#63 Building the Largest Asset Management Firm in the World: Co-Founder of BlackRock Barbara Novick

What this episode is about

Barbara Novick, co-founder of BlackRock, discusses the origins and growth of the largest asset management firm in the world, highlighting its inception in 1988 with a focus on complex fixed income securities. She reflects on the firm's unexpected journey to managing over $9 trillion in assets and shares insights into the collaborative dynamics among the eight founders that contributed to their success.

Key takeaways

• BlackRock's success proves that in finance, a boutique idea can turn into a behemoth with the right partnership.
• From niche beginnings, diversifying quickly became BlackRock's lifeline—proving adaptability is key in asset management.
• Eight founders with differing perspectives transformed conflict into creativity, proving that healthy debates fuel innovation.
• Embracing change isn't just a motto; it’s BlackRock's lifeblood, turning industry threats into strategic opportunities.
• With $9 trillion under management, BlackRock shows that sometimes, size really does matter in the investment world.

Who speaks in this episode?

• Lynn Tomen (Host) · 8 min speaking
• Barbara Novick (Guest) · 19 min speaking

What is discussed, and when

1. 0:00 – 5:00: Black Rock, Lynn Tomen, Amazon, Facebook
2. 5:00 – 10:00: Black Rock, PNC Bank
3. 10:00 – 15:00: Black Rock, State Street
4. 15:00 – 20:00: Black Rock
5. 25:00 – 27:08: Facebook

Notable quotes from "#63 Building the Largest Asset Management Firm in the World: Co-Founder of BlackRock Barbara Novick"

• Welcome to the three takeaways podcast which features short memorable conversations with the world's best thinkers Business Leaders writers politicians scientists and other.

  about Lynn Tomen · at 0:01

• Germany and Japan it is also larger than the market value of Apple Amazon Facebook and Google combined Barbara has just transitioned from Vice chairman to senior advisor of…

  about Black Rock · at 0:55

• A long time it was probably about the 10year mark where we really started to move into other asset classes partly as a result of us joining PNC Bank and how did you view change…

  about PNC Bank · at 5:06

• Odd product mix just because of the nature of the pieces that came to us through that system so we ended up buying State Street research and management up in Boston from meti…

  about State Street · at 13:32

• Data I don't even know what we're talking about right and it's not so easy to get good data on many companies so we focused very early on sasb as a reporting standard of course…

  about SASB · at 16:23

Who and what is mentioned in this episode?

People

• Barbara Novick — Person · Main guest · 2 mentions
  Co-founder and senior leader of BlackRock, she explains how the firm grew (strategy, tech, acquisitions, regulation) and shares her three career takeaways.
  And Columbia Lynn tomen hi everyone it's Lyn toen welcome to another episode today I'm delighted to be with Barbara novic she's a co-founder of Black Rock the largest…
• Lynn Tomen — Person · Host · 1 mention · first at 0:21
  She introduces the show and interviews Barbara Novick, guiding the discussion through BlackRock’s founding, growth, and lessons learned.

Companies & orgs

• Black Rock — Company · Business focus · 9 mentions · first at 0:30
  Primary subject of the episode, discussed as the largest investment firm in the world with over $9 trillion under management.
• PNC Bank — Company · Business focus · 1 mention · first at 5:11
  Mentioned as a company BlackRock joined, which helped them diversify into other asset classes.
• State Street — Company · Business focus · 1 mention · first at 13:40
  Mentioned as an acquisition that helped BlackRock scale in mutual funds and equities.
• Facebook — Company · Case study · 2 mentions · first at 1:01
  Used as a comparison to illustrate the scale of BlackRock's assets under management.
  World except for the US and China and it's larger than the combined GDP of Germany and Japan it is also larger than the market value of Apple Amazon Facebook and Google…
• Apple Inc. — Company · Case study · 2 mentions
  Used as a comparison to illustrate the scale of BlackRock's assets under management.
  World except for the US and China and it's larger than the combined GDP of Germany and Japan it is also larger than the market value of Apple Amazon Facebook and Google…
• Amazon — Company · Case study · 1 mention · first at 0:59
  Used as a comparison to illustrate the scale of BlackRock's assets under management.
  World except for the US and China and it's larger than the combined GDP of Germany and Japan it is also larger than the market value of Apple Amazon Facebook and Google…
• Google LLC — Company · Case study · 1 mention · first at 1:01
  Used as a comparison to illustrate the scale of BlackRock's assets under management.
  World except for the US and China and it's larger than the combined GDP of Germany and Japan it is also larger than the market value of Apple Amazon Facebook and Google…

Concepts & topics

• SASB — Concept · Framework · 2 mentions
  Discussed as a reporting standard for ESG data, fundamental to BlackRock's approach to sustainability.

Full transcript with timestamps

0:01 welcome to the three takeaways podcast which features short memorable conversations with the world's best thinkers Business Leaders writers politicians scientists and other newsmakers each episode ends with the three key takeaways that person has learned over their lives and their careers and now your host and board member of schools at Harvard Princeton and Columbia Lynn tomen hi everyone it's Lyn toen welcome to another episode today I'm delighted to be with Barbara novic she's a co-founder of Black Rock the largest investment firm in the world with over $9 trillion under management and clients in over a 100 countries to put $9 trillion in perspective it's more than the annual GDP the annual gross domestic product of all countries in the world except for the US and China and it's larger than the combined GDP of Germany and Japan it is also larger than the market value of Apple Amazon Facebook and Google combined Barbara has

1:05 just transitioned from Vice chairman to senior advisor of Black Rock I'm excited to find out how she and her co-founders built the largest asset management firm in the world and what the keys to Black Rock success are welcome Barbara and thanks so much for our conversation today thanks Lyn happy to join you it is a pleasure Barbara Barbara how did you come to start black Black Rock did you have any idea you were going to build the largest asset management firm in the world it's interesting when you look back 1988 is when we started and there were eight of us and we had an idea and the idea had to do with managing complex fixed income securities at the time mostly mortgages and asset back Securities and it was kind of a niche strategy to look forward and predict that we would grow to be the largest in the world not a chance would we hope to grow and and be successful and certainly sustain ourselves as a business yes but

2:10 no one had any idea how this would actually evolve over time eight is a whole lot of Founders how did you all function together was it good to have a lot of Founders I think eight was actually really good uh from the outset we were a partnership and there were some other firms that started around the same time that had different structures and they didn't succeed so it's both a combination of who we had and the Dynamics between us but then also the idea that it was a real partnership we were in it together we're all sort of rowing in the same direction if you will but with very different personalities and different perspectives which is healthy and debate at various points in time of directions and key decisions to make and what was your initial plan like the initial plan fit on one of the partners his kid had an easel one of those little Ty art easel and it said manage fixed income portfolios advise companies that have

3:20 fixed income portfolios and raise Capital to invest in companies whose primary business involves fixed income portfolios so that's kind of code word for insurance but basically that was the business plan fit on one big piece of paper wow and that's very simple did you stay focused on a narrow area or how did you think about diversifying and did that Focus change over time so at the very beginning it was very much a focus mortgages and asset backs but pretty clearly we decided that that was a very narrow Niche and while that was a great door opener and a great way to start a business in terms of foundation that we needed to have corporate bonds and overtime municipal bonds and then high yield and non-dollar and all these other fixed income asset classes and the thought was very simple mortgages were kind of a hot area at the time we were starting and they were complex a lot of people didn't understand them and we did

4:27 and that gave us the opening but over time our clients were going to change their needs and if somebody wanted to switch let's say from a mortgage specialty mandate to more of a core Bond or broad-based fixed income mandate if we didn't have that capability that meant they'd leave us if we had that capability they might cancel one mandate and morph it into a different mandate and that's exactly what ended up happening so we Diversified really just a few years into the business business and over time built out a full spectrum fixed income we stayed fixed income for a long time it was probably about the 10year mark where we really started to move into other asset classes partly as a result of us joining PNC Bank and how did you view change I'll jump ahead to the end but I I'll give you a taste here Embrace change I think that's the common theme from day one of our firm is you you might make some mistakes along the

5:35 way you have to course correct from those but overall Embrace change look at strategic opportunities in terms of Acquisitions or in the case of selling the company to PNC look at new asset classes look at new markets look at changes commercial mortgage back Securities became a thing we got involved in those fairly early even today looking at the ESG space we were one of the earlier participants in looking at sustainability and different aspects of sustainability so always looking forward trying to figure out what's next in the markets in technology in customer preferences and what products do you now offer everything if it's investable chances are we offer it so I think you have to look at it from who are our clients and our clients fit in multiple categories so a tremendous percentage of the money that's managed at Black Rock is for retirement but retirement includes pension plans it includes individuals in

6:47 IAS it includes 401K plans it includes even Insurance you know annuities and things like that so there's a lot of different preferences for those different types of in invers even within the retirement space and that then trickles down so it's both the asset classes and the different ways of combining them that might matter but then it's also can you offer it in investable format so a mutual fund or brand of mutual funds or a private fund or a separate account so there's a lot of different ways of delivering investment products to people and today we have everything from from mutual funds to ETFs to you name it and across the different asset classes and a growing um presence in the private Market infrastructure private Equity things like that how did you view public policy and how did you deal with it so the first 20 years we didn't really do much with public policy we kind of deferred everything to the cell side and

7:56 it worked just fine and then after the financial crisis we were concerned that there would be a wave of new rules and it was important for investors to have a seat at the table and so we established a public policy group I basically stood up a group to become a voice of investors on behalf of our clients and we again similar to the rest of our business Embrace change we didn't look at regulation and say oh that's a bad thing we said let's make sure there is new regulation that is good for investors so that's how we went into it a lot of Market structure issues many of which we supported and helped shape how did you think about technology technology from day one big for us so when you looked around we initially thought as many startups do that you buy not build so we went out we're going to raise a mutual fund and we need needed a custodian and we thought well let's see what systems are out there we need a portfolio management

9:05 system we need a custody we need a lot of things and everyone showed us what they had and told us what they could do and for basic custody that that was pretty straightforward but for portfolio Management Systems there really was nothing that did what we wanted we wanted something that would tell us real time our positions how they compared to the Benchmark that we were measuring against how much cash we had we we had a whole lot of requirements and we were shocked that that system wasn't there so instead of buying we were forced into a position of building and that was actually the birth of what is today our Black Rock Solutions or lad business and we've been a leader in technology for Asset Management we expanded it and decided to offer it externally even to competitors and that decision which was again a decision that got a lot of conversation internally but at the end of the day that was the direction we decid to go

10:07 and it's been a very good one and it's been very influential I think in the business yeah it's so interesting to me because the big us multinational Banks still don't have that kind of a technology system that provides all the information that you all do in such a customer friendly format yeah I can't comment on what other people have or don't have I don't get to see those systems but I know our system has been designed both to be usable as a portfolio manager but also it was initially designed that portfolio management client service people interface with custodians everyone throughout the firm would have access to the same information on the client portfolios and then over time we gave clients access to their own portfolios to be able to see information and it was was a very powerful thing today you know you can get things on your smartphone you can get it on a tablet you know so much has gone into the client experience

11:10 and trying to refresh that and stay up with new technology as one of the key platforms but then also using technology for what we call operational excellence and reducing errors and things like that and sometimes for investment ideas so artificial intelligence and machine learning and taking large data sets and coming up with kernels of insights from those those are all integrated into the systems how did you think about marketing for a firm the size of black rock it is remarkable that many people at the retail level don't know the firm how did you think about Marketing in the beginning and how did that evolve at the beginning we took the approach that we should stay under the radar we didn't have any marketing professionals we didn't have a PR department we weren't a public company and we took a very low-key approach it wasn't really until we did our IPO that we started to change and we realized that once we did an IPO

12:18 we were going to be putting information out every quarter and that people going to write about us whether we spoke with them or not so we started to engage a bit more today of course there's a whole PR department as well as a marketing department and we do things in multiple languages very much pushed out to the different marketplaces and it's uh a much more proactive approach but the original one was to do as little as possible and then we sort of grew into it as our business evolved public company more retail products more retail shareholders um today I think a lot of people have heard of us and are aware of us where acquisition important for Black Rock success and growth Acquisitions were very important we were very much a fixed income shop when we joined PNC they had we had sister subsidiaries that did equities and then over time they asked us to take those buy those into our company and actually manage those

13:19 companies so that was our first sort of dip our toe in the water for equities and we realized pretty quickly that we didn't have enough size to be effective and we had kind of an odd product mix just because of the nature of the pieces that came to us through that system so we ended up buying State Street research and management up in Boston from meti and that took us to a different level we had a lot more or I'll say sort of normal broad-based strategies things people were looking for in addition to the niche strategies that we had gotten through PNC and even that we didn't feel was big enough or broad enough and when we bought Mira Lynch Investment Management that was another game Cher so really took us to a point of scale in mutual funds in equities to a product mix that was much more appealing to a much broader set of clients and then I would say you know the final acquisition really being

14:27 bgi and that taking us into index investing in addition to active but also giving us the ETF product line so today we've got a mix of kind of every specialty you know every sector health care and technology and all sorts of Niche things and also many Regional products and a really good mix and how did you think about local versus global local versus global is key on multiple Dimensions there's clearly the client Dimension but there's also today a very strong regulatory Dimension so if you look let's say take ESG as an example since it's very current There Are Rules coming out that are EU specific There are rules in different markets in in Asia in Japan in China in Australia all over the region and then in the US yet had a different set of rules so you have to be able to number one comply with all the rules that's always a given but in today's day and age preferably try to engage early so that you can be involved in shaping

15:40 those rules and you can provide some practical input the practitioners perspective is important and the investor perspective is important so that's really what we set out to do and today I think it's really quite apparent how much you need to have that local aspect for environmental social governance ESG you were one of the first to focus on ESG what do you think is next what's next I don't think ESG is anywhere near done I think you know we set out and and the pillars that I looked at and and tried to encourage was number one company reporting you know without good data I don't even know what we're talking about right and it's not so easy to get good data on many companies so we focused very early on sasb as a reporting standard of course they've now gone through a couple of iterations but just getting some globally accepted standards for companies to report that's a fundamental building block to everything

16:47 else the second thing we talked about and we put out reports on this was that there should be a Common Language we called it taxonomy but really Lang anguage for how you talk about ESG how do you label products how do you position products because one person might say ESG is no tobacco somebody else might say it's no carbon somebody else might say it's you know the best ESG scores from msci in a particular sector in which case carbon intense Industries are included so just defining it and you're seeing right right now a lot of stories about greenwashing and you know truth in advertising and and whatever else but part of that is that the lack of a Common Language makes it very difficult to ascertain what are different products and are they doing the things you think they're doing or not doing and then the third component of that is reporting at the portfolio level so for example all of our ETFs we put out a template that

18:01 we report on the contents of that portfolio and many of our mutual funds as well and the goal was to get to 100% of our funds so I think The Regulators need to start with those Basics I hope that they will and then see where you want to go from there but I don't think we're anywhere close to done on that topic before we look at next topics there's also a lot of work being done on technology the use of Technology Outsourcing the use of AI what biases might be in models things like that so I I expect there'll be another wave of regulation in that direction beyond the obvious of data privacy and and issues that have been out there a while what other decisions were important for black Rock's success I think the technology and the diversification and the decision to overtime go more local will three of the most important and the Go Local it's not something we decided yesterday it's something we

19:06 decided 10 15 years ago and has put us in a good position for what world we see today looking from the outside it looks like black rock has made perfect decisions over its whole life but did Black Rock make any big mistakes and if Black Rock did how is the firm able to recover from them I think the most renowned mistake was a big investment in Peter Cooper village ston town right before the financial crisis a leverage real estate play which we invested both our own money and we marketed a fund to clients to invest and that did very poorly you have the financial crisis crushed real estate leveraged Financial instruments were not a good not a good timing and recovered I think hopefully we learned our lesson in terms of concentration risk and and the size of investment and the use of Leverage and all those kinds of things but the timing couldn't have been worse in an AET class that really got crushed that was in New

20:19 York wasn't it yes yes okay was there anything special you did with your clients during or after that no I mean I think they understood it it had risks and and obviously we invested our own money and we thought it was a good deal for them and for us and it clearly did not work out that way but I do think we learned a lot from it and you know just the financial engineering the deal structure in hindsight probably could do better as you look ahead what trends do you see in finance and in Asset Management you mentioned ESG are there others I think there's a growing Focus for regulatory scrutiny on the asset management industry on a whole range of topics and that leads to some need for scale I mean the amount of reporting that is required today versus where we were 10 and 20 years ago is enormous the amount of compliance work the use of derivatives the reporting of derivative use by fund by firm so many

21:32 different categories of of reporting money market funds so I think the need for technology to manage it all the need for scale to be able to cover those costs I think there's a whole bunch of trends that are going to come together in a related way and drive the business over time I think you will see consolidation it's almost like a barbell you either have to be a really small boutique or you have to be really quite substantial size firm if you're in the middle you're kind of squeezed you need to find third parties you can Outsource the regulatory reporting or some aspects of it people talk about reg Tech there's a lot of third party providers that have stood up businesses there some business opportunities there but there's a lot of change coming before I ask you for the three takeaways you'd like to leave the audience with today is there anything else you'd like to mention that you haven't already talked about I think a

22:32 lot of it is about the people right so the original 8 we had eight fantastic people and many of us stayed very active in The Firm I retired earlier this year that leaves still four very active full-time employees on our management committee plus somebody who is on our board and it's been a really interesting period when you think about it for 30 plus years that many people to stay together as partners I think that's been critical and then bringing in other people and welcoming them and building that management team to be broader than the original eight so some of them through Acquisitions and staying with the company some of them coming in just laterally it's a very very strong management team and a culture that really emphasizes Career Development and young leaders and and things like that so I think that aspect is a critical one it's all about the people what you've done is extraordinary to build a 9

23:42 trillion asset management firm and to keep the team together and do it so successfully so congratulations thank you Barbara what are the three takeaways that you'd like to leave the audience with so my top three would be the Integrity relationships and embracing change and if I just expand on each of those a little bit there's definitely a right and wrong and most people know where that line is there's not that many gray things and being willing to speak up have a contradictory view not necessarily be confrontational about it but not go with the flow that's a mark of somebody who's confident without being overconfident and I do think that that whole Integrity building a reputation always harder to build and and easy to destroy and something that just has to be right top of mind in all the decisions the second one in terms of relationships putting yourself in someone else's shoes listening to what

24:46 their concerns are whether it's with clients or later on in my career with policy makers it's not about saying yes or no it's about understanding the why the reasoning and then being able to deliver the best solution and sometimes it's not the solution they started from that they thought they were looking for and I I'll give a simple example I had somebody who told me they were going to be looking for a trade entry system and a risk management system and they were thinking of those as two separate things and I said to them that's really interesting you know we're now starting to offer a Latin externally and it is both a trade entry system and a risk management system is that something you'd consider but knowing what they were looking for and how they were going about it gave an opportunity to show them a different path which they then actually ended up pursuing so it's really it's with clients it's with

25:48 employees it's with really everyone and then lastly is embracing change as I mentioned earlier and it's in everything it's in change in the market it's in changes in society when I look at what the standards are today of acceptable behavior versus 40 years ago it's really quite a generational change it's about finding Solutions and really embracing what's next not so much looking back and pining for the past I think at the end of the day that builds resilience and that's what we need right now need people who have the empathy but also have the but those are my top three Barbara this has been wonderful thank you so much thanks Lynn really enjoyed being with you today me too if you enjoyed today's episode you can listen or subscribe for free on Apple podcasts or wherever you listen if you would like to receive information on upcoming episodes be sure to sign up for our newsletter at thre takeaways doccom or follow us on Twitter

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Questions about this episode

Who speaks in "#63 Building the Largest Asset Management Firm in the World: Co-Founder of BlackRock Barbara Novick"?

Lynn Tomen (Host), Barbara Novick (Guest).

What is "#63 Building the Largest Asset Management Firm in the World: Co-Founder of BlackRock Barbara Novick" about?

Barbara Novick, co-founder of BlackRock, discusses the origins and growth of the largest asset management firm in the world, highlighting its inception in 1988 with a focus on complex fixed income securities. She reflects on the firm's unexpected journey to managing over $9 trillion in assets and shares insights into the collaborative dynamics among the eight founders that contributed to their…

What is mentioned in this 3 Takeaways episode?

10 people, works and ideas are mentioned, including Black Rock, Barbara Novick, Lynn Tomen, SASB, PNC Bank, State Street. Each one on this page links to its own page with every episode that mentions it.

How long is "#63 Building the Largest Asset Management Firm in the World: Co-Founder of BlackRock Barbara Novick"?

The episode runs 27 min; the transcript is about 4,128 words in 25 timestamped sections.

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