#413 – Bill Ackman: Investing, Financial Battles, Harvard, DEI, X & Free Speech
Feb 20, 2024
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Bill Ackman, founder and CEO of Pershing Square Capital Management, is known for his bold financial strategies and activism. In this engaging discussion, he delves into the nuances of value investing versus speculation, sharing insights on the evolving music industry and the impact of AI on investment strategies. Ackman also discusses the intricacies of activist investing and the challenges of shareholder activism, as well as the need for accountability in academia following a plagiarism scandal at Harvard. He emphasizes the importance of resilience, leadership, and fostering dialogue in today's complex landscape.
Ackman emphasizes learning from Warren Buffett's unemotional investment approach.
Ackman explains activist investing's role in improving company performance and shareholder value.
Pershing Square's evolution from making noise to actively managing companies.
Activists shift power balance between shareholders and management for improved performance.
Ackman's successes (Canadian Pacific) and challenges (Valiant Pharmaceuticals) in investing.
Ackman's battle with Carl Icahn over Herbalife and the issue of pyramid schemes.
Deep dives
Bill Ackman reveals Warren Buffett's impact on his investing approach
Bill Ackman describes how Warren Buffett's long-term, unemotional approach to investing has influenced his own investing style. He emphasizes the importance of being financially secure and not letting emotions drive investment decisions.
Activist investing: A strategy of influencing and improving companies
Bill Ackman explains activist investing, which involves investing in companies and actively working to improve their performance and value. He discusses how activist investors engage with management, make noise, and may even take board seats to effect change and enhance shareholder value.
The evolution of Pershing Square's activist approach
Bill Ackman shares the history and evolution of Pershing Square's activism. He highlights how they have progressed from making noise in the early days to taking board seats and actively participating in the management of companies. Ackman cites successful examples, including Wendy's and General Growth, that have shaped their approach and yielded positive results.
Activist investing restores balance of power between owners and management
Activist investing has been instrumental in restoring the balance of power between the owners of a business and its management. In the past, the rise of mutual funds and a diverse shareholder base led to underperformance and a lack of control among shareholders. However, activists have emerged as thought leaders who can influence the direction of a company. Activists typically own small stakes in businesses and must convince other shareholders of their ideas. By gaining majority support, they can effectively behave as controlling shareholders and drive change. This movement towards more democratic and engaged ownership has been beneficial for the performance of the US stock market.
The dramatic success and challenges of Bill Ackman's investing career
Bill Ackman, an influential investor, has experienced both significant successes and challenges throughout his investing career. One of his most notable successes was his investment in the rail company Canadian Pacific, which turned out to be one of the best investments he has ever made. He successfully led a proxy battle to reshape the company's board and leadership, resulting in a significant increase in the stock's value. However, he also faced a major loss with Valiant Pharmaceuticals, where a series of disastrous decisions by the company resulted in a $4 billion loss for Ackman's hedge fund. This loss led to a challenging period for him, including personal and legal difficulties. However, he was able to overcome these challenges through perseverance, a commitment to his investment principles, a supportive team, and a focus on making progress every day.
The Herbalife saga and the battle with Carl Icahn
Another notable event in Bill Ackman's career was his battle with Carl Icahn over the controversial company Herbalife. Ackman exposed what he believed was a fraudulent pyramid scheme, targeting vulnerable populations like undocumented immigrants. His hedge fund made a large short bet against the company, but Icahn took the opposite side and bought a significant stake in Herbalife. This led to a highly publicized clash between the two investors, each defending their positions. The saga dragged on with legal battles and intense media scrutiny. Despite the ongoing feud, Ackman never backed down from his conviction about Herbalife's practices. While the battle resulted in reputational challenges, it also brought attention to the issue of multi-level marketing and pyramid schemes in the business world.
Plagiarism Allegations Against President Gay
President Gay of Harvard University faced allegations of plagiarism in several of her articles. The allegations included the use of similar words and missing footnotes. The issue of plagiarism was seen as a failure of leadership and prompted calls for her resignation.
The DEI Ideology and Its Impact on Universities
The DEI (Diversity, Equity, and Inclusion) ideology has infiltrated university campuses, including Harvard. It promotes an oppressor-oppressed framework, with Israel being deemed the oppressor and the Palestinians the oppressed. It limits open dialogue and diversity of viewpoints on campus, leading to protests and discomfort for students who do not align with the ideology.
The Governance Issues at Harvard
Harvard's governance structure has been criticized, particularly the self-perpetuating board that elects its own members. The lack of diversity in the board and the faculty contributes to the limited range of viewpoints and the promotion of the DEI ideology. The failure of governance affects the selection of leaders and the overall direction of the institution.
The Fallout from Accusations of Academic Fraud
The episode discusses the fallout from accusations of academic fraud made against Neri Oxman, a scientist and researcher. The speaker emphasizes that the accusations were unfounded, highlighting that they were based on inadvertent mistakes and misunderstandings of academic standards, rather than intentional plagiarism. The podcast explores the damage caused by such accusations to Oxman's reputation and the importance of protecting and celebrating great scientists. The speaker also criticizes the state of journalism and media coverage, highlighting the need for platforms like Twitter to counterbalance the power of traditional journalism.
The Disappointments and Hopes in Politics
In this part of the podcast, the conversation shifts to politics. Bill Ackman shares his thoughts on Donald Trump's presidency and the current state of U.S. politics. He discusses the potential as well as the shortcomings of Trump's leadership, particularly in regards to the economy and foreign relations. Ackman also expresses his disappointment with Joe Biden's presidency, citing concerns about his declining mental acuity and the need for fresh leadership. He expresses hope for a future presidential candidate like Dean Phillips, highlighting his honesty, capabilities, business background, and centrist stance. Ackman emphasizes the importance of bipartisan leadership and the need for the American political system to undergo positive changes.
OUTLINE:
Here’s the timestamps for the episode. On some podcast players you should be able to click the timestamp to jump to that time.
(00:00) – Introduction
(08:55) – Investing basics
(13:47) – Investing in music
(22:08) – Process of researching companies
(26:47) – Investing in restaurants
(32:16) – Investing in Google
(37:58) – AI
(43:13) – Warren Buffet
(45:22) – Psychology of investing
(54:53) – Activist investing
(1:04:41) – General Growth Properties
(1:20:57) – Canadian Pacific Railway
(1:28:21) – OpenAI
(1:32:32) – Biggest loss and lowest point
(1:47:21) – Herbalife and Carl Icahn
(2:04:11) – Oct 7
(2:10:42) – College campus protests
(2:29:09) – DEI in universities
(2:50:00) – Neri Oxman
(3:15:30) – X and free speech
(3:19:54) – Trump
(3:27:30) – Dean Phillips
(3:34:36) – Future
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