On a typical day, you might walk into a store and wander down an aisle hoping to pick up some groceries. As you enter the store, you find it sectioned off into different aisles which will make it easy for you to find what you need. You walk into one of those aisles, you start to see the product you’re looking for, let’s say cereal for the time being.
As you walk down the cereal aisle, you will find that you are given an executive choice to make, what brand of cereal are you going to choose? Having the choice of a brand makes us feel like we get to choose what we put into our body. If I don’t like a certain cereal's taste, I can choose another, I can give my money to a company that matches my criteria, whether I’m focused on health, taste, or any other reason.
But, this is a twisted game of illusions. This is where they give the consumer power, leading them to believe that they are making a choice amongst different brands…but it’s kind of a lie.
A recent video on Tiktok went viral because it exposed who owns most of our food brands. You might walk into a grocery store and see 20-30 different brands but behind those 30 brands are a few companies. The main kicker is that behind those few companies, they all have one thing in common, the biggest investors are either Vanguard or BlackRock.
Who is BlackRock and Vanguard?
Vanguard and BlackRock are two of the largest investment firms in the world, managing trillions of dollars in assets for their clients. They offer a variety of products and services, such as mutual funds, exchange-traded funds (ETFs), index funds, active management, portfolio construction, risk management, and advisory services.
Vanguard was founded in 1975 by John C. Bogle, who pioneered the concept of index investing. BlackRock was founded in 1988 by Larry Fink and seven other partners, who started as a fixed income investment manager. It has grown to become a global leader in asset management, risk management, and technology solutions. It is also a publicly traded company, with its shares listed on the New York Stock Exchange.
So the gist of it is that BlackRock and Vanguard are investment firms, they invest money from their clients and now hold large shares in some of the biggest companies in the world. What are these companies you might ask? These companies include Apple, Microsoft, Google, Amazon in the tech industry, they own Visa and Mastercard in the banking industry, Johnson & Johnson and Procter and Gamble for consumer goods and tons of more companies. We’ll get more into the nitty gritty later.
Now this is speculation but after that video went viral, it didn’t take long till one of the main search results for “About Vanguard and BlackRock” became:
You have to admit that it is slightly suspicious. Why would this need to be an immediate result for someone inquiring about financial management? But I will let you decide what you think and just present you with the facts.
And sure, the article goes on to state that the money they use to buy the share's is the client's money and that they do not make any personal decisions, but they also manage trillions of dollars so I have to ask, do millions of clients get to have a say or are there a handful of executives that have most of the control?
Conflict of Interest: How does BlackRock's management of assets and its instrumental role in resolving the 2008 financial crisis raise concerns over lack of transparency?
Combined, these firms manage assets worth around $20 trillion, equating to more than half the total value of all companies in the S&P 500, at about $38 trillion. To put this scale into perspective, this is larger than the GDP of every country on the planet.
BlackRock has also earned the moniker “The fourth branch of government” from Bloomberg, due to its close ties with central banks and its significant role in cleaning up the mess of the 2008 housing crisis alongside the Federal Reserve.
Let me elaborate, during the 2008 financial crisis, when the housing bubble burst and led to a broader financial meltdown, BlackRock, one of the world's largest asset management firms, was recruited by the Federal Reserve to assist with the fallout.
Now, how did the Federal reserve decide that BlackRock being tasked with valuing and selling assets that it, or its clients, may have had a vested interest in, creating the potential for conflicts was a good idea? Only they could answer that for you.
Wasn’t it a conflict of interest to have an investment firm dispose of assets in a manner that could impact its own holdings or those of its clients?
How do we know that BlackRock's involvement wasn’t influenced by its own investment decisions and strategies, prioritizing its own interests or those of its clients over those of the taxpayers? There’s also a very obvious lack of transparency surrounding BlackRock's actions during this time, giving the perfect atmosphere for mistrust to sprout.
Decoding the Titans: How do BlackRock and Vanguard, through their enormous Assets Under Management (AUM), leverage their influence across diverse sectors?
Just to reiterate, the Assets Under Management (AUM) of BlackRock and Vanguard stands at $8.6 trillion and $8.1 trillion respectively, with investments spread across 1600 U.S. companies.
The largest shareholder for BlackRock is Vanguard and the largest shareholder for Vanguard is BlackRock. On both of their sheets, a subset of either company owns their own shares.
And the influence doesn’t stop there.
It extends into global financial markets. For example, BlackRock’s trading algorithm, Aladdin (Asset, Liability, Debt and Derivative Investment Network), conducts an average of 250,000 trades daily, managing over $21.6 trillion in assets. It directs the actions of almost all major U.S. banks and the Federal Reserve, controlling a large chunk of ETFs, the bond market, and the stock market. The vast network of Aladdin, consisting of approximately 5,000 supercomputers, is relied upon by numerous banks and funds, raising crucial questions about our delicate financial system.
In the food industry, institutional investors hold a significant percentage of stock. For example, Vanguard Group is the largest shareholder in PepsiCo, with BlackRock not far behind. These firms also have a large stake in other major food companies.
In the energy sector, BlackRock has made sizable investments, including $170 billion in U.S. public energy companies and $85bn in coal companies alone. Together, BlackRock, State Street, and Vanguard hold significant investments in oil companies operating in the Amazon rainforest.
In the pharmaceutical and health industry, the Vanguard Group holds the position of the largest shareholder in giants like Johnson & Johnson, Merck & Co, and many more, with BlackRock being the second-largest shareholder in these companies.
In digital media, Vanguard and BlackRock hold a significant stake in Time Warner, Comcast, Disney, and News Corp. They also own a substantial percentage of many significant foreign media outlets.
In the travel industry, Vanguard and BlackRock have stakes in Expedia Group, Bookings Holdings, American Express, Boeing, Airbnb, and TripAdvisor, among others.
These firms also have ties with the government, with many of their executives holding key positions in cabinets, including the one of President Joe Biden. They also have a history of major acquisitions, further solidifying their dominance in the financial market.
NGOs also feature in this interconnected landscape, with the Gates Foundation, a major sponsor of the World Health Organization, having ties with big pharma companies, and through them, with BlackRock, Vanguard, and State Street.
How do Vanguard and BlackRock investment strategies and extensive ownership across industries impact the global economy, and what are the potential consequences of their concentration of power?
All this data suggests only one thing which is that these firms have a pretty substantial amount of control over prominent businesses across numerous sectors, they’re not even limited from each other's stocks. Together, they form an enormous network of interlinked investments, resembling a pyramid, with Vanguard and BlackRock at its visible top.
The influence of these firms extends far beyond what is imaginable. Their reach permeates a wide array of industries, from food and technology to pharmaceuticals, media, travel, and beyond. What's even worse is that the intertwining nature of their investments means that the financial system that we rely on is formed on the flow of wealth and power being concentrated by two firms to an astonishing degree.
This concentration of power has serious implications for the global economy. With such broad portfolios, these companies have an outsized influence on the direction of industries and the global economy as a whole.
Their investment decisions can completely sway market trends, impact employment levels, and even shape government policy. The greatest evidence of this fact was the pandemic. With their influence, they have the power to either promote sustainable, equitable business practices, or contribute to economic disparities.
The ties between these major players and various governmental and non-governmental organizations adds an extra layer of complexity to their impact. The revolving doors between these financial behemoths and government positions bring to mind important questions about potential conflicts of interest and the influence of private wealth on public policy.
In the realm of media, the considerable stakes these companies hold would obviously influence the flow of information and public opinion, underscoring the importance of media diversity and independent journalism.
This concentration of power also raises serious concerns about market competition. If these companies have dominant stakes in a multitude of major businesses, it could lead to anti-competitive practices and stifle innovation.
The role of these companies in the energy sector, particularly their investments in fossil fuel companies, directly impact our global climate crisis. The decisions about where to invest could either support a transition to renewable energy or exacerbate our dependence on fossil fuels.
Both these companies have made it so that when you search up who they are owned by, it says "Client." But when you take a few seconds and look into who their biggest investor is (a.k.a "client"), it is the other firm. I just find that to be a little bit shady.
But who cares…so long as we get to pick what cereal we get to eat.