The David Rubenstein ShowPershing Square Capital Management CEO and Founder Bill Ackman talks about the candidates for President of the United States in 2024, AI and the state of Harvard after anti-Israel protests on their campus. He shares his insights on "The David Rubenstein Show: Peer-to-Peer Conversations". The full episode will air December 6th on Bloomberg Television.
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. We'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 and 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 we're what's going to be interesting is to see what happens when people get have to reprice their debt, and I think that can have sort of a cliff like effect, and 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. The other hands, some people say the Fed can't wait till after the election because the economy might need a stimulus. So you have a view on what the FED is likely to do.
I think they're going to cut rates, and you know, I think they're going to cut rates sooner than people expect, 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 and inflation is trending below three percent or you know, that's a very high real r 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. So 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 Key one 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 selected, or 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. I 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 asi and to say he's not going to run and create the opportunity for some competition of alternative. Do you think that I think that I think he's you know, past his prime 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 best. And I don't think Biden is there. And I don't say that, you know, with any derision of the President. I 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, you know, if the country wanted me at some point, you know, I would be open to it. 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 I'd 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 you me put myself out there.
Let'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. It's probably what I told him at age ten or something like this. So I always had all kinds of entrepreneurial jobs and things.
So as a young boy, or did you have any newspaper routes or things like that.
Sure, So my dad did not believe in allowances. He said, look, you want to make money, you have to work. And initially he offered me some job opportunities.
Early one was.
Digging a fifty 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 and that I didn't want to get paid per hour. So 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 on 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 was spending money. In 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 he became a friend, sold advertising for those guides all over the world, and so we had this working out of the basement of dorm room.
We sold hundreds.
Of thousands of dollars of advertising in these books, and we got a commission for doing so, and it started that's got a fifteen percent promote for selling advertising, and that kind of led to this hedge fund thing.
And you did pretty well on Harvard, and when you graduated, you then did what.
I graduated 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 developer 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 a hedge fund.
And just just said, Okay, I've got a harvardusins school. I 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 Harbard 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 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 Burkwitz, a classmate of mine a business school. We started in September of ninety two. And yes, we had no experience. And what was interesting is that none of the people who knew me in high school, like parents, my friends.
Had no interest because they thought of me as a kid.
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 Pershing Square year or two later.
No, So Gotham was a decade and we did kind of equity and then private equity and some venture capital, and then actually had a pretty challenging period that led to a decision to wind up Gotham and then I launched Pershing Square in January of two thousand and four, almost twenty years ago.
You specialized in picking stocks. You weren't a macro investor then, where 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 and 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 different meanings to different people. But you would you call the CEO and say, we own five percent, 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?
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, and Wendy's owned one hundred percent of a chain called Tim Horton's in Canada. And Tim Hortons was a very profitable, successful, pure franchise of coffee and donut chaining principally in Canada, and you could fairly clearly see that business was worth about five billion dollars at least. It had about four hundred and fifty million of operating income, probably worth meaningfully more than that. But you could buy all of Wendy's for five billion, So literally the market was describing zero value to the Wendy's franchise, and our advice to the CEO is, well, just spin off to Importance and then focus on fixing Wendy's. But you can create enormous value in just separating two companies. So it 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 fun circa two thousand and four, 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, what Wendys would be worth if they spun off to Importance.
And then we wrote a letter to the board.
We attached the Blackstone evaluation, which was double where the stock was trading, and then six weeks later, magically they spun off Tim Horton's.
Okay, so you did that with other companies and being an activist, was it consistent with your personality to do this, because you've got to be a tough guy to call up CEOs and say, look, I got a better idea abou how to run your company than you do.
It was consistent with my personality. I've think always been some form of an activist.
Yet 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. Twenty 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. In 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 seven o eight 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 ninety four times your money.
Investment or less one hundred times actually one hundred times.
Yeah, Yes, we bet that the credit spreads would widens because we needed we'd have to shut down the global economy, and that's basically what happened.
So did people say, do you have any more deals like that? When you did that one? Yes, and that was a hard to find.
You know, the three black Swan events in the last twenty years, we were We've been able to make a big, big, profitable bets on. But these kind of blacks one type things hopefully occur only every seven years.
Let's say interest rates went up and they started going up, you made another macro back 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 current macro bet that we have on.
The pleasure you get out of doing this is what you like to make money. You have investors, you want to make them happier.
So it's a lot of things.
You know, 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, as you get to pick everyone you work with. We choose people based on principally personal qualities. You know, 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 seventeen billion of assets have a lot more than forty one employees. And of the forty one, we only have eight people team, which is also unusual. So I think this plays attracts you know what people call force multipliers, you know, 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 fund people and I get to come into the office every day and work with them.
So I would say that's a great thing too.
It's actually a lot of fun to make money for people, you know, it's 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. So I do it is fun to make people money.
Even if some hedge funds they've delegated the money decision making to many of different people in the firm, you make all the final decisions yourself.
It works as 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 called transcripts. I won't be the person that you know, 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 you know, we don't have kind of collective buy in on. At the end of the day, I do retain the ultimate veto yeah, your name, and the ultimate decision on sizing.
One big change I made in the last.
Couple of years, I pointed a cio, a very talented guy named Ryan Israel who's been with the firm for about fourteen years. And Ryan is exceptional, and he's taken a real leadership role among that eight person you know team. But you know, 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.
But people on the investment team generally, yes, they've graduated to the top of their class at Wharton, They've always been interested in business and investing. They went to work at a Apollo a KKR 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. You know, people are cycling through 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 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 good Google or Alphabet, which.
You're a biggest shareholder of Alphabet.
We're a small shareholder of alphaet because it's a massive company. We've got a you know, a large investments approaching two billion dollar investment in the business. 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 and 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 bit of a disaster.
Stock gout crushed on the basis of you know, fear.
That Google is way behind an AI and and there 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 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. Did you do that? Why did you commit to give away half of your net worth?
Well, I think he committed half for 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 Persian Square Foundation, actually, I think seventeen 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. I 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 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 public about your criticism of the way Harvard handled the events of October seventh then their aftermath. Could you talk about that now?
The first reaction of a group of thirty four Harvard student clubs on the morning after October seventh was to put out a statement saying that Israel was one hundred percent 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 the Palestinians in the West Bank, or you can say, you know, we can talk about God's strip, 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 not so much directed at Harvard, but you know, I love to know. I got actually a text from a CEO in my industry. It's like Bill, you know your 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. 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 initiative, if you will, at Harvard. And 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 into fada, into Fada, you know, let's free Palestine and from the river to the sea. The meaning of into fada 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.
Have you said you're not going to donate the 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 person square. I haven't made any statements about, you know, 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 you know, one, there's been a meaningful rise in anti Semitic incidents on campus and university's done very little.
You know.
The reaction was, let's form a task force. And I think again, had this been another ethnic group that or these kind of activity took place, Harvard would be suspending the people involved, not just allowing you.
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 twenty five 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 acknowledgment, 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 on campus. And this is not just a Harvard problem. You know, there's and it's an NYU problem. It's a University of Pennsylvanian problem.
It.
You know, the the more I examined 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 are the 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. I think we've made a kind of meaningful contribution to you know, the capitalist system and the functioning of how you know. I think the probably the most significant impact we've had. We were sort of an early activist and as you probably know, the nature of boardrooms, you know, twenty 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 US capital markets, in the US 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, people's livelihood, on US competitiveness, 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, benefits our investors, but it also on benefits kind of the market generally. So I think that's an important and good contribution.
You know.
Philanthropically, we have invested in, you know, six hundred million dollars in a wider 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 Googles, and we have a couple of those, a number of those filanthropically, and I do feel like we've invested money on which society has earned unattractive return.
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