WHEN: Today, Wednesday, July 20, 2022
WHERE: CNBC’s “Mad Money”
Following is the unofficial transcript of a CNBC exclusive interview with BlackRock Founder, Chairman & CEO Larry Fink on CNBC’s “Mad Money” (M-F, 6PM-7PM ET) today, Wednesday, July 20th for the first week of “Mad Money” broadcasting from the New York Stock Exchange. Following is a link to video on CNBC.com:
All references must be sourced to CNBC.
PART I
JIM CRAMER: Larry first, I am absolutely thrilled during our first week that you’re here. You have created an institution like no other. Now many people have heard of BlackRock and they know it’s the biggest, but very few people actually know how it happened and what you do that’s so different from everyone else. First time on “Mad Money.” You’ve got the floor.
LARRY FINK: Well Jim, it’s great to be on the floor. It’s great to be here the first week on the New York Stock Exchange. As a former board member, this Exchange, you know, it’s a really important part of economic history for this country and the world. So it’s it’s a real pleasure to be here. There’s really no secret sauce. It’s it’s a building a firm with incredible culture, making and building a team of people on the concept of long-term ism that, you know, over time, I’ve learned from my parents that investing over a long period of time is the best way to invest and even from the first day we started the company in 1988 and then we went public in 1999, the whole concept was about building long term wealth. It is not something that is freakish or something that is going to be instantaneous. It’s about working with clients, being a fiduciary, making sure we are never in conflict with our clients. And I think over time, we continue to build the organization and we built it on behalf of our clients. This is before we were a public firm and then when we were public firm building on behalf of our clients and the beneficiaries were our shareholders. And I really do believe it’s, it’s the people of the firm. It’s our commitment to our clients worldwide and a recognition. You know, today we manage eight and a half trillion dollars.
CRAMER: I hope you realize that that’s quite, countries do not have that.
FINK: No but none of it is our money. Not a penny of it is our money and it’s a huge responsibility. We are actually the largest manager of retirement assets in the United States. We are the largest in Japan. We’re the largest in Mexico in retirement assets and number two in Great Britain. And nothing is more long term than building day after day, week after week at a pool of money to retire in dignity.
CRAMER: This is a great point. There have been literally millions of new people in our markets Larry and they’re in. They may and I love that okay but they may not be doing it right. Long-termism is something that they need to discover and be nurtured. How do we help them understand that as exciting as the markets can be, it may not be the most lucrative way to do it.
FINK: No. Well, first of all, I am thrilled that we’re seeing more people in the market and may I may disagree of their methods and the day trading and all that but let’s be clear, there’s room for all that too. But I’m thrilled about what is what we witnessed in crypto or what we witnessed in meme stocks. Okay, it’s, these are things that BlackRock doesn’t do but it’s an entry level and, and that entry level then should lead to understanding and studying what, you know, what are the companies that are going to, they’re going to grow and grow, you know, with America, with the world, with the globalization of the world grow together, that you’re going to be able to enjoy that growth and then have enough wealth to live in dignity during retirement.
CRAMER: You also have done something no other fund manager’s done, choice. You’ve always emphasized choice and this time you’ve even taken it to another level and not everybody’s using it I think it’s a shame. If you have certain leanings, you can tell your people how you lean and then they vote your way.
FINK: Correct. I mean, our our desire is to provide choice to every client. It’s their decision where to put the money and we built an organization that at one time was just a bond manager, and now we have the ability to across regions, across products from cash to private equity, you know, we’re the largest ETF manager for those people who don’t know iShares as part of Blackrock and so all of that is just providing choice. And I do believe that is what in and one other point, we have been democratizing the cost of entry. I mean, we have lowered our fees by 50% over the last 10 years in all our ETFs and so we’re doing this with the idea that we’re trying to make the entry level more easier, more successful, and that they’re going to be enjoying more of the upswing of the profits.
CRAMER: It’s vital the way they have to start this way. This is where they should put their money. Oh, you’re absolutely right. I don’t mind individual stock buying but you want retirement saving and you want choice, it’s your place. Now you also have done something that a lot of people may not be aware of. You have the finest financial tech division that would be worth in this crazy market far more, but instead and you’re doing number, number two or three in the industry use it. It’s Aladdin and we don’t talk about it.
FINK: So Aladdin is something that we started when I when I, when we started BlackRock, we wanted to develop our own proprietary risk system and 25% of the employees when we started as a startup company with no clients and no revenues was people in tech. And in 1980, that was kind of unusual. You know, at the start of FinTech which we weren’t smart enough to call it a FinTech in 1988 but we built us up the division now we are the leading financial technology firm in helping companies, financial services companies, banks, insurance companies, asset managers, wealth managers—
CRAMER: Government.
FINK: Governments.
CRAMER: Twice, right? When the government didn’t know what to do.
FINK: Many governments have hired us and continue to hire us, but to use the systems to help them. Now, the reason why so many wealth managers are using it today, why so many big investment firms that you may be, other people may be investing use it because it streamlines their process. So, it is a, it is a financial engine that allows from the idea generation to the trade entry to the ticket to the confirmation to the custodial bank and then it all rolls up into your your overall general account. So, you know what it does the most for the and why people love it, you spend less time operationally and more time investing because it streamlines the process and today, we have revenues of $1.3 billion just in our technology division and as you said, it is the leading risk system in financial services.
CRAMER: Or else I mean it is quite a compliment that your competitors find it’s the best one to use.
FINK: You know what? We, we, they’re our clients.
CRAMER: Right, right.
FINK: Okay so—
CRAMER: I have to be careful because your clients who also are in the same business.
FINK: We’re in the same business. But we created something called Open Aladdin now where if they want to have a proprietary model just for them, they have that and no one else will see that. So, it’s an open system that they can create their own models and systems. And it’s not this monolithic system that everybody turns left and turns right at the same time. It allows that individuality of each company to do what they think is right and the reason why they’re on it because it really streamlines it. Now let me tell you, I would tell you Aladdin is BlackRock’s secret sauce.
CRAMER: Yes, it is. I know that.
FINK: But it’s a secret sauce because when you see some of the other assets, financial services companies, they have a spaghetti of systems. We we operate even with eight and a half trillion dollars in one system across all products across all regions.
CRAMER: We’re not here to talk about why you should buy, you can tell people to buy BlackRock, I can. 3% with that technology, 3% yield is fantastic. We’re going to be right back with more of Larry Fink, CEO of BlackRock.
PART II
CRAMER: Alright Larry, we’ve talked about the greatness of BlackRock, but now get to talk about the greatness of our country, and whether it is threatened by inflation, whether it is threatened by global political tension or whether this just happens to be in the long-term business as usual for longer term investors.
FINK: It’s definitely business as usual. I mean, you know, when I started my career, when you started your career, you know, we had much higher inflation, much more problems in our country then. We’re gonna get through this and let’s be clear, we are, we have, we do have really elevated inflation. A lot of it is policy generated, our immigration policies, I can go on a lot of things—
CRAMER: No but that’s important. I’d like you to go on because it can lead to a recession and people need to know that.
FINK: And so much of the inflation is is really related to supply, not demand. Demand is actually unchanged from 2019. Okay, so that’s what people don’t understand demand has not changed that much. But the reality is we have supply problems because of supply chains and all that. Obviously, we have the Russia Ukraine war that aggravated this even more, but we’ve had and then we had just just a sum of monetary policy and fiscal stimulus over the last few years it’s all leading to this really elevated inflation.
CRAMER: Okay, so—
FINK: But this is all fixable.
CRAMER: Right. Well, I totally agree with you but let’s say you’re a person who’s worried about retirement and say has 10 years that where they want until they want to retire, do you tell them look you can go buy a three year? What do you, what would be—
FINK: So I’m asked that all the question by a really famous person calls me up panicking. What should I do? I gotta get out. I can’t stand it, I can’t stand it. I said, go on vacation, you know.
CRAMER: That’s—
FINK: Okay. I just said, Look, if you really can’t stand it, then sell it. I mean, I’m not here to tell you if you’re if you can’t sleep at night then sell. But the reality is we’ve seen this inflation is going to be fixed over time. We’re already seeing commodity prices crashing from the high.
CRAMER: Right, no one talks about that and supply chains have gotten better.
FINK: Supply chains and a lot of the industry is getting better right now. And and and so and the Federal Reserve is tightening and that is going to, the Federal Reserve’s tool is to tighten and through tightening, they will limit demand. So is there a risk of a recession? Sure.
CRAMER: But we’re not in one yet.
FINK: No, but and even if we’re in one, it’s gonna be quite mild. The financials, the financial foundation of America is as strong today as ever. This is not—
CRAMER: And the amount of money coming out of your from, your firm still has money coming in. But there is still a huge amount of money coming out. There are a lot of people who don’t have a lot of faith and real people are very concerned versus our mutual friend Ken Langone said, you know, most people do not realize that the price of chopped meat has gone up a lot in this country.
FINK: And unfortunately, he’s right. And I cited that in another commentary I gave last week. I’m more worried about food inflation than energy. Food inflation is so disruptive in the emerging world and so destructive and in parts of our communities in the United States and so we’re under appreciating and one of the biggest reasons why we have such large food inflation is the cost of fertilizer is up 150%. Okay, fertilizer is generally created, ammonia is created by natural gas and ammonia is the fertilizer that we use and so, you know, like BlackRock just announced a, an investment in a company that can create ammonia through hydrogen cheaper than any other new technology. So what I’m so bullish on and this is why I love capitalism in America, we have such unbelievable entrepreneurs. I had dinner last night with five unbelievable entrepreneurs and all five companies are new unicorns in environmental change, creating hydrogen, and we’re seeing—
CRAMER: Green hydrogen.
FINK: Green hydrogen.
CRAMER: And to be economic—
FINK: This is going to be blue hydrogen. Okay but, but it’s going to create but it’s going to create ammonia, so they’re building a factory actually in Nebraska right now. So it’s going to be right where all the farm belt is and so the farm but getting back to food, food prices are so elevated because we don’t have adequate fertilizer supply. Why? Because we don’t have we have not built enough pipeline through all the resources we have—
CRAMER: Because we have 100 years worth of natural gas but we can’t get it to where it has to go.
FINK: Correct.
CRAMER: And there are issues in the government about siting of pipelines, everybody has a view which brings me to something that you give people a view on. Climate change, but you very specifically in your letters have said this is about business. Climate change is about business which and frankly about the idea of, if you are not careful, it’s a great investment risk.
FINK: There’s no question climate risk is going to be, we’re gonna have a lot of investment risk in climate change, and we’re already seeing them the valuations of emerging countries already where you’re having these incredible heat spells. You’re seeing that right now. In fact, I could say at BlackRock that we have more employees in in our London office since since Covid. And you know why? We have air conditioning in our offices and they don’t have air conditioners at home. I mean it just—
CRAMER: Right but these are things, these are all part—
FINK: Our behavior changes are happening, and we have to be prepared for that. And the only way we have to be prepared to tackle this we have to aggressively invest in new technologies for decarbonization. But at the same time, we have to aggressively work with our energy companies to have adequate supply for security. But more importantly, our allies are all asking us right now can you provide us with more gas? Can you provide us more of that? And and so here we are 100 years of natural gas, we don’t have the pipelines to get it. We don’t have it. I mean, I’m working in projects in Alaska right now. We’re working on projects everywhere right now to try to make America the exporter.
CRAMER: And you offer if someone’s interested in what you’re saying you can invest in, in funds that do just this. So you can feel like you’re part of the solution. Now you are part of the solution, not feel. You really are part of the solution.
FINK: Look, we there we are, we’re going to have to tackle climate change, we’re going to have to do it as a world. But tackling climate change doesn’t mean the abandonment of hydrocarbons, it means it means we have to invest in hydrocarbons at the same time as we are as we are decarbonizing, but the key is if we’re ever going to get the world to that point, we have to provide a cheaper alternative to coal. Okay. The world right now is using more coal than ever and so this is why it’s a very complex issue. It’s not a one-year or two-year problem. It is more, the problem is beyond any one political cycle and that’s the tension we’re seeing now with politics in this.
CRAMER: So do we have enough people who are proficient enough to measure whether someone’s doing something climate worthy or ESG wise are we, are there too many companies claiming? Because you have to be, I wouldn’t want you to be the arbiter but you got a lot to do.
FINK: I don’t want to be the arbiter but, but let me be clear. So as a young bond trader, I was, you know, I was there at the beginning of the mortgage security market. Okay, and there was a lot of bad behavior back then that you see that in all new markets. We’ve always said, and this is how we built BlackRock on data analytics, we are committed in building the best data and analytics so we so we could show and understand how climate risk is investment risk. So this is one of the big sleeves of Aladdin, Aladdin climate so we could really build understand and help clients understand why we may think this. This is why we’re we have volunteered and asking companies to volunteer to provide more data so we can understand how a company is moving forward. And I would tell you, almost every company we speak to now is moving forward. This is, this is a change—
CRAMER: You know, these are all positives.
FINK: These are great.
CRAMER: These are all good and I’m gonna leave it at that because one I got to have you back but two I need, I needed hope. Many of us needed hope, many of us are—
FINK: Well, I but—
CRAMER: You offer—
FINK: Hope.
CRAMER: Substance. Substance I mean, this is not hope based on like, well, I hope it gets—
FINK: No this is we have to have data analytics to make it—
CRAMER: Actual data, people. Excellent. Anyway—
FINK: And it’s about hope. You’re right.
CRAMER: Alright, I like that. Larry Fink, Chairman and CEO of BlackRock, Larry, thank you so much.
FINK: No we gotta hug.
