Bill Ackman

0:28Every business starts with an idea. In recent years, one of the most successful Wall Street investors has been Bill Ackman. He's built Pershing Square into one of the most successful and listened to firms in all of Wall Street. But he's also been outspoken in a number of other areas, including philanthropy and politics. I had a chance to sit down with Bill in his office recently to talk about a variety of issues, including his latest bet on where the economy is going. There is a general consensus in the United States, in some circles, that we probably have avoided a recession for the near future.

0:58We're going to have a so-called soft landing. That's the consensus. Is that your view as well? I think it's really hard to predict. I do think the economy is weakening. We're seeing evidence of that in some of our companies. You're seeing, I have some concerns. There's been a huge subsidy in terms of low interest rates. And companies, most companies, fix their rates or their debt at very low rates. And certainly real estate investors did the same. And that works until it doesn't work. And so I think what's going to be interesting is to see what happens when people have to reprice their debt. And I think that can have sort of a cliff-like effect.

1:36And you're certainly seeing that in real estate. Now, the markets are assuming, and the markets are not always right, but the markets are assuming that there's going to be a Fed discount cut sometime next year. As we talk now, just about the end of November, it's not clear what the Fed will do. But some people say that the Fed, if they were to cut interest rates next year, would help the Democrats and therefore be seen as very political. On the other hand, some people say the Fed can't wait until after the election because the economy might need a stimulus. So do you have a view on what the Fed's likely to do?

2:06I think they're going to cut rates. And I think they're going to cut rates sooner than people expect because what's happening is the real rate of interest ultimately, which is what impacts the economy, keeps increasing as inflation declines. So if the Fed keeps rates in the sort of middle fives and inflation is, you know, trending below 3 percent, or, you know, that's a very high real rate of interest. And I think that is having a sort of retarding effect on the economy. And then, of course, again, you know, many businesses and certainly many individuals have the benefit of fixed rate debt. And that fixed rate debt, certainly for companies and for commercial real estate, starts to roll off.

2:44So I think there's a risk of a hard landing if the Fed doesn't start cutting rates, you know, pretty soon. So, you know, I think the market expects sometime middle of next year I think it's more likely probably as early as Q1. For the economy itself, do you think it really is going to make a difference if President Trump, if he's the Republican nominee and gets elected, or if President Biden is the Democratic nominee, he's elected? You know, I do think leadership matters enormously in everything from the economy to geopolitics. And I hope we're going to have a broader selection than Trump and Biden.

3:16I think Biden's done a lot of good things, but I think his legacy will not be a good one if he is the nominee. I do think the right thing for Biden to do is to step aside and to say he's not going to run and create the opportunity for some competition of alternative. Why do you think that? I think that I think he's passed his prime in a kind of meaningful way. I do think it's a bit like being CEO of a major company. It's a full-time job, and you need to be strong. You need to be at your intellectual best, and I don't think Biden is there. And I don't say that with any derision of the president.

3:55I always respect the president and want whoever the president is to be successful, but I think he's clearly past his physical and cognitive peak. So you're a young, experienced investment professional. You ever thought about running for office yourself? I think if the country wanted me at some point, I would be open to it. It's not my time. I still have a lot of work to do. If I ever would take that step, I would have to find myself at a time in life when I felt ready to take on that kind of responsibility. But it's something where the country would have to ask me as opposed to me putting myself out there.

4:36Let's talk a moment about the background of yourself when you grew up and how you came to this business. So where did you grow up? I grew up in Chappaqua, New York. And did you say to your parents, I want to be a hedge fund investor? No. What did you want to be? I wanted to be a businessman, is probably what I told them, at age 10 or something like this. So I always had all kinds of entrepreneurial jobs and things. So as a young boy, did you have any newspaper routes or things like that? Sure. So my dad did not believe in allowances. He said, look, if you want to make money, you have to work. And initially he offered me some job opportunities.

5:12An early one was digging a 50-foot long, you know, sort of ditch, as I would describe it, to help deal with water flow off of our property. And he offered to pay me, you know, whatever it was, a dollar an hour or something like this. And it was a good lesson in that I didn't want to get paid per hour. So the next time he gave me a project, I said, look, let me price the project. and then it doesn't matter how quickly I get it done. I don't want to be paid on an hourly basis. So those are some of the early things. I wouldn't call them entrepreneurial, but they generated some money that I could spend money.

5:47In terms of early life job experiences, one of the most valuable ones was actually when I was a Harvard student. There's something called the Let's Go Travel Guides, which were these books that students wrote about budget travel. and a friend of mine, Whitney Tilson and I, we became a friend, sold advertising for those guides all over the world. And so we had this, working out of the basement of a dorm room, we sold hundreds of thousands of dollars of advertising in these books and we got a commission for doing so. And I got a 15 % promote for selling advertising and that kind of led to this hedge fund thing.

6:26And you did pretty well at Harvard. And when you graduated, you then did what? I graduated at work for my dad, actually. My grandfather and his brother started a firm that arranged financing for real estate developers and what you might call commercial mortgage brokerage, and also raised equity financing for developers, sold property. And I went to work there. I spent a little under two years there before going to business school. And you went to business school at Harvard? I did. And after you graduated from Harvard Business School, what did you do? That's when I started Hedge Fund. And you just said, okay, I'm at Harvard Business School.

7:01I don't need to have any more experience. I'm just going to start a hedge fund? Yes. I had started investing in business school with a classmate. Actually, I went to Harvard with a plan about I was going to learn about investing so I could someday be an investor. And there were no courses on investing at Harvard, but there were courses on finance and accounting and competitive strategy with Michael Porter. And that was the backdrop for my education about investing. I said, look, I'll open a brokerage account. I've made a little money in my real estate commissions. And this will be another year of, if I lose it all, it's another year of Harvard Business School.

7:36If I learn something from it, maybe it's a career. And I kind of fell in love with investing. And it's something you can kind of figure out, actually, whether you're good at or not, pretty, you know, in a couple of year period of time. So you started Pershing Square after that period of time or right away? I started a firm called Gotham Partners with a partner named David Berkowitz, a classmate of mine, business school. We started in September of 92. And, yes, we had no experience. And what was interesting is that none of the people who knew me in high school, like parents of my friends, had no interest because they thought of me as a kid.

8:08But we raised money from mostly people who were themselves good investors. And I think they could see in us, I guess, some potential. All right. So you then transformed that into Pershing Square a year or two later? No. So Gotham was a decade, and we did kind of public equity and then private equity and some venture capital. And then I actually had a pretty challenging period that led to a decision to wind up Gotham. And then I launched Pershing Square in January of 2004, almost 20 years ago. You specialized in picking stocks. You weren't a macro investor then. Were you a stock picker? Yes. I would say we were kind of an activist stock picker.

8:51We would buy a pretty concentrated portfolio, buy large stakes in companies that we thought were great businesses or had great assets but were under-managed. And when you're an activist, of course, that word has different meanings to different people, but would you call the CEO and say, we own 5%, we'd like to be on the board, we'd like to tell you how to run your company? Did you do that? Was that intimidating to do that? It's not exactly what we said because, again, we were young and inexperienced. But it was more that we'd find a company. One of the early investments was Wendy's, the hamburger chain.

9:22And Wendy's owned 100 % of a chain called Tim Hortons in Canada. And Tim Hortons was a very profitable, successful, pure franchise of coffee and donut chain, principally in Canada. And you could fairly clearly see that business was worth about$5 billion at least. It had about$450 million of operating income, probably worth meaningfully more than that. But you could buy all of Wendy's for$5 billion. So literally the market was ascribing zero value to the Wendy's franchise. And our advice to the CEO is, well, just spin off Tim Hortons and then focus on fixing Wendy's. But you can create enormous value in just separating the two companies.

9:57It was a bit like investment banking where we didn't charge a fee. And actually back then, because we couldn't get a return phone call because we were a tiny little fund circa 2004, we hired Blackstone, which had an investment bank at the time. and we hired them to say put together a fairness opinion if you will of what Wendy's would be worth if they spun off to importance and then we wrote a letter to the board we attached the Blackstone valuation which was nearly double where the stock was trading and then six weeks later magically they spun off Tim Hortons okay so you did that with other companies and being an activist was it consistent with your personality to do this because you got to be a tough guy to call up CEOs and say look I'm gonna I got a better idea about how to run your company than you do.

10:45It was consistent with my personality. I've always been some form of an activist, yes. And today your focus is on the kind of activist investing or you've stopped that? So, you know, when you're, no one knows who you are and you're trying to affect change in a company, you have to sort of be an activist. You have to use the media, the public platform to, in some cases shame a company into doing the right thing. 20 years later, having had a meaningful number of successful engagements with companies, we don't really have to do that anymore. And so a lot of the stuff we've done recently has been either buying into a company that already has great leadership and we're happy to share ideas.

11:27In some cases, you know, there needs to be a change in leadership, but we're able to get things done without, you know, sort of what you might call activism, more like engaged owners of businesses. And you've done three extremely successful macro bets, one during the period of the time of the housing crisis, 07, 08. And that one was extremely successful. You did one again during the COVID period of time, which was, I think, maybe your best investment ever. You made a 94 times your money investment, more or less. Almost 100 times, actually. 100 times. Yes. We bet that the credit spreads would widen because we'd have to shut down the global economy.

12:08And that's basically what happened. So did people say, do you have any more deals like that when you did that one? Yes. And those are hard to find. The three black swan events in the last 20 years, we've been able to make big profitable bets on. but these kind of black swan type things hopefully occur only every seven years, let's say. Interest rates went up and they started going up. You made another macro bet that turned out to be pretty successful as well. Yes. So do you have any other macro bets you can mention now or nothing you can mention? We have another one on as we speak. Actually, we're betting that the Federal Reserve is going to have to cut rates more quickly than people expect.

12:49That's the current macro bet that we have. Join Bloomberg in Houston or via live stream on November 4th for the future investor, finding the opportunities. This 2025 event series will examine how companies are investing in their businesses to create efficiencies, innovating their products and services, and improving the customer experience. This series is presented by Invesco QQQ. Register at bloomberglive.com slash futureinvestorhouston. That's bloomberglive.com slash futureinvestorhouston. The pleasure you get out of doing this is what? You like to make money? You have investors, you want to make them happier?

13:29So it's a lot of things. One, I work with a great group of people that I got to individually select. I mean, as you know, the benefit of being a CEO is you get to pick everyone you work with. We choose people based on principally personal qualities. Are they a good human being? Are they a person of good character? Of course, they need to be exceptional in whatever it is that they do for the firm. And we're a tiny firm. We're unusual. And most firms with 17 billion of assets have a lot more than 41 employees. And of the 41, we only have eight people on the investment team, which is also unusual.

13:59So I think this place attracts what people call force multipliers, people who could get done a lot more, whether you're on the accounting team, the legal team, than a typical kind of person. So you have a bunch of high-performing, high-quality, fun people, and I get to come into the office every day and work with them. So I would say that's a great thing. Two, it's actually a lot of fun to make money for people. You know, I get the occasional letter, email, often from existing investors, but actually more often from people that I don't know that happen to, you know, buy a stock along with us. You know, we've had some nice successes, which, you know, have been life transformational for people.

14:41So I do, it is fun to make people money, even if some hedge funds, they've delegated the money decision making to many different people in the firm. You make all the final decisions yourself? It works is we have an eight-person investment team. And each idea is one that a two-person team will do a deep dive on. I will do less of a deep dive. I'll read the public filings. I'll read conference call transcripts. I won't be the person that talks to former employees, that kind of thing. And then we talk about every idea as a team. And ultimately, the team, collectively, we don't do things generally that we don't have kind of collective buy-in on.

15:23At the end of the day, I do retain the ultimate veto, yay or nay, and the ultimate decision on sizing. Now, one big change I made in the last couple of years, I appointed a CIO, a very talented guy named Ryan Israel, who's been with the firm for about 14 years. And Ryan is exceptional, and he's taken a real leadership role among that eight person team. But I use the word team often here because that's how this place operates. What type of people would get a job here? You're looking for people who are really smart, good academic credentials, driven. What is it that you look for when you're interviewing people?

16:00It depends on what role, but people on the investment team generally, yes, they've graduated top of their class at Wharton. They've always been interested in business and investing. They went to work at an Apollo, a KKR, a Carlisle. We like people that get private equity experience. We think that's the best background for what we do. We're really private equity investors investing in the public markets. and the sort of temperament of a typical private equity person fits well here. We only own really eight companies. They don't change that often. So this is not a place where a typical hedge fund firm, people are cycling through the idea of the week, the idea of the month.

16:45Here we may do one new idea a year. Now another area that investors have been very interested in lately is artificial intelligence. Are you investing in things relating to artificial intelligence? The most direct investment we have in AI, I would say, is Google or Alphabet. You're a big shareholder of Alphabet. We're a small shareholder of Alphabet because it's a massive company. We've got a large investment. It's approaching$2 billion investment in the business. And actually, it was AI that created the opportunity for us to buy Google at an attractive price. Basically, Microsoft and OpenAI had a very powerful demonstration and a launch of a new product.

17:22and then Google's kind of launch, or it was a bit of a disaster, stock got crushed on the basis of, you know, fear that Google was way behind in AI and their advertising franchise more than covered the value of the company and you got whatever they were doing in AI, if you will, for free. And our view, based on work we had done, is that actually Google was sort of neck and neck, if not ahead of OpenAI in terms of their business progress. So one of the pluses, some people would say, of being a successful investor is you do make a a fair amount of money, and then you have the opportunity to be a philanthropist.

17:54So you were one of the early signers of the Giving Pledge. Why did you do that? Why did you commit to give away half of your net worth? Well, I think you commit to give away half or more. That was kind of my plan anyway. And then, you know, one day, you know, Warren Buffett calls up and says, Bill, you know, I want you to sign the Giving Pledge. So I think it's a, you know, I've learned a lot about philanthropy. I started the Pershing Square Foundation actually, I think, 17 years ago. My personal business plan was always to be super successful and then take the resources I don't need and then redeploy them in a way that I thought was best for society.

18:32I do think that philanthropy is often not the best way to solve problems. I do think that capitalism and for-profit business models are generally the best way to solve problems. But there are still problems, societal ones, that can't be solved in the traditional capital markets. There's sort of a gap. And so those are the areas that we tend to focus on. One of the institutions you've been very philanthropic with is your alma mater, Harvard. But recently you've been very public about your criticism of the way Harvard handled the events of October 7th and their aftermath. Could you talk about that now?

19:06The first reaction of a group of 34 Harvard student clubs on the morning after October 7th was to put out a statement saying that Israel was 100 % responsible for the acts of Hamas. And my view on that was, you know, that's ridiculous. And that's more than ridiculous, I would say. And, you know, these students need to have some, you know, judgment and perspective. You can come out and say, look, I'm very unhappy about Israel's treatment of Palestinians and the West Bank. Or you can say, you know, we can talk about the Gaza Strip. But you can't support terrorists, and particularly terrorists that rape and pillage and, you know, murder and burn and take hostages.

19:55And so my first point there was not so much directed at Harvard, but, you know, love to know. So I got actually a text from a CEO in my industry. He's like, Bill, you know the people at Harvard. I'd like to know who the students are behind these clubs so I make sure I don't inadvertently hire them. And so I tweeted out that sort of made that point and caused a bit of a firestorm. And I got a lot of pushback. Oh, why are you picking on students? And I said, look, you can't hide behind a corporate entity if you're going to support terrorism. That's a major decision. So that was sort of my first initiative, if you will, at Harvard.

20:35And then, you know, there were protests on campus. And the protests weren't, the protests were supportive of terrorism and supportive of things like, you know, when you have a group of students shouting, Intifada, Intifada, you know, let's free Palestine from the river to the sea. The meaning of Intifada means to kill Jews. When I raised this issue, Harvard said, well, we have a commitment to free speech, and that's why we have to allow this. Well, there's certain speech that is certainly permissible under the First Amendment, and then there's certain speech that I would say is undesirable on a campus.

21:11Have you said you're not going to donate to Harvard anymore, or have you said, I'm not going to hire people from these Harvard students anymore, or people like those people? No. Well, one, we're not going to hire anyone that supports terrorism at Pershing Square. I haven't made any statements about economic support for Harvard. I want Harvard to do the right thing. I don't want to threaten one way or another. That's not my kind of approach. But I do think Harvard needs to do a deep examination of, one, there's been a meaningful rise in anti-Semitic incidents on campus. And universities have done very little.

21:45The reaction was, let's form a task force. and I think again had this been another ethnic group that were these kind of activity took place Harvard would be suspending the people involved not just allowing so you're going to continue to be involved in this issue and try to push Harvard to do what you think they should be doing absolutely you know I wrote a pretty thoughtful letter that was you know I think 25 million people saw it on Twitter and remarkably I did not get a response which to me is a very very bad and weak approach literally no response no acknowledgement no dear Bill I hear what you're saying but nothing so yes I'm an activist but my activism today is probably not in the corporate boardroom it's it's on campus and and And this is not just a Harvard problem.

22:43And it's an NYU problem. It's a University of Pennsylvania problem. The more I examine the issue, the more woke, the more left-leaning the institution, the more anti-Semitism, which is a very unfortunate thing. You've built Pershing from nothing to what it is today, a very successful hedge fund. What makes you most proud, that having done that from the start or other things you've done in your philanthropic life, What are you most proud of having achieved in your life so far? So, you know, a number of things. I love having a company where I believe that pretty much everyone here is excited to come into work every day.

23:22I think we've made a kind of meaningful contribution to, you know, the capitalist system and the functioning of how, you know, I think probably the most significant impact we've had. We were sort of an early activist. And as you probably know, the nature of boardrooms 20 years ago is meaningfully different today. And a big part of that is the rise of shareholder activism, and I think we played an important role there. I think that's led to the U.S. capital markets and the U.S. stock market being one of the best performing markets in the world. And that has a huge impact on people's pensions, on people's savings, on people's livelihood, on U.S.

23:59competitiveness, on our national security. And so, you know, I think, you know, the good news about my day job is, you know, it's fun, it's profitable. It benefits our investors, but it also benefits kind of the market generally. So I think that's an important and good contribution. You know, philanthropically, we have invested, you know,$600-odd million in a wider range of initiatives. And, you know, a number of those, you know, it's a bit like investing. Hopefully you have a few Googles, and we have a number of those philanthropically. And I do feel like we've invested money on which society has earned an attractive return.

24:44Thanks for listening. To hear more of my interviews, you can subscribe and download my podcast on Spotify, Apple, or wherever you listen.

24:59Thank you.