Blackstone 批判指南

For whatever reason, Blackstone founder and CEO Stephen A. Schwarzman has a thirty-chapter-long series called “My Personal History” that is, well, exactly what it sounds like — a financial hagiography that frames him as a noble, sensible man with strong values, like when he sent a letter to “distinguished skull and bones alumni” Averell Harriman, whose father Edward Harriman had crashed the stock market in 1901 in his dogged attempt to monopolize the post-bubble railroad industry. Averell himself had co-founded a bank with Fritz Thyssen, who banked the nazis.

Anyway, seven chapters in, Schwarzman makes a bold claim while telling the story of his first job on Wall Street in 1969, where he saw the oncoming collapse of a nearby student fridge rental and life insurance business (no, really):

I knew at once that the business could not last. Students kick refrigerators, throw them around and break them in no time. And a 20-year-old believes he will live forever; he has no interest in life insurance. 

A visit to the company confirmed my suspicions. No one there seemed to know who was sitting in the next room. It looked like a growth company only because the number of students kept rising. Internally, it was out of control. I went back to the office and wrote a report concluding that the company would, in time, go bankrupt. Soon after, it did.

You may not be able to read a financial statement, but you can still recognize madness and folly. When weighing an investment, there are questions one must ask. Does the company have a real reason for being? Are people going to get excited about its products? Are the people running it authentic and focused, or are they merely salespeople trying to persuade you of something that is not real?

Good question, Steve! 

While we’re on the subject, why is it that you invested $275 billion of Blackstone’s roughly $1.4 trillion in assets under management into data center and digital infrastructure investments? While people might get excited about their products, I have it on good authority that the $2.3 billion debt financing deal you did for CoreWeave (back when, per The Information, it only had $16 million in revenue) closed despite everybody having serious misgivings about the financial health, ongoing returns and actual viability of the business.

Based on everything I’ve learned about Blackstone, it appears that the only people you do business with are “salespeople trying to persuade you of something that is not real”! 

Let’s go down the list:

• Blackstone-owned medical device rental company Apria Healthcare paid, per the Private Equity Stakeholder Project, its owners $210 million in dividends in the same month that it paid a $40.5 million settlement related to its fraudulent billing practices, otherwise known as defrauding the sick and elderly. Great job guys!
• In 2019, per Housing Is A Human Right, the UN’s special envoy on the Right To Housing and the chair-rapporteur of the UN’s Working Group on human rights sent Schwarzman a seven-page-long letter stating that Blackstone was "significantly contributing” to the financialization of housing, which was “having a grave impact on the enjoyment of the right to adequate housing for millions of people in the world,” with Blackstone-owned Invitation Homes’ jacking up leases, charging tenants for repairs, forcing people out of their homes, and its overall financialization of housing directly discriminating against African Americans, to name only a few of the horrors caused by this company.
  • I go into more detail about this in the piece.
• In 2018, Blackstone bought Atlanta-based Packers Sanitation Services. Five years later in 2023, PSSI was forced to pay a mere $1.5 million to the Department of Labor for, to quote TIME, “...[employing] more than 100 children—some as young as 13—were employed in hazardous jobs cleaning equipment like skull splitters, brisket saws, and bone cutters in meatpacking plants in eight states over the course of three years.”
• In March and July 2021, Blackstone would take its payments platform PaySafe and benefits platform Alight public via two separate SPACs with billionaire Bill Foley, with the stocks peaking at $185 and $260 a share respectively. Their stocks are worth $5.51 and $9.16 as of writing this sentence, with effectively anyone who invested during the IPO utterly screwed.

Blackstone is the world’s largest commercial landlord, the world’s largest private equity firm, and the largest investor in data center infrastructure. It has invested in and/or loaned money at least once to OpenAI, Anthropic, CoreWeave, Google TPUs, Firmus, a private equity vehicle to sell Anthropic’s software, Lambda, and innumerable amounts of random AI startups and AI infrastructure companies at a scale that is hard to quantify for reasons I covered in both the Hater’s Guides to Private Equity and Private Credit, which mostly stem from the word “private.”

Nevertheless, even from the outside, Blackstone’s exposure to AI — and the greater software industry — is distressingly large, and thanks to that privacy, it’s very, very hard to tell where the money is coming from, both in the case of where Blackstone gets its funds and what specific vehicle it’s deploying them from. 

Put another way, you can find Blackstone’s fingerprints on almost every big AI deal, yet more often than not have no way of saying what specific fund sunk in the cash. 

Blackstone, as the Ur-Private Equitor, is not one company but a labyrinth of different investment funds, each funded by a combination of corporate pension funds, sovereign wealth funds, horrifyingly, public pension funds, which Bloomberg Intelligence estimates accounts for 32% or so of Blackstone’s overall funding.

Today, I’m going to dig into how credit, insurance and big bets on AI have changed one of the most evil companies in the world.