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Matt Levine

Larry Fink Wants Companies to Talk More About the Future

Corporations have lots of money. Someone has to decide what to do with it.

One way I like to think about the stock buyback debate is that it's a debate over who should get to allocate capital to projects. Some people think that if the manager of a company is skilled enough to make money for that company, she should get to hold onto it and invest it in new projects. After all, she has shown that she is able to make money. Other people think that she should give the money back to the shareholders, so they can invest it in new projects. After all, it is their money, and they have shown that they are able to invest it profitably. Neither of these views is unassailable, and for roughly the same reasons: Past success, in business and in investing, only weakly predicts future success. But there the money is, and someone has to decide what to do with it.

This debate is sometimes described as one about long-termism versus short-termism, with long-termism meaning that the managers get to keep the money for a long time and short-termism meaning that they don't.  Larry Fink, the chief executive officer of BlackRock, is one of the best-known advocates of long-termism, and a member of the secret club of investors that we talked about this morning, which meets to plot ways to make companies more long-term-oriented. Yesterday, Fink sent a letter to more than 500 companies saying that they should keep their money, but tell investors how they're going to spend it: