sachs, which led him to accept a position at First Boston instead.
Larry says, “I was devastated, but it ended up being the blessing of blessings.”
He was placed in its bond-trading department, and, given his real estate knowledge, was mainly trading mortgage-backed bonds.
Timeline (so far):
1952 - Larry Fink is born.
1976 - Larry graduates from UCLA with a political theory degree.
1978 - Larry completes his MBA with UCLA and joins First Boston.
Lesson 📚
Success does not require exceptional beginnings.
First Boston
Larry was 23-year-old when he started his career at First Boston in 1976.
By the early 1980s, he was put in charge of what was then a virtually unknown business – structuring and trading mortgage-backed securities.
Larry was instrumental in creation and evolution of mortgage-backed securities market in the US.
He pitched the first collateralized mortgage obligation (CMO) that Freddie Mac ever issued.
What is Freddie Mac 🤷
Freddie Mac, officially known as the Federal Home Loan Mortgage Corporation (FHLMC), is a publicly traded government-sponsored enterprise (GSE) established in 1970.
Its primary purpose is to expand the secondary market for mortgages in the United States, thereby increasing the availability of mortgage funds for homebuyers.
He saw it as a way for Freddie Mac to offload $1 billion in mortgages.
Executives at Freddie agreed and allowed First Boston to take mortgages, pool them, slice them, and sell them as securities.
Larry sold his first CMO in 1983. This hugely profitable offering made him a rock star at First Boston.
Soon he was creating similar products for General Motors and other finance companies, including the 1986 $4.6 billion securitization of General Motors’ auto loans.
Over time, Larry added about $1 billion to First Boston’s bottom line.
At 31, he became the youngest managing director in First Boston’s history and the youngest member of its management committee.
Many believed that he would eventually run the firm.
Then his downfall came. 📉
Although he was much smarter than many bond traders, Larry’s ego grew in tandem with his success, and his cockiness grated with some colleagues.
He once admitted, “I was a jerk. My team and I felt like rock stars. Management loved us. I was on track to become CEO of the firm. And then… well, I screwed up. And it was bad.”
Larry's hot streak at First Boston ended in 1986.
His desk suddenly lost about $100m when interest rates unexpectedly fell.
He recalled, "I lost $100 million in one quarter, and I didn't know why. And we made $130 million the quarter before, and I didn't know why we made so much money. So we should have been fired the quarter we made the money.”
On Wall Street, you are only as good as your last quarter.
Despite the money Fink had made at First Boston in the preceding decade, he went from CEO-in-waiting to outcast, until he eventually quit in early 1988.
As fast as he became a rising star, he was just as quickly ousted from the limelight.
In 2016, as Larry delivered the commencement address to UCLA undergraduates, he reflected:
“I was upset with how we were sidelined. But I was even more upset with myself, because I had become complacent… too sure of what I thought I knew.
Success and failure both require humility – knowing there are limits to your knowledge and your abilities.
Humility is being able to admit that you were wrong.
It’s not always easy. But if you can’t admit you’re wrong, you can’t grow.
Whether in my 42 years of marriage or my 40-year career, I know that one of most important things I can say when I’ve made a mistake is: “I’m sorry. What can I do better?”
Only when you’ve asked that question can you really begin to grow.”
Larry's experience at First Boston would profoundly influence his future endeavours.
Lesson 📚
Success and failure require humility.
It’s not always easy to admit that you were wrong, but if you can’t admit it, you can’t grow.
BlackRock
Timeline (so far):
1952 - Larry Fink is born.
1974 - Larry graduates from UCLA with a political theory degree.
1976 - Larry completes his MBA with UCLA and joins First Boston.
1983 - Larry becomes the youngest managing director in First Boston's history.
1986 - Larry loses $100M. He becomes an outcast at First Boston.
1988 - Larry leaves First Boston. He starts BlackRock with several other founders.
After leaving the firm in 1988, Larry co-founded BlackRock, where he committed to implementing robust risk management systems to avoid similar mistakes at First Boston.
He stated, “The whole concept for BlackRock grew out of that experience at First Boston. We are not going to live that again. We are going to have systems to analyze risk.”
Larry assembled a group of highly talented and accomplished individuals to start BlackRock.
He basically formed the Avengers of Wall Street.
They comprised of math experts who headed the designs of risk management tools at many top banks. Mortgage bond specialists. Top bond analysts.
One key person was Robert Kapito, Fink’s right-hand man on the mortgage trading desk at First Boston.
He is one of the few early founders of BlackRock that are still with the company today.
Some would say they are the “yin and yang” of BlackRock. Larry was the guy who loves schmoozing, networking and drawing up the grand strategy. Kapito was the aggressive and uncompromising executor.
One BlackRock executive observed:
Rob would be wholly unsuccessful without Larry, but what people don’t realize is that Larry would probably be wholly unsuccessful without Rob.
The two of them are like salt and pepper shakers. They are very different, but they go together.”
The funny backstory had been that Larry wasn’t too keen on hiring Kapito at First Boston.
He was forced into it by his manager.
Back then, most of Larry’s team was Jewish. When the Jewish holidays came by, more than half the team would be gone.
He hired Kapito because he thought he could work on the desk when everyone else was off for the holidays. As it turns out, Kapito was just as Jewish as the rest of the guys.
Thanks to Larry and his team’s solid reputations and connections within the industry, BlackRock hit the ground running.
Within its first six years, the firm managed about $23bn and grew from about 8 to 150 employees. 📈
However, when BlackRock went public in October 1999, the offering was met with a tepid response.
The market valued BlackRock at just under $900M – much lower than anticipated given how quickly the firm had grown the size of its asset under management.
The lacklustre performance had been largely due to the timing of IPO.
Markets had started to turn volatile. Technology stocks faced inflated valuations. A dot-com bubble was forming, and investors were growing cautious.
Larry had been tempted to scrap the whole thing, but Merrill Lynch’s chief executive David Komansky, whose company was the lead underwriter, dissuaded him.
He yelled at Larry:
“What the fuck are you doing? Just do the IPO.
If you do your job well over the next four to five years, it will be a distant memory.
Just do the fucking IPO now. Don’t be a fucking asshole.”
Shortly after, the dot-com bubble burst.
In a turn of events, BlackRock’s bond-oriented business suddenly became a very attractive alternative for investors looking for stability.
As BlackRock's business expanded rapidly, its balance sheet grew increasingly robust.
This meant that they could go after huge acquisitions that would transform their business.
Lesson 📚
After the rain, the sun will reappear. There is life. After the pain, the joy will still be here.
The first deal came in the summer of 2004, when BlackRock bought State Street Research, a money manager owned by insurer MetLife, for $375m.
But the first truly transformational deal arrived a few years later.
In 2006, the well-connected Larry learnt that Merrill Lynch’s new CEO Stan O’Neal was open to the idea of selling the investment bank’s sprawling money-management arm, Merrill Lynch Investment Management.
The deal valued MLIM at approximately $13.5 billion, with BlackRock acquiring a 49.8% stake in the combined entity.
At the time of the merger, MLIM managed around $491 billion in assets, while BlackRock had approximately $511 billion, bringing the total AUM close to $1 trillion. This positioned the new BlackRock as one of the largest asset managers globally.
Another pivotal deal that elevated BlackRock to the forefront of Wall Street occurred in 2009, just a year after the tumultuous events of the 2008 financial crisis.
Thanks to its rigorous risk management philosophy, BlackRock emerged unscathed from the turmoil of the financial crisis and was well-positioned to seize emerging opportunities.
In the wake of the 2008 financial crisis, Barclays faced significant challenges, including the need to bolster its capital position. The bank had previously acquired the U.S. operations of Lehman Brothers, which became a financial burden.
By early 2009, Barclays was under pressure to raise capital and avoid a government bailout. This situation made Barclay Global Investors (BGI), which included the highly successful iShares ETF platform, a prime candidate for sale.
Larry Fink, CEO of BlackRock, recognized this opportunity.
On June 11, 2009, BlackRock announced it would acquire BGI for $13.5 billion in stock and cash.
At the time of the acquisition, BGI managed approximately $1.3 trillion in assets. BlackRock had about $1.3 trillion in assets under management prior to the deal.
The merger effectively doubled BlackRock's AUM, positioning it as the largest asset manager globally.
Today, BlackRock’s stock market valuation is about $126b.
Larger than the combined values of its competitors T Rowe Price, Franklin Templeton, Invesco, Janus Henderson, Schroders and State Street.
Its asset under management has ballooned to over $10 trillion – two times larger than the size of Japan’s economy.
From an ordinary childhood devoid of remarkable achievements, Larry Fink has risen to become the undisputed king of Wall Street, leading BlackRock to unparalleled heights in the financial world. 👑
Timeline (complete):
1952 - Larry Fink is born.
1974 - Larry graduates from UCLA with a political theory degree.
1976 - Larry completes his MBA with UCLA and joins First Boston.
1983 - Larry becomes the youngest managing director in First Boston's history.
1986 - Larry loses $100M. He becomes an outcast at First Boston.
1988 - Larry leaves First Boston. He starts BlackRock with several other founders.
1994 - BlackRock grows rapidly. It now manages $23 billion of assets and grows from 8 to 150 employees.
1999 - BlackRock IPOs. However, performance is lackluster.
2000 - The dot-com bubble bursts. BlackRock business expands rapidly.
2006 - BlackRock merges with Merrill Lynch Investment Management. Total asset under management is now $1 trillion.
2009 - BlackRock buys Barclay Global Investors and their highly successful iShares ETF platform. BlackRock grows to $2.6 trillion asset under management.
2024 - BlackRock manages over $10 trillion of assets. Two times larger than the size of Japan's economy.
Ladies and gentlemen, there you have it. Larry Fink.
Thank you so much for reading up to this point. I thoroughly enjoyed learning about Larry’s career.
I hoped you enjoyed reading this too. If you did, please subscribe for more career spotlights.
Take care and till next time! 🫡