Monday, August 12, 2013

Blackrock's CEO on Fear in the Global Economy

Meet Larry Fink, CEO of Blackrock - one of the largest asset managers in the world.  While not exactly the bravest sounding name he drops a few quotes in the most recent issue of BusinessWeek that shows he knows bravery in the face of fear.

When asked about longer life expectancy and the impact of living an average extra ten years and its impact on public policy, public pensions, retirement saving, and working longer and how the public's perception of retirement in the face of the longer life expectancy he had this to say.

Q: Are fear and alarm the best way to fix this problem?
A: No. It’s talking about the blessing of longevity. I mean, I’m surprised at how much we spend and read about having better health, whether it’s more exercise, and whether it’s taking omega-3 pills, eating more healthy, having preventive health care.

Whereas the financial services community feeds off of personal fear, Fink runs the other direction with the question and challenges everyone to focus on the blessing of a longer life.  He follows it up with this Q and A:

What would you say is the biggest enemy of adequate retirement savings right now?
One of the key elements of human behavior is, humans have a greater fear of loss than enjoyment of success. All the academic studies will show you that the fear of loss of capital is far greater than the enjoyment of gains. You have seen most individual investors underinvest, because they’re so frightened of losing money.

He continues the theme by admonishing us to let go of fear and begin to embrace the possibility of success.  Blackrock isn't going to sell fear - they have a very long-term perspective as shown by his last comment.

You manage $4 trillion worth of assets, but you’re not Wall Street?
What Wall Street is, they’re market makers. Wall Street’s business model is making money on velocity of money. They’re a click industry. That’s what Wall Street is. They make a lot of money when there’s a lot of turnover. And they make a lot of money when that velocity is fast. The investment management business, we don’t make money on clicks. Actually, our returns degrade when we buy and sell a lot because we pay commissions to Wall Street. So our job is long periods of holding. 

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