In 1979, the research department of Bell Laboratories (now Nokia Bell Labs), stated that a daily copy of the New York Times had as much information within it as an educated individual from the 16th century would absorb in their entire life.
Fact or fiction? Bell Laboratories has a distinguished history, being credited with developing solar cells, the transistor, radio astronomy, the laser, leap forwards in circuitry, a multitude of computer programming languages and information theory. Nine Nobel Prizes and five Turing awards have been awarded for work at Bell Labs. There’s some credibility behind the thinking.
A few years later in 1982, futurist R. Buckminster Fuller estimated that in 1900 human knowledge doubled every 100 years, by 1945 it doubled every 25 years, and by 1982 it doubled every 12-13 months. In 2019, IBM suggested human knowledge would be doubling every 12 hours in 2020.
There is the obvious question of what is defined as knowledge and information. It would suggest as computing power increases, information is able to be stored, processed, and turned into knowledge on a collective basis. Information by itself doesn’t automatically equal more sophistication, nor are we individually able to cram it all into our minds.
In some ways it’s less beneficial. There is so much information floating around now that we can each choose what information we want to engage with. Back in the 1980’s yourself and your next-door neighbour were probably operating on the same information from a limited range of media. Only the radio via short wave or an amateur radio setup gave some differing contact with other parts of the world.
But there was a uniformity in the information because the infrastructure to deliver it was expensive and it went through stricter editorial controls. The conclusions you came to may have been different, but you and your neighbour were likely living in the same information world. Today, yourself and your neighbour could be living in completely different realities.
Today, anyone can publish on a website for the couple of hundred dollars it costs to host it. Social media is even less expensive to use. We vet what we put on our website and believe it’s of a standard that reflects well on us, but anyone can publish anything for next to no cost. Not everyone is so rigorous with what they publish, either intentionally or unintentionally.
Conspiracy theories are an example.
They Own Everything!
You may know the names Vanguard, Blackrock, and State Street. All are global investment managers who have done a lot to champion low-cost access to investing for retail investors. Due to their scale and focus on index tracking funds, they have a stake in the great majority of listed companies, and they own a decent stake in many of those companies. As an example, Vanguard is the largest holder of Apple stock, while Blackrock and State Street are the third and fourth largest holders.
Pre-pandemic, some left wing academics started wringing their hands about this concentration by a few large asset managers in the companies in major indices like the S&P 500 in the US. There were hints that this could be anti-competitive and asset managers might have too much voting power in the companies concerned, but it was presented in boring articles, so it never captured much attention.
Post-pandemic, some peoples’ thinking shifted, as evidenced by lockdown protests. There was suddenly a lot of conspiratorial thinking that shadowy figures were controlling everything in the world. Conspiratorial people like to do internet detective work and go down many rabbit holes. Sometimes they reach conclusions from information without understanding it. One example is that of Blackrock, Vanguard, and State Street. Some people discovered that these asset managers own a lot of listed companies, and they were shocked by it.
The shock led them to believe they’d truly unearthed something of huge significance. Some made videos with dramatic music saying ominous things like “what if I told you there were companies that own and control every company…” pointing out that Vanguard, Blackrock and State Street own media companies and pharmaceutical companies, energy companies and car makers etc.
Who Owns Vanguard?
There were hints that something nefarious might be afoot and strings could be pulled by these asset managers to suppress information in the media and have companies do whatever they want. Then the internet detectives noticed that while Blackrock and State Street were listed companies and Vanguard owned them in their funds, Vanguard’s owners weren’t listed anywhere.
The conspiracists couldn’t figure out who owned Vanguard and there was much concern about who the shadowy Vanguard owners were. It was thought Vanguard’s owners must ultimately be pulling all the strings in the world!
People lapped these dark and mysterious videos up. Some of them have millions of views on Youtube. You can now see people on social media platforms suggesting something truly evil is occurring with these asset managers owning all these companies. People have responded to the videos with comments like “Oh wow, I’m going to check my retirement account now and look for Vanguard, Blackrock, State Street and sell out!”
You might think that would be a clue. “I’m going to check MY retirement account.” If a person found Blackrock, Vanguard or State Street funds listed in THEIR retirement account, at some point the penny should drop.
THEY, THEMSELVES, the end investor, and millions of others like them, are the actual owners of the media companies, the pharmaceutical companies, the energy companies, the car makers and any other company within the funds. It’s the end investor’s money. Vanguard, Blackrock, State Street, or any other asset manager are merely investing on behalf of those investors, so they can participate in equity or bond markets at a low cost.
With Blackrock and State Street being listed companies, who owns Vanguard? No conspiracy there either. Vanguard is a mutual, so it’s owned by the investors in its funds. Just every day investors benefiting from low-cost investment funds. Some of the same investors convinced something dastardly is happening!
Who Owns The Funds?
While the conspiracy theorists want to point to all the public available data about the companies Vanguard, Blackrock and State Street collectively own, they never bother to highlight the other publicly available data about who owns the Blackrock, Vanguard and State Street ETFs and mutual funds. In the US, Companies like Envestnet, Northwestern Mutual, Creative Planning, Betterment, Wealthfront and WealthNavi among others, repeatedly show up as the largest holders of Blackrock, Vanguard, and State Street funds.
Who are they? All financial advice groups. Which again shows, the real owners of every company in the world, are individual investors saving for their retirement.
Also ignored is that if something evil was going on, surely the “dark forces” of Vanguard, Blackrock and State Street, who are large holders of Google (Alphabet) who own Youtube, would be demanding these videos be suppressed? Yet they’re all still freely available letting the creators embarrass themselves and the viewers misinform themselves.
Voting Power
There is an argument that large asset managers can exercise too much control over companies via voting power. Specifically, that power should be in the hands of the end investor. That does need further examination. However, there’s one thing to consider: most shareholders are barely engaged with the companies they own.
In Australia, Computershare and Link are two of the largest share registries. They send out all the relevant documents so shareholders have a record of what companies they own and can vote at Annual General Meetings. Computershare stats show in 2021 only 2.6% of eligible shareholders bothered to vote at an AGM, a figure that has halved since 2012. Link stats for 2021 show 3.49% of eligible shareholders bothered to vote.
Blackrock, to its credit, is looking to address ways to allow holders to vote, but how many retail holders will take up the opportunity? If the stats above are any indication, and voting for ETFs and managed funds is opened to their retail holders, they won’t engage anyway. What happens in the meantime? Anyone with concerns can always check how asset managers vote or engage with the companies they own on behalf of investors, as evidenced by Vanguard’s investment stewardship reporting.
The final question is why do people go down these rabbit holes? We could say it should only take five minutes of very basic research to clear this matter up, but we work in the area, so we know where to look and debunk it. Most people wouldn’t know where to start. Having it all fed to them with a spooky video that may play on fears of a grand conspiracy is much easier to swallow.
The majority of people live normal lives, maybe they’re mundane without much going on. The feeling that bigger forces are against them may help with a confirmation bias to explain away any struggles they have. Conspiracies like this are more exciting, engaging and maybe even satisfying, than the dry, boring truth: which is large index fund managers exist to help us invest in financial markets at a low cost.
It doesn’t get more mundane than that.
This represents general information only. If you’re looking for a Canberra financial advisor, we have a new office. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.
