When To Be Greedy

Warren Buffet's favorite line is: "Be fearful when others are greedy and greedy when others are fearful."

The Masters of the Universe were very, very fearful in 2008.

The financial crisis was a fast-moving, deadly plague. Liquidity was the only vaccine, but no one knew if the American government would inoculate the infamously promiscuous fat cats.

Recounting the widespread fear from those dark days, the never-shy, always-swaggering Ken Griffin of Citadel — a $29 billion hedge fund — recently said:

"Survival is the right choice of words … I will make it very clear. If Morgan Stanley did not open for business on Monday, I would be done by Wednesday."

Eight months after Lehman Brothers went down — as the plague's victims were still being counted, tagged, and politicized— Larry Fink was negotiating a deal that would turn BlackRock "into a financial services colossus."

With its acquisition of Barclays Investment Investors, BlackRock was buying ETF's trillion dollar future.

His bet has paid off.

Since 2009, the ETF market has grown 5x. BlackRock now manages $4.4 trillion in passive ETFs. Its acquired Barclay's iShares has grown from $300 billion to ~$2 trillion since the deal.

Since the deal closed, Barclays is down 40 percent and BlackRock is up 160 percent, but those numbers do not tell the full story.

Big deals are complicated because, beyond the terms, they are leadership moments. Leaders must manage their stakeholders as well as their own psychologies. Deals do not come together if leaders, on both sides, are unable and unwilling to, in Fisher's words, get to yes.

Eight months after Wall Street nearly collapsed, as his peers were thanking the survival gods of finance, Larry Fink led BlackRock to its most significant and most consequential deal. As his colleague described it: "Larry Fink bet his entire firm on the BGI acquisition ... it took tremendous courage."

Buffett wouldn't call it courage. He would call it being greedy when others were fearful.