Activist Investor Bill Ackman on The David Rubenstein Show

[Music] this is uh my kitchen table and also my filing system over much of the past three decades I've been an investor the highest calling of mankind I've often thought was Private equity and then I started interviewing while I watch your interview I know how to do some interviews I've learned in doing my interviews how leaders make it to the I asked him how much he wanted he said 250 I said fine I didn't negotiate with him I did no due diligence I have something I'd like to sell and how they stay there you don't feel inadequate now because being only the second wealthiest man in the world is that right in recent years one of the most successful Wall Street investors has been Bill Amman he's built persing square into one of the most successful and listen to firms in all of Wall Street but he's also been outspoken in a number of other areas including philanthropy and politics 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's a general consensus in the United States in some circles that we probably have avoided a recession for the near future we're going to have a so-called soft Landing that's the consensus is that your view as well uh I think it's really hard to predict I do think the economy is weakening uh we're seeing you know evidence of that in some of our companies you're seeing uh I have some concerns uh you know the there's been a huge subsidy in terms of low interest rates and companies most companies fix their uh rates or their debt at you know very low rates and certainly Real Estate Investors did the same and that works until it doesn't work and so I think we're what's going to be interesting is to see what happens when people get have to repic their debt and I think that can have sort of a cliff-like effect and you're certainly seeing that uh in real estate now the markets are assuming and the markets are not always right but the market Market are assuming that there's going to be a Fed discount cut sometime next year and as we talk now just about the end of November um it's not clear what the FED will do but uh 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 the other hand some people say the FED can't wait till after the election because the economy might need a a stimulus so you have a view on what the fed's likely to do I think they're going to cut rates and uh you I think they're going to cut rates sooner than people expect uh because you know what's happening is the real rate of interest ultimately which is what impacts the economy keeps increasing as inflation declines right so if the FED keeps rates in the sort of middle fives uh and inflation is you know trending below 3% or uh 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 uh you know many businesses and certainly many individuals have the benefit of fixed rate debt and uh that fixed rate debt certainly for companies and for for commercial real estate starts to roll off so I think there's a a risk of a hard Landing If the Fed doesn't start cutting rates you know pretty soon so you 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 is if he's the Republican nominee and gets elected or President Biden is the Democratic nominee he's elected you know I do think uh leadership matters enormously in everything from the economy uh to geopolitics and uh and I hope we're going to have a broader selection than Trump and Biden I think Biden's done a lot of good things uh but I think uh his legacy will not be a good one If he if he is the the nominee uh 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 you know past his Prime in in a kind of meaningful way I do think of it's a bit like being CEO of a major company it's a it's a it's a full-time job and you need to be at your you know you need to be strong you need to be at your intellectual uh best and I don't think Biden is there and I I don't say that uh you know with any derision of of the president I always respect the president and and want whoever the president is to be successful but I think he's clearly passed his physical and cognitive Peak so you're a young experienced investment professional uh you ever thought about running for office yourself I think you know if if uh the country wanted me at some point uh you I would be open to it um you know it's not I think it's not my time I still have a lot of work to do and you know like to if I ever would take that step I would have to do uh I'd have to find myself at a time in life when I felt ready to take on that kind of responsibility but I it's it's something where the country would have to ask me as opposed to uh me put myself out [Music] there [Music] let's talk a moment about the background of uh your yourself when you grew up and how you came to this business so where did you grow up I grew up uh in chapaqua New York and did you say to your parents I want to be a hedge fund investor no what do you want to be I wanted to be a businessman is probably what I told him 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 you know newspaper routes or things like that sure so my my dad did not believe in allowances uh he said look if you want to make money you have to work uh and initially he offered me some job opportunities one early one was digging a you know 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 uh a dollar an hour or something like this uh and it was a good lesson and that you I didn't want to get paid per hour so the next time he gave me a project I said look let me let me price the project and then it doesn't matter I how quickly I get it done I don't want to pay to be paid on an hourly basis so those are some of the early things I wouldn't call them entrepreneurial but they they generated some some money that I spending money in terms of early life job experiences uh one of the most uh valuable ones was actually when I was a Harvard student uh there's something called the Leto travel guides which were these uh books that uh students wrote about uh budget travel and a friend of mine Whitney Tilson and I uh we became a friend uh 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 uh hundreds of thousands of dollars of advertising in these books and uh we got a commission for doing so and you know started that's got a 15% promote for selling advertising and that kind of led to this hedge fund thing and you did pretty well at Harvard and when you graduated you then did what uh I graduated at work for my dad actually uh my grandfather and his brother started a firm that arranged financing for Real Estate developers and uh what you might call commercial mortgage brokerage um and also raised Equity financing for developers sold property and I went to work there uh 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 a hedge fund and just just said okay I'm at Harvard Business School I don't need to have any more experience I'm just going to start a hedge fund uh yes uh I had started investing uh in in Business School uh with a classmate uh 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 uh that was the backdrop for my education about investing I said look I'll open a brokerage account I made a little money in my uh real estate commissions and this will be another year of if I lose it all it's another year of Harbor business school if I learned 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 a couple year period of time so you started persing Square after that period of time or right away I started a firm called Gotham partners with a partner named David burwitz a classmate of mine business school we started in September of 92 uh and yes we had no experience um 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 U but 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 persing square a year or two later no so Gotham was a uh a decade uh and we did kind of public equity and then private equity and some venture capital and uh and then actually had a pretty challenging period that led to a decision to wind up Gotham and then I launched uh persing Square in January of 2004 uh almost 20 years ago you specialize in picking stocks you weren't a macro investor then were you were a stock picker yes I would say we were kind of an activist stock picker we would buy pretty concentrated portfolio by large stakes in companies that we thought were great businesses or had great assets but were undermanaged and when you're an activist of course that word has uh different meanings to different people but you 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 and was that intimidating to do that yeah it's not exactly what we said um because again we were young and inexperienced um but uh it was more that we'd find a company one of the early Investments was Wendy's the hamburger chain and Wendy's owned 100% of a chain called Tim Hortons in Canada and Tim Horton was a very profitable successful pure franchise of coffee and dut chaining 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 it's 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 Horton's and then focus on fixing Wendy's but you can create enormous value and just separating the two companies it was a bit like Investment Banking where we didn't charge a fee uh and actually back then um because we couldn't get a return phone call uh because we were a tiny little fund Circa um you know 2004 we hired Blackstone uh which had a 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 Tim Horton's and then we wrote a letter to the board we attached the Blackstone valuation uh which was nearly double where the stock was trading and then six weeks later magically they spun off Tim Horton okay so you did that with other companies and being an activist was it uh consistent with your personality to do this because you got to be a tough guy to call up CEOs and say hey look I got I got a better idea about how to run your company than you do it was consistent with my personality I I think always been some form of an activist yes and today your focus is on the kind of activist investing or youve stopped that so you know when you're no one knows who you are uh 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 um 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 uh has been either buying into a company that already has great leadership and we're happy to share ideas uh in some cases uh 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 you've done three extremely successful macro bets one During the period of the time of the uh housing crisis 0708 and that one was extremely successful you did one again During the covid period of time yes which was I think maybe your best investment ever you made a 94 times your money investment almost 100 times actually 100 times yeah if you yes we bet that the credit spreads would widen as because we need a we'd have to shut down the global economy and uh that's basically what happened D so yeah did people say do you have any more deals like that one you did that one yes and that was a hard to find um you know the the three three Black Swan events in the last 20 years we've were we've been able to be make a big big uh profitable bets on but these kind of Black Swan type things hopefully occur only every seven years let's say well 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 that's the the current macro bet that we have on 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 yes I'm an activist uh but my activism today is probably not in the corporate boardroom uh it's it's on campus some hedge funds they've delegated uh the money decision making uh to many different people in The Firm you make all the final decisions yourself the way 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 uh I will do less of a deep dive um I'll read the public filings I'll read conference called transcripts I won't be the person that uh you know talks to former employees that 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 uh that you know we don't have kind of collective Buy in on at the end of the day I do retain the ultimate veto uh yeah or nay uh and the ultimate decision on sizing one big change I made in the last you know 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 uh Ryan is exceptional uh and he's taken a real leadership role among that eight person uh you know team uh but it it you know we 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 it depends on what role uh but people on the investment team uh generally yes they've uh graduated top of their class at Wharton uh they've always been interested in business and investing they went to work at a Apollo KKR carile uh we like people that that get private Equity uh experience we think that's the best background for what we do we're really private Equity investors investing in the public markets um and the sort of temperament of a typical private Equity person fits well here uh we only own really eight companies uh they don't change that often um so this is not a place where a typical hedge fund firm you know people are cycling through you know the idea of the week the idea of the month here 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 you know the most direct investment we have in AI I would say is Google or alphabet uh which you has you're a biggest shareholder of alphabet we're a small shareholder of alphabet because it's a massive company we've got a you know a large investment approaching $2 billion dollar investment uh in the business um and actually it was it was the it was AI that created the opportunity for us to buy Google at an attractive price you know basically Microsoft uh an open AI had a very powerful demonstration of a launch of a new product and then Google's kind of launch or it was a a bit of a disaster stock got crushed on the basis of you know fear that Google is way behind in Ai and and they're make you know 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 open AI in terms of of their their business progress so one of the pluses some people would say of being a successful investor is you do make a fair amount of money and then you have the opportunity to be a philanthropist so you were one of the early signers of the giving pledge uh why did you do that why did you commit to give away half of your net worth well I think you commit to give we 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 um the I think it's a uh you know I've learned a lot about philanthropy uh I started the Persian Square Foundation uh actually I think 17 years ago um 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 um I do think uh 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 uh can't be solved in the traditional Capital markets there's sort of a gap um and so you know 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 uh public about your criticism of the way Harvard handled the uh events of October 7th and their aftermath could you talk about that now the first reaction of a group of 34 Harvard student clubs on the morning after uh October 7th was to put out a statement saying that Israel was 100% responsible uh for the acts of Hamas and uh my view on that uh 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 uh I'm very unhappy about Israel's uh how treatment of Palestinians and the West Bank or you can say you know we can talk about uh Goda strip um but you can't support terrorists and particularly terrorists that rape and pillage and you know Murder and burn and take hostages and so my first point there was uh not so much directed at Harvard but you know love to know I got a actually a text from a CEO in my industry he's like Bill you know you're 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 uh caused a bit of a firestorm and I got a lot of push back uh why are you picking on students I said look you can't hide behind a corporate entity if you're going to support terrorism you know that's a that's a major decision so that was sort of my first uh initiative if you will at Harvard and then you know there were protests on campus um and the protests weren't uh protests were supportive of terrorism and uh supportive of things like you know when you have a group of students shouting inata inata uh you know let's free Palestine and from The River To The Sea the meaning of inata 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 uh that I would say is undesirable on a campus have you said you're not going to donate to Harvard anymore or have you said not going to hire people from these Harvard students anymore or people like those people no uh well one we're not going to hire anyone that supports terrorism the persing square um I haven't made any statements about um you know economic support for Harvard I want Harvard to do the right thing I don't want to threaten uh one way or another that's not my kind of approach but I do think Harvard needs to do a deep examination of you know one there's been a meaningful rise in antisemitic incidents on campus and uh universities uh done very little uh you know the reaction was let's let's form a task force uh and I think again had this been another ethnic group um that uh where this kind of activity took place Harvard would be suspending the people involved not uh just allowing it 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 uh you know I wrote a pretty thoughtful letter uh that was you know I think 25 million people saw it on Twitter uh and uh remarkably I did not get a response which to me uh is a very very bad uh um and weak uh approach literally no response no acknowledgement no dear bill I hear what you're saying but um nothing so uh yes I'm an activist uh but my activism today is probably not in the corporate boardroom uh it's it's on campus and uh and this is not just the Harvard problem uh you know there's and it's an NYU problem it's the univiversity of Pennsylvania problem uh it you know the the more I examine the issue the more woke the more left leaning the institution the more anti-Semitism uh which is a very unfortunate thing you built puring 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 uh you know a number of things I I I love having a company where I believe that pretty much everyone here is excited to come to work every day uh I think we've made a kind of meaningful contribution uh to you know the capitalist system and the functioning of how B you know I think the probably the most significant impact we've had we were sort of an early activist um and as you probably know the nature of boardrooms you know 20 years ago is meaningfully different uh 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 US capital markets uh and the US Stock Market being one of the best performing uh markets in the world and that has a huge impact on people's pensions on people's savings on people's livelihood on us competitiveness on our uh 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 um it benefits our investors but it also benefits kind of the market generally so I think that's a an important and good contribution you know philanthropically uh we have invested you know 600 odd million dollars in a wide range of initiatives and you know a number of those uh you know it's a bit like investing you have hopefully you have a few uh Googles and uh we have a couple of those a number of those philanthropically um and I do feel like we've invested money uh that on which society has earned an attractive return

Channel: David Rubenstein

Views: 253,747

Keywords: Bloomberg

Id: sdGs9sQd4XY

Length: 24min 6sec (1446 seconds)

Published: Thu Dec 07 2023