Bill Ackman: How to Evaluate Stock's Worth?

the problem with short selling is it's still not accepted as a particularly well accepted as an american way of investing there seems like something inherently shadowy or evil about short sellers you're called an activist that's quite an adjective nowadays when you hear this term what do you think about uh think about picking another job um no the answer is i think a very interesting presentation uh from matt from from blackrock and blackrock is a uh built a business largely on passive strategies and uh you know phenomenal business the vast majority of the capital markets today the public capital markets the investors are passive uh you know they're indexed uh they're closet indexed uh their index plus an alpha strategy and if you look at the shareholder list of major companies it's blackrock it's fidelity it's cap research um it's vanguard uh and and by charter these institutions are passive if you think about capitalism you know 100 years ago it was very different right you had carnegie and jp morgan you had you know players who buy big stakes and businesses they were controlled shareholders there was an owner on the board of directors so so capitalism over time has democratized uh which i think is great for accessibility to uh you know the average man in terms of investing in the market but you get rid of owners uh controlling uh companies and i think uh what activists do is they're sort of they represent other shareholders you know if you think back to my friend mr icon in the 80s he operated very differently today an act of a shareholder takes a stake in a business and is only successful if all of the shareholders benefit it's not green mail where the the active investor buys the state gets a benefit for himself and moves on uh you know if you take a stake in canadian pacific railroad and other people follow you in and they vote in your directors and a new ceo comes in and the stock does well you know the shareholders benefit collectively so it's a i think it's a very valuable feature for the market if the shareholders don't support the activist it never gets done and we're not a control investor we're a lead investor or leading the charge on behalf of other shareholders actually you're allowing me to segue perfectly into the next question so when an activist or specifically you invest on the long side tell us about that first call to the c-suite because usually it means there's some change you're looking to do whether it's board seats or strategy and so you know what what's that call like when you make it well first it's rare that we look for board seats uh i'm on three boards today but we've made uh you know 26 activist investments i'll call it and we've been on uh four or five boards you know over so it's it's a minority of the time um you know i think it's uh you know when i call um we get a very you know open reception and uh we're dealing with very sophisticated ceos and companies and the vast majority of the time uh you know we're in favor of we like the business we think it's undervalued that's not a bad thing to hear as a ceo of the company and we have some ideas on how the business can be made more valuable um it's rare that the idea is replace the ceo uh that's not a call the ceo likes to receive right they know that there's change in the ear when you're making a call sure look at fortune brands right we took a stake in the business in october of 2010 we sat down with the management of the company and we outlined why we believed fortune brands which owned titleist business called fortune brands home and security jim beam why that consolidated uh conglomerate made uh it was time for that business to be separated and we walked through the strategic logic you know what's going on in the spirits industry uh why there are opportunities if you could have a standalone home products business and why was probably time to sell titleist and uh that was a private quiet meeting we walked through a 85-page presentation we asked management how long they would need to kind of think about what we had to say they said you know give us five six weeks five weeks later they announced that they would be selling titleist spinning off the home products business that stock was 40 the day before we started buying it the pieces today are worth uh 96 a share and it's two and a half years later uh i've got a very appreciative phone calls from the the managements of the respective subsidiaries you know i think they love running their own businesses uh you know the the ceo the spirits company you know when the housing market was not in a good place you could be doing a fabulous job selling jim beam but still you're not your stock options aren't worth very much so i think it's a it's a positive development for the shareholders i think it's very good for the management of the company so are you intimating that when you make that call they like that you're on board uh i think the answer is perhaps there's some degree of concern of what we have might have in mind but uh in the vast majority of the cases there you know people seem receptive to hearing what we have to say and and we're we're not uh there's a full spectrum of techniques in activist investing so most your positions on the long side when you go the other way to the short side and we'll talk about one specifically but do you then also make that c-suite call or do you kind of do it in a different fashion you know uh we i did not call herbalife prior to making a presentation um you know in the case of mba mbia you know 10 years ago or more we did sit down with the management of the company at least to hear how they were you know some answers to some questions we had on herbalife we were able to figure things out without meeting with the management so tell us a little about your portfolio why so few names um you know obviously there has been some rumors of the performance up six percent uh for the first quarter i know you can't say that's accurate or not accurate with most of um your portfolio up double digits uh one down double digits which we'll talk about but give us uh just a take on why so few names and um so for a bunch of reasons i mean i've always had the view that uh you know why why not own the best 10 or 11 investments as opposed to ideas 12 through 25 or 12 through 100 which is more typical and uh you know i think there are very few great investments at any one time so the ability to concentrate is an enormously valuable asset of a strategy the problem with it is most uh it leads to bumpier returns and it leads to uh more attention on on mistakes or things that aren't going well you know i don't know a portfolio manager that doesn't have a stock that's down in his portfolio right but you don't read articles about uh when we're getting an awful lot of attention for a pretty high profile situation that's uh that's struggling um but i think there's uh it depends on what your business model is but if you want to make high rates of return over a long period of time it's hard to do that being very diversified i mean if you look through the 400 wealthiest people in the world most of them made their fortune in one business or a portfolio of two businesses very few made it in a portfolio of 100 so it's it's that and the other benefit allows you to run a much simpler uh investment firm we have an eight person investment team if we had 30 names we couldn't manage that portfolio the way we do with a small team by having a small team you can hire better talent there's actually an argument that some people are now making that you know buying the index or buying diversified funds have had much better returns than buying you know those hedge funds that have you know a very specific smaller portfolio approach like yours i haven't seen that article i mean i think we've done very well relative to uh any index alternative certainly so i mean it depends on how you judge us i think if you judge us on a 90-day basis i have no idea how we're going to do relative to an index but i think this is a strategy that over time should earn a meaningful premium over you know any kind of benchmark uh or you shouldn't give us your money yeah so talk to us about the bill ackman strategy or that mental checklist that you go through before deciding to go longer shorter position i mean it's not a bill ackman strategy he's a pershing square strategy square and it's it you know i do get a fair amount of the uh but you have the final say yay or nay that's correct okay so someone could depict that ceo buck stops with me absolutely we just want to make sure that good ones in the battery management by committee that's correct okay but just to be clear every idea has a leader at persian square so the leader may not be me sometimes me sometimes not go through that strategy and go through uh how it works and when you come you know maybe you'll override that portfolio manager or not but what's the checklist you kind of go through so we look for very high quality businesses uh what we describe as simple predictable free cash flow generative dominant businesses a business that warren buffett would describe as having a moat around it right if you if you believe that the value of anything financial is the present value the cash you can take out of it over its life we need to know how much cash is going to generate over its life so the business quality to us is the single most important uh criterion for determining what's interesting because if we can't predict the cash flows we don't know what's worth we don't know what's worth we can't invest so we figure out what it's worth figure out how good the business is how predictable will this cash flows be from a railroad or a spirits company or a real estate company shopping mall business and then we say okay well where's the trading and if there's a wide gap between price and value uh you can buy it for 50 cents it's worth a dollar 20. and then we're going to take a hard look and try to understand why it trades at a deep discount and uh once we understand the reasons we decide well these things that we can solve you know can we in light of the situation uh the circumstances can we be influential in changing these these levers that can cause this valuation discrepancy to narrow and is this a business that while we're causing the valuation discrepancy to narrow we can also perhaps contribute to the valuation growing and those things are true we found something that looks quite interesting for us and um usually this investment philosophy does it take a week a month three months to do the research a year i mean you have ten names what how long it depends i mean one of the best investments we've ever made uh took us four hours to do the work uh it was during the financial crisis which was that uh wakovia corporation so um i was on my blackberry uh eating breakfast uh the brooklyn diner uh in front of my building and the story went across the uh i was just you know wall street journal headline reuters headline excuse me went across saying um that group uh to acquire the wachovia banking subsidiaries for two dollars in citigroup stock stock was halted this was kind of an interesting transaction because they were buying the subsidiaries for citigroup stock i figured that's interesting what happens to the holding company so i went back to the you know kind of went upstairs to the office and you know cracked open the 10k and another member of the team mick maguire uh he and i worked on it and uh what was interesting is the thousand page 10k of wachovia corporation i think 900 pages were on the banking subsidiary there was fewer than 100 pages on the holding company and by buying the banking subsidiary citi was leaving a holding company which had cash um you know in wachovia securities a.g edwards they had paid seven billion four to six months before evergreen asset management and they were taking a 27 billion dollar loss on the sale of the subsidiary and uh it also had a liability called non-cumulative perpetual preferred stock which if you ever want to have a liability in your life this is the single greatest liability to have it's a it's a form of equity where you never have to pay a dividend and when you don't pay them they don't accumulate and the worst case is they get a couple directors on the board and you say hi to them each meeting and you have this very interesting i said look this could be our berkshire hathaway and uh the end of the day we figured the ass you know in four hours we determined the holding company was worth at least 11 to 14 cash a tax refund that you could you could carry back the 27 billion dollar loss recover cash taxes have been paid so you have this cash vehicle you know wachovia securities which is a you know good wealth management business you'd own a.g edwards another interesting asset you these are businesses you know well and uh the stock opened after it was halted at a dollar 84. so we said look it's worth you know 11 to 14 1.84 we bought 42 of the volume for the next four days and then it was acquired by then wells came in and put in a topping bid of seven dollars in wells fargo stock which wasn't actually a topping bid but the wells fargo deal did not require government assistance right so i think sheila barely remember that like i actually interviewed sheila beer sure for our show sure so before we go into some of the investing uh actually someone bring me some water that would be great great maybe a bottled water thank you so you're known for occasionally hiring people with some non-traditional financial backgrounds a former fly fisherman a tennis pro someone you met in a taxi so what actually are you looking for so most of the people that we have on the investment team uh are people with more conventional backgrounds uh half the team worked at blackstone in either private equity or investment banking uh a few guys from goldman sachs um but i'm a big believer you know i had internships in my uh life and uh you know if i meet a great human being uh you know i want to give some you know people who didn't go to harvard business school and didn't work at goldman sachs for four years you know some exposure so i met the beginning of pershing i met a guy named oliver white uh who i believe is one of the you know he's become recognized one of the top fly fishing guides in the world very smart interesting guy taught me fly fishing and i said look if you're interested in business and you want to uh intern at uh you know learn something about it you know come work for me and uh oliver came and spent 18 months with us um you're taking a very outdoorsy guy and you're putting him in manhattan which is kind of an interesting uh thing he didn't like that part of it but he learned a ton about business uh and then he left he actually worked a lot on uh one of our proxy contest situations uh uh in the ceridian we had a proxy contest one of the issues was the uh the uh ceo was using the corporate chat to do a lot of fly fishing junkets so we were able to track that stuff through his network of fly fishermen so it was useful in the proxy contest anyway um and uh oliver left uh you know dude and i backed him to buy a fly fishing lodge which the abaco lodge in uh abaco in the bahamas and it's like you know 20 unlevered return on capital and he's done an unbelievable job managing and and uh we hired a guy named mary sadamski who i met on the tennis court a super talented guy went to wake forest you know top tennis player and uh he um you know i offered him a job and he's worked for us for the last couple of years and he did a lot of the research on herbalife and he did a phenomenal job um so i just you know he's going to go to business school uh because he's going to he needs more training to come back into the business but i think it's a you know it's a nice thing to offer people those kind of i know well i was offered opportunities i'm glad i flew down with you maybe maybe i have a role for at pershing soon so now let's get into a little of the fun part so you've been in quite a bit of news lately i mean i've had 30-ish interviews on impact players and actually researching you i thought would be quite easy but actually it's very difficult because you actually have to separate fact from fiction sure it's become very difficult with you i have to i have noticed that as well i have to be honest with you but um you most know that's what you think is what you think is fiction exactly i'm my own version you've become most notably uh famous for this public feud you've had with carl icahn and i'm not going to get into that other than um do you feel like you underestimated how personal this fight over herbalife was going to become and for someone that has been relatively a private guy and a a you know an investor and really sticking to his business and his family life and how you know keep things separate you now you you can't go anywhere without seeing bill ackman whether it was a new york times op-ed or this month's vanity fair or today on i thought i bought up most of those vanity fair shoes yeah well they're still around so i mean you have to be surprised how this takes off and how does it you know so does it make you second guess how you've kind of gone about this whole uh of a fear look sure taking a short position and going public with it is a pretty serious business um we uh and i debated long and hard as to whether i wanted to do that again uh you know we i took a lot of heat for taking a big short position in mbia and uh and sharing my thinking publicly about why i thought that 150 to 1 levered aaa rated institution guaranteeing subprime cdos was not good for america and not good for your pocketbook yeah and could cause a financial crisis by the way and there's some similarities because you thought the regulators were missing that as well and we did and it took us a couple years to get the regulators interested in taking a look at the accounting issues reserving issues and and so on for the company but i learned a lot about dealing with uh the regulatory community uh and also now a lot of headaches associated with it uh in the case of verbal life um i couldn't really believe i came to the conclusion that how can this company really exist how is it possible that a 4 billion revenue business with a 7 billion market cap is a pyramid scheme um and but you know how could bernie madoff had 50 billion under management in a pyramid scheme um and i debated do i want to go public with this and uh you know the first part of that analysis is one we've got to get to a level of certainty here that is higher than any other investment we've ever had because again to come out and say a company's effectively violating the law is a pretty serious uh accusation uh we didn't want to do it on our own you know we hired one of the top law firms in the country who did six months worth of work and came to the same conclusion and agreed to meet with regulators with us which i think was important part of our the work we did but still do i want to go public and take the heat the problem with short selling is it's still not accepted as a particularly well accepted as an american way of investing there seems like something inherently shadowy or evil about short sellers um you look at some of the uh you know david ironhorns call on lehman jim chanel's call on we had jim chanel and he's still talking about china and if uh lehman had done a recapitalization in response to david einhorn saying they had inadequate capital yeah lehman would still exist and i don't know exactly what the uh the course of the financial crisis we've sort of had a financial crisis probably not as severe um had mdia in effect recapitalized when we pointed out the adequacy of their capital you know municipal bondholders would have a better would have a better insurer in the case of verbal life uh we concluded the risk reward was very attractive we thought by virtue of sharing our thinking publicly and pyramid schemes rely on deception uh there are they've got to recruit almost a couple two million people a year to keep the scheme going and a growing number to keep this game growing it's harder to do that when there's tremendous visibility about the business model the company's been forced to update its disclosures that it's now sending to its distributors that in fact 88 of the distributors make nothing they get no royalties from from real life that's not a fact that they were willing to disclose publicly before they've been forced to shut down some of this uh lead generation recruitment that happens on the internet which is a completely the way it's done by their distributors is we believe totally in violation of law so just by virtue of going public we mitigate the risk of being short because it affects their ability to deceive people it affects the fundamentals of the company and that reduces the downside of being short the stock price rising and then we have the benefit of a potential regulator but you would never guess that but so all that's the kind of thesis now did i think that a group of hedge fund managers would take the other side of the trade and and uh try to you know orchestrate a short squeeze no i didn't think that in fact what i think is disappointing about that again it doesn't bother me at all if someone takes the other side every investment we have there's probably someone short things that were long or obviously long things that were short that's how the markets work what what's sort of nice about the hedge fund industry is it was an industry where it was more a cooperative industry i didn't view my people in the industry as competitors because we would find value together you know ultimately you know you see partnerships and various investments this was the first case where a lot of sniping going on between managers which i think is just a negative for the industry yeah so i want to uh so to quote you if the ftc misses herbalife it's the equivalent of the sec missing madoff so why have the regulators missed it for over a decade so look it's not an easy thing to be a regulator it's uh you know it's a job where you don't get a lot of awards for being a regulator unfortunately you you get in trouble for missing things uh you have limited resources even though it's the government they have limited budgets uh companies have you know uh you know lobbying organizations they have uh influence uh and they you know they they push on the margin to minimize uh regulation oversight of their business so their force is fighting against regulators but what are you seeing so clearly that they aren't it took us 18 months to do the work we could spend an unlimited amount of money hiring the best lawyers in the country we can put an unlimited amount of resources to figure things out we could focus just on this one company and we have no obligation to regulate the rest of the direct so-called multi-level marketing industry we found one outlier we spent all of our time and energy on it we studied it and it took us a very long time to get to a level of conviction and certainty that we feel comfortable going public a regulator can't do that um they just don't have the resources to do that um and that's you know uh same thing on uh you know in fact if i were if i were chairman of the sec i would have a regular meeting with jim chanos david einhorn and all the best short sellers and say what are your favorite shorts so have you sat down with the sec giving them your presentation uh i've been told that i'm not allowed to answer that answer that question but you you should assume that uh we're fairly proactive at purging square yeah and that we will meet uh and have met with uh a wide array of regulators that have jurisdiction for the company so um you have said that you'll donate any of the money that you might gain from herbal life to charity i should say as a side note my wife is hoping you win because she's at the rfk center for human rights and she's hoping that you win and then wants to sit down with you okay but why have you decided that this is something that in some ways you're now giving to the charitable side and we'll talk about your philanthropy which has been really outstanding and not discussed enough about how much you've given back but i i i mean why are you making this case a little different than others look i think the answer is well first of all i'm philanthropic generally there is a taint associated with short selling my experience with mbia is every time we talked about or made a presentation about mbia people would say oh he only believes that because he's going to make a profit if the stock price goes down and what's interesting is all day people go on cnbc and talk about stocks they like and no one discredits them by virtue of the fact they're going to make a profit if it rises but on the short selling side there's something at least some people perceive inherently wrong with it in the mbia case the stock basically went up for years this the credit spreads got tighter and tighter and the aaa rate rating remained until one day i gave a presentation at uh forgot which conference and i said at the end of my presentation i hereby commit to give away 100 of the profits that i personally make from this investment that was the high for the stock it went straight down the credit spreads went from 13 to two thousand we made you know a lot of money yeah uh i see to the persian square foundation uh with a hundred and forty million dollars from that uh wow situation fantastic and we spent the money already so we need to refill uh the foundation so yeah in fact we've got 200 million on on charitable things and we're running out of resources yep so now on to uh jcpenney you own somewhere around 15 of the company makes you the largest shareholder the stocks dropped north of 20 this year you've taken a bit of a hit uh both you and your investment in it um why the confidence that you think this retailer can turn it around we'll see but here's what we find interesting about jcpenney it's a great brand it's been around for 110 years by virtue of being around for 110 years uh jcpenney has 110 million square feet of some of the best shopping mall real estate uh in the country that's a great place to start if you're a retailer it has long-term ladder debt maturities over a very long period of time and it's a great platform but it was really a retailer that was dying slowly uh you know it really peaked probably in the you know late 80s early 90s and it's been difficult from there and the thesis was if we can bring you know mike ullman was approaching retirement 66 or so years old um perhaps we can help recruit a top retail uh ceo who can bring kind of a growth strategy to the company and uh we recruited ron johnson and he and he's gone to work and it's uh and he's doing one of the most difficult kinds of business turnarounds i mean hunter harrison at cp has done an unbelievable job uh turning around a railroad which is not an easy thing by any means but he doesn't need to change the business model of the railroad right the revenue side sort of takes care of itself here what ron is doing is you know fixing the cost structure they've taken you know something approaching a billion dollars out of the cost structure uh changing the merchandise in the stores changing the way the merchandise is presented um if you had to uh now the impact has been on a consolidated basis something very close to a disaster right sales are down tremendously sequential comps have declined dramatically no business can survive uh the the the trend here and he's working very aggressively with his team uh to fix the mistakes have been made there's been some big mistakes and i think one of the big mistakes was perhaps too much change too quickly without adequate testing what the impact would be and uh so you know again as i've you know i've told our investors jcpenney is the highest risk and highest reward investment in the portfolio you think about retail just a segue for a second yeah um the wealthiest people in the world are retailers in every country whether it's the waltons on the united states or whether it's the guy who owns ikea in sweden or the uh indiglo uh you know japan uh the the the indus inditex in in spain if you get a retailer fixed if you get a good model and you can replicate uh it's about the best way to make money ever but it's not easy it's hard jcpenney has huge structural competitive advantages by virtue of its asset base by virtue of its brand that's a good place to start but it doesn't guarantee success and my guess you won't answer this next question but when a stock's down roughly 25 and the stock market's gone up dramatically at what point do you decide i'm going to buy more or what point decide i'm cutting my losses this is just the wrong direction it has nothing to do with the stock price for us it has to do with what's going on in the business uh you know in jcpenney case we're on the board we're working hard along with the other directors and make sure that this ship is steered uh is steered correctly um you know as a general rule uh you know we if we conclude that we're wrong or we've learned new you know investing is about the best investments are the ones where we are the confident we're right and everyone else is wrong okay and you have to in order to be you know been accused recently of being arrogant among other things no no i'm going to actually ask you that it was called it was pompous but that's okay pompous i don't think i'm pompous but i've certainly been accused of being arrogant and there's a difference between arrogance and confidence yeah if you're arrogant and investing you're gonna get killed right if you're not confident you'll never make an investment all right so you have to do a sufficient amount of work to be confident enough to have the conviction do something that's contrarian right we bought the stock of a uh very soon to be bankrupt retailer i'm sorry a shopping mall company during the financial crisis uh at pennies per share you have to be willing to look silly when you do something like that uh general growth stocks up 90 fold since our original investment um you know on that's we had confidence maybe people thought it was arrogant to believe that we could be successful in turning around but you also have to be humble and you have to recognize when there are new facts you hadn't considered that are inconsistent with your thesis well if you look at herbalife none of the the bull case for herbalife none of those arguments have in our view any merit and therefore we're we continue to have conviction but if we were to learn a new fact that all of a sudden we realized herbalife was a great company and was wasn't a pyramid scheme and the products really had tremendous efficacy and they were priced correctly and there was real demand for them yeah yeah we would change your mind so one last question on jcpenney but they've their sales has been down 32 same store sales and you commented that the media has been very negative and ceo johnson gets picked on more than any other ceo in the country do you really believe that criticism's not deserved criticism is deserved uh and ron is working very hard uh i don't know what the date of that comment is but you know look uh he's this is a very difficult thing to do he is uh you know i'd say the ad hominem criticism i think is inappropriate but look he's a uh the buck stops with him he's ceo of the company uh if it's failing under his watch you know he deserves uh and the board deserve responsibility for that so i'm pretty sure i may be mistaken that your entire portfolio is u.s except for canadian pacific railway which may have been your best performer last quarter why is this your only non-us play and do you think actually this may be a trend where you're starting to look um outside of the u.s so we do very few things in fact we do very few things a year right our average holding period is four or five years for our kind of active investments and we have ten stocks right we need to find a couple of ideas a year it doesn't make sense to me unless the universe we play in we've run out of targets you know why go why fly to europe to have a meeting with management why you know deal with a jurisdiction where we're less well-known where we have fewer relationships we don't understand the legal system the regulatory environment so we focus on the united states and canada and we've invested in canada before because we you know we understand the language we understand the law it's close to home it's a short flight to uh in calgary's next few hours but uh you know just close to home i can go see my kids so you like to feel and touch it yeah yeah it's very important yeah um so what has been your single biggest mistake you've made either investing in a company or deciding to walk away from investing you know we uh spent an enormous amount of time looking at mastercard before it went public and i've always believed that you know i'd said previously i was asked by you know at a business school by a student what's the single best business in the world i said if you could own a royalty on people spending money like visa or mastercard the greatest business in the world if that ever became a public company you want to buy that company if you ever could buy that company well became a public company and we did an enormous amount of work in the company we couldn't get comfortable with the regulatory risk uh you know the consumer protection agency things no there was a there was outstanding uh kind of uh uh kind of anti-trust litigation okay relating to kind of monopolistic uh practices of the uh of the visa mastercard and you know when you have a strategy where you put 10 15 plus percent of your assets in any one investment you can't take even a very small risk of a catastrophic outcome interesting and so we passed on mastercard and it's been a incredible investment management's done an amazing job that's a that was that's a big miss yeah well but it's very interesting it's either that one the question is whether it's a miss uh did we do we overestimate the regulatory risk or uh or did it just work out in an original way so i think as a as part of a you know 50 stock portfolio we would have bought it as part of a 10 stock portfolio we couldn't do it so unclear to me but i still look at that one and say do we really have a miss there so i'm sure you know you have some fans some critics and you've been described as pompous and needlessly competitive although i have to admit i've been called worse in my own industry as well um so tell me how would how do you think that your peers describe you and how do you how do you think um those that you invest in describe you so in the last 90 days i've had one very vocal critic um no actually two really yeah i don't think any of us have seen it uh well two uh there's carl and then there's this guy that i met uh money manager named bob chapman who uh i met on a panel seven years ago we were on a panel together shook hands never spoken to him since i've never had an email correspondence i've never seen him since but in the last 90 days he's been running the talk show circuit on how i'm you know either wrong or stupid or arrogant uh you know giving quotes to vanity fair um it's unfortunate uh you know i i don't mind criticism um but i don't i don't like reading things that are i don't you know it's hard to read for someone who doesn't know me well to be commenting on what i'm like as a person i find i find that difficult um but you know whatever i got you have a thick skin to be in this business uh and um you know if you end up in a very public uh situation you should expect to have fans and critics and you know i just try to focus on what my job is and we focus on making money for our investors and i live my life and well i want to talk about the side that i'm most proud about being your friend about and that's what you and your wife has done and so uh give me a few seconds here but you've been quite philanthropic and in some ways it's gone unnoticed because what's surprising is you are one of the youngest individuals to sign the giving pledge which for those who are not familiar with that it's giving 50 of your net worth away during the time you're living or more or more right and in 2011 you and your wife karen were among the list of philanthropies uh 50 list of most generous and that's just great and i think we all read the journal and everyone likes to read about the things you know that goes viral but the truth is you don't get enough credit for giving back and i want to applaud you for that i also want to get an understanding of you know why did you sign the pledge and tell me about some of your foundation work that you and karen are doing that's kind of true to your heart so we can get to know you away from some of the other things we read sure so uh my dad was a very successful businessman he's still he's still active at 74 years old and what's interesting about philanthropy is it's i don't think it's innate i think it's learned and my dad always pushed me on how important it was to be charitable and so i had the benefit of someone who provided real leadership uh to me you know the obvious points are uh you know i don't need anything else economically my family's in a great uh position uh financially i'm financially independent i don't have those kind of concerns so the question what to do with the resources right you can give them to the next generation uh and they're you know a lot of times it doesn't work out very well right i i benefited by no my father said to me bill you'll never inherit anything from me probably ever or unless you don't need the money uh and uh and so i didn't have to worry about that affecting my incentive structure and i think that you know i grew up you know one of my closest friends uh was expecting to inherit a lot of money and it affected his ability um he was very talented very smart but he couldn't commit to anything and stick to it because he had too much optionality in a way and so i think um you know you can you can create a lot of damage by handing uh you know fortune to uh to the next generation and they're a lot more needier and more important causes so give us a couple of the things that your foundation's involved with so i'll give you who i think will get the nobel prize uh seven eight years ago a guy came to see me named andrew yoon and he had just started something called the one acre fund and the one acre fund young guy moved to kenya i don't know if he was there just on vacation or otherwise and uh i met all these one-acre farmers these are women that support their families uh and you know nine ten months of the year they can feed their families based on what they can produce on the one acre that the government has given them the other several months of the year uh they basically and their kids starve and they starve and through teaching modern farming techniques uh providing better uh seed technology better fertilizer he's able to increase their output by 3x and they have a surplus and he provides the seeds and and the this fertilizer and the consulting advice in exchange for half of the excess increase in output and he takes that money and reinvested another farmer we've invested a relatively tiny amount of money with him and we're his biggest funder seven million dollars by the end of this year he will have taken something approaching a hundred i think over a hundred thousand of these one acre farmers from starvation to feeding their families to having an excess where they can send their kids to school it's incredible that's okay and uh you know uh one of our members of advisory board uh you know with his former cfo of mcdonald's matt paul he's helped andrew in thinking about franchising how to build the system and they're in kenya now and they're uh going into burundi and uh it's an incredible model um i just look at a guy like that and you know my added value here was pushing him okay and uh giving him capital to accelerate what he's doing he's compounding if this were a growth by the way he could make that a profitable business if he's slowed his rate of growth but we've we've given him capital too so he can do it more quickly and stuff like that i mean you know fantastic well last question because it's what is on everyone give money to the one acre fund so you can find them online somewhere i mean certainly great work so there are four teams left in the final four we're going into the final four weekend so we want to know who you would short and who you would go long um and and just to so i know you've been busy so i know you know who the final four is but i'm just saying you have to prep because that would really go viral if you didn't know who the final four is so i'm going to tell you just in advance you have louisville wisconsin michigan and syracuse there's no pen there's no harvard this year although you know penn was the 79 team when bird and magic were there i assume you went to you went to bed i did so i'm just letting you know we made a final four once but harvard did have their first victory in the ncaa so kudos to them so who would you short and who would you go along i think short selling is risky i wouldn't do that you i picked michigan because mom went there michigan to go long i don't have a point of view okay then i only go publicly short if we really do our dude all right then i'll go louisville to win okay so i'm louisville young michigan and we'll we'll have a nice lunch again appreciate it well i want to thank once again partners connect and reuters for putting this together and my friend bill for coming to do this today thank you very much you

Channel: Business Basics

Views: 395,586

Rating: 4.9197922 out of 5

Keywords: Investing, Investments, Finance, Wall Street, ETF, Stock Market, Warren Buffett, Economy, Long Term, Bonds, Bitcoin, Portfolio, big tech hearing, tech ceo hearing, amazon, google, facebook, jeff bezos, mark zuckerberg, antitrust, antitrust hearing, tech hearing today, antitrust hearing today, reuters, live video, tech hearing live, Sundar Pichai, reuters news, news, live news, apple, tim cook, big tech, trump, biden

Id: 1lZigs2kpKc

Length: 39min 52sec (2392 seconds)

Published: Sun Nov 22 2020

Reddit Comments

[u/NYCnosukja]

This clip from an interview years ago is so fascinating for a couple reasons:

• The obvious one being his description for the "greatest business in the world" fits current-day Stripe perfectly
• The way he says "if they ever became a public company, you wanna buy that company - if you could ever buy the company" is so damn apt for the current SPAC situation
• How Mastercard & Visa went from his "biggest investment miss" to the latest targets of his criticism w/r/t pornography

Or this might be my Feb calls talking..

[u/diorgasm]

Every single day I think to myself , fuck, should have bought more shares last week

[u/CIark]

Imagine watching this and then deciding this guy wants to invest in Subway

[u/usulwalker]

Wow he gives 50% of his earnings to help others. This guy is awsome.

[u/[deleted]]

Lol the first ever investing video I saw was from Billy boy explaining Lemonade stand. At that time I thought why is a billionaire making an hour long video on youtube. Researched about him a bit. Then came across PSTH and I now 60% of my portfolio is PSTH. Idk about the target, In Bill Spacman I believe!

[u/saitks99]

Nice Find !!