BlackRock CEO Larry Fink, Reflects on His $100M Early-Career Loss

In 1986 Larry Fink lost one hundred million dollars in a single quarter, and the loss made him.

He had earned the right to be reckless. After an MBA from UCLA and a rejection from Goldman Sachs that he later called the blessing of blessings, Fink joined First Boston as one of the first mortgage backed securities traders on Wall Street. He was brilliant at it. By his early thirties he was running the bond department, and his desk had added roughly a billion dollars to the firm's bottom line.

Then rates moved the wrong way. His hedges failed. The position that had made him a star unwound in three months and took his reputation with it. "I screwed up," he said later. "And it was bad."

The detail that matters most is the one Fink tells against himself. The quarter before the disaster, his desk earned one hundred and thirty million dollars, and he has joked that the firm should have fired him then instead, because he did not understand that outcome any better than the one that followed. That is the confession of a man who realised, too late, that he had been carrying enormous risk without the instruments to see it.

He hung on until 1988, then left, saying he did not have the option to stay. With seven colleagues and five million dollars of seed capital from Blackstone he built the firm that became BlackRock, on a thesis plain enough to sound obvious now. Know what you own. Know what it does when the world turns.

The loss did not teach him to avoid risk. It taught him to price it. Every dollar BlackRock manages today rests on machinery a humiliated thirty three year old decided he would never again go without.