Bill Ackman: Investing, Financial Battles, Harvard, DEI, X & Free Speech

00:00:00.000 | The only person who can cause you more harm

00:00:01.520 | than a thief with a dagger is a journalist with a pen.

00:00:04.040 | - The following is a conversation with Bill Ackman,

00:00:09.160 | a legendary activist investor

00:00:11.160 | who has been part of some of the biggest

00:00:13.120 | and at times controversial trades in history.

00:00:16.600 | Also, he is fearlessly vocal on X, FKA Twitter,

00:00:21.360 | and uses the platform to fight for ideas he believes in.

00:00:25.340 | For example, he was a central figure

00:00:27.880 | in the resignation of the president of Harvard University,

00:00:31.080 | Claudine Gay, the saga of which we discuss in this episode.

00:00:35.720 | This is the Lex Friedman Podcast.

00:00:38.800 | To support it, please check out our sponsors

00:00:41.260 | in the description.

00:00:42.600 | And now, dear friends, here's Bill Ackman.

00:00:46.280 | In your lecture on the basics of finance and investing,

00:00:49.800 | you mentioned a book, "Intelligent Investor"

00:00:52.320 | by Benjamin Graham as being formative in your life.

00:00:56.120 | What key lesson do you take away from that book

00:00:58.600 | that informs your own investing?

00:01:00.400 | - Sure.

00:01:01.240 | Actually, it was the first investment book I read,

00:01:03.300 | and as such, it was kind of the inspiration

00:01:05.520 | for my career and a lot of my life.

00:01:07.360 | So, important book.

00:01:08.600 | You know, bear in mind this is sort of

00:01:10.680 | after the Great Depression.

00:01:12.560 | People lost confidence investing in markets.

00:01:15.520 | World War II, and then he writes this book.

00:01:18.000 | It's for like the average man.

00:01:19.880 | And basically, he says that you have to understand

00:01:23.160 | the difference between price and value, right?

00:01:26.560 | Price is what you pay, value is what you get.

00:01:30.200 | And he said the stock market is here to serve you, right?

00:01:33.940 | And it's a bit like the neighbor that comes by every day

00:01:36.000 | and makes you an offer for your house.

00:01:37.960 | Makes you a stupid offer, you ignore it.

00:01:40.700 | Makes you a great offer, you can take it.

00:01:43.040 | And that's the stock market.

00:01:44.080 | And the key is to figure out what something's worth,

00:01:47.180 | and you have to kind of weigh it.

00:01:49.000 | He talked about the difference between,

00:01:51.600 | he said the stock market in the short term

00:01:53.480 | is a voting machine.

00:01:54.520 | It represents speculative interests,

00:01:57.520 | supply and demand of people in the short term.

00:02:00.320 | But in the long term, the stock market's a weighing machine.

00:02:03.280 | You're much more accurate.

00:02:04.660 | It's gonna tell you what something's worth.

00:02:06.360 | And so, if you can divine what something's worth,

00:02:09.180 | then you can really take advantage of the market

00:02:11.000 | 'cause it's really here to help you.

00:02:13.020 | And that's kind of the message of the book.

00:02:14.600 | - In that same way, there's a kind of difference

00:02:16.480 | between speculation and investing.

00:02:18.920 | - Yeah, speculation is just a bit like buying,

00:02:22.500 | trading crypto, right?

00:02:25.080 | You're--

00:02:25.920 | - Strong words.

00:02:27.200 | - Well, short term trading crypto.

00:02:29.900 | Maybe in the long run, there's intrinsic value.

00:02:31.700 | But the, you know, it's many investors,

00:02:36.700 | you know, in a bubble going into the, you know, the crash,

00:02:41.920 | were really just pure speculators.

00:02:43.320 | They didn't know what things were worth.

00:02:44.400 | They just knew they were going up, right?

00:02:46.200 | That's speculation.

00:02:48.400 | And investing is, you know, doing your homework,

00:02:51.880 | digging down, understanding a business,

00:02:54.360 | understanding the competitive dynamics of an industry,

00:02:56.920 | understanding what management's gonna do,

00:02:58.320 | understanding what price you're gonna pay.

00:02:59.880 | You know, the value of anything, I would say,

00:03:03.680 | other than love, let's say,

00:03:05.600 | is the present value of the cash

00:03:07.280 | you can take out of it over its life.

00:03:09.120 | Now, some people think about love that way,

00:03:11.400 | but it's not the right way to think about love.

00:03:13.680 | But it's, yeah, so investing is about

00:03:16.400 | basically building a model of what this business

00:03:20.280 | is gonna produce over its lifetime.

00:03:22.280 | - So how do you get to that,

00:03:23.960 | this idea of called value investing?

00:03:26.200 | How do you get to the value of a thing?

00:03:28.320 | Even like philosophically, value of anything, really,

00:03:30.940 | but we can just talk about the things

00:03:32.800 | that are on the stock market, companies.

00:03:35.360 | - The value of a security is the present value of the cash

00:03:40.360 | you can take out of it over its life.

00:03:43.480 | So if you think about a bond,

00:03:44.640 | your bond pays a 5% coupon interest rate.

00:03:48.320 | You get that, let's say, every year

00:03:49.720 | or twice a year, split in half.

00:03:51.940 | And it's very predictable.

00:03:53.320 | And if it's a US government bond,

00:03:54.440 | you know you're gonna get it.

00:03:55.280 | So that's a pretty easy thing to value.

00:03:57.120 | A stock is an interest in a business.

00:04:00.600 | It's like owning a piece of a company.

00:04:02.920 | And a business, a profitable one, is like a bond

00:04:05.640 | in that it generates these coupons

00:04:07.720 | or these earnings or cashflow every year.

00:04:11.360 | The difference with a stock and a bond

00:04:14.160 | is that the bond, it's a contract.

00:04:16.640 | You know what you're gonna get

00:04:17.800 | as long as they don't go bankrupt and default.

00:04:20.560 | With a stock, you have to make predictions

00:04:22.000 | about the business.

00:04:22.880 | How many widgets are you gonna sell this year?

00:04:24.320 | How many are you gonna sell next year?

00:04:26.640 | What are the costs gonna be?

00:04:27.860 | How much of the money that they generate

00:04:29.440 | do they need to reinvest in the business

00:04:31.000 | to keep the business going?

00:04:32.360 | And that's more complicated.

00:04:35.440 | But what we do is we try to find businesses

00:04:39.120 | where, with a very high degree of confidence,

00:04:41.000 | we know what those cash flows are gonna be

00:04:43.360 | for a very long time.

00:04:45.080 | And there are very few businesses

00:04:46.400 | that you can have a really high degree of certainty about.

00:04:48.320 | And as a result, many investments are speculations

00:04:50.960 | 'cause it's really very difficult to predict the future.

00:04:54.040 | So what we do for a living, what I do for a living,

00:04:56.720 | is find those rare companies that you can kind of predict

00:04:59.200 | what they're gonna look like

00:05:00.040 | over a very long period of time.

00:05:01.560 | - So what are the factors that indicate

00:05:06.280 | that a company is something,

00:05:07.800 | is going to be something that's going to make a lot of money,

00:05:10.240 | it's gonna have a lot of value,

00:05:11.760 | and it's going to be reliable over a long period of time?

00:05:14.960 | And what is your process of figuring out

00:05:16.960 | whether a company is or isn't that?

00:05:18.760 | - So every consumer has a view on different brands

00:05:23.960 | and different companies.

00:05:25.940 | And what we look for are sort of

00:05:28.240 | these non-disruptible businesses,

00:05:30.360 | a business where you can kind of close your eyes,

00:05:33.320 | stock market shuts for a decade,

00:05:35.600 | and you know that 10 years from now

00:05:37.160 | it's gonna be a more valuable, more profitable company.

00:05:39.520 | So we own a business called Universal Music Group.

00:05:42.760 | It's in the business of helping artists

00:05:45.080 | become global artists, sort of the recorded music business.

00:05:49.040 | And it's in the business of owning rights

00:05:52.760 | to sort of the music publishing rights of songwriters.

00:05:56.200 | And I think music is forever, right?

00:05:59.200 | Music is a many thousand year old

00:06:01.720 | part of the human experience.

00:06:04.960 | And I think it will be thousands of years from now.

00:06:08.320 | And so that's a pretty good backdrop to invest in a company.

00:06:11.760 | And the company basically owns

00:06:14.120 | a third of the global recorded music.

00:06:16.880 | And that's, you know,

00:06:18.000 | the most dominant sort of market share in the business.

00:06:20.720 | They're the best at taking an artist who's 18 years old,

00:06:23.800 | who's got a great voice

00:06:24.720 | and has started to get a presence on YouTube and Instagram

00:06:29.720 | and helping that artist become a superstar.

00:06:33.720 | And that's a unique talent.

00:06:35.480 | And the result is the best artists in the world

00:06:37.600 | wanna come work for them.

00:06:39.160 | But they also have this incredible library of, you know,

00:06:41.840 | the Beatles, the Rolling Stone, U2, et cetera.

00:06:45.080 | So, and then if you think about what music has become,

00:06:49.240 | used to be about records and CDs and, you know,

00:06:52.840 | eight track tapes for those of whom,

00:06:54.800 | and it was about a new format

00:06:56.040 | and that's how they drive sales.

00:06:57.840 | And it's become a business,

00:06:58.920 | which is like the podcast business about streaming.

00:07:01.960 | And you can, streaming is a lot more predictable

00:07:05.080 | than selling records, right?

00:07:06.920 | You can sort of say, okay,

00:07:08.720 | how many people have smartphones?

00:07:10.520 | How many people are gonna have smartphones next year?

00:07:12.160 | There's a kind of global penetration

00:07:13.920 | over time of smartphones.

00:07:15.800 | You pay, call it 10, 11 bucks a month for a subscription

00:07:18.960 | or last for a family plan.

00:07:21.280 | And you can kind of build a model

00:07:23.200 | of what the world looks like and predict, you know,

00:07:25.720 | the growth of the streaming business.

00:07:27.560 | You predict what kind of market share Universal

00:07:29.520 | is gonna have over time.

00:07:31.120 | And you can't get to a precise view of value.

00:07:34.060 | You can get to an approximation.

00:07:35.560 | And the key is to buy at a price

00:07:38.080 | that represents a big discount to that approximation.

00:07:40.800 | And that gets back to Ben Graham.

00:07:42.120 | Ben Graham was about what he called,

00:07:43.960 | invented this concept of margin of safety, right?

00:07:47.120 | You wanna buy a company at a price

00:07:49.720 | that if you're wrong about what you think it's worth,

00:07:52.160 | and it turns out to be worth 30% less,

00:07:54.600 | you paid a deep enough discount to your estimate

00:07:57.440 | that you're still okay.

00:07:58.920 | It's about investing.

00:07:59.960 | A big part of investing is not losing money.

00:08:02.640 | If you can avoid losing money

00:08:05.000 | and then have a few great hits,

00:08:07.400 | you can do very, very well over time.

00:08:09.360 | - Well, music is interesting 'cause yes,

00:08:11.480 | music's been around for a very long time,

00:08:13.600 | but the way to make money from music has been evolving.

00:08:16.480 | Like you mentioned streaming,

00:08:17.840 | there's a big transition initiated by, I guess,

00:08:20.880 | Napster then created Spotify of how you make money

00:08:24.480 | on music with Apple and with all of this.

00:08:28.840 | And the question is how well are companies like UMG

00:08:33.120 | able to adjust to such transformations?

00:08:35.840 | One, I could ask you about the future,

00:08:38.520 | which is artificial intelligence,

00:08:40.860 | being able to generate music, for example.

00:08:43.560 | There've been a lot of amazing advancements with,

00:08:46.200 | so do you have to also think about that?

00:08:48.080 | Like when you close your eyes,

00:08:49.920 | all the things you think about,

00:08:51.440 | are you imagining the possible ways

00:08:53.120 | that the future is completely different from the present

00:08:57.000 | and how well this company will be able

00:08:58.520 | to like surf the wave of that?

00:09:00.640 | - Sure, and they've had to surf a lot of waves.

00:09:02.380 | And actually the music business peaked the last time

00:09:04.940 | in like the late '90s or 2000 timeframe.

00:09:08.280 | And then really innovation, Napster digitization of music

00:09:11.320 | almost killed the industry.

00:09:13.200 | And Universal really led an effort to save the industry

00:09:17.040 | and actually made an early deal with Spotify

00:09:20.120 | that enabled the industry to really recover.

00:09:23.340 | And so by virtue of their market position

00:09:25.040 | and their credibility and their willingness

00:09:27.120 | to kind of adopt new technologies,

00:09:29.260 | they've kept their position.

00:09:30.240 | Now they of course had this huge advantage

00:09:32.240 | because I think the Beatles are forever.

00:09:33.760 | I think U2 is forever.

00:09:35.120 | I think Rolling Stones are forever.

00:09:37.280 | So they had a nice base of assets that were important

00:09:41.780 | and I think will forever be, and forever is a long time.

00:09:44.480 | But again, there's enormous,

00:09:48.720 | there are all kinds of risks in every business.

00:09:50.400 | This is one that I think

00:09:51.240 | has a very high degree of persistence.

00:09:52.960 | And I can't envision a world

00:09:55.600 | where beyond streaming in a sense.

00:09:57.960 | Now you may have a Neuralink chip in your head

00:10:00.880 | that instead of a phone,

00:10:02.760 | but the music can come in a digitized kind of format.

00:10:06.100 | You're gonna wanna have an infinite library

00:10:08.040 | that you can walk around in your pocket or in your brain.

00:10:10.760 | It's not gonna matter that much at the form factor,

00:10:13.400 | the device changes.

00:10:15.240 | It's not really that important,

00:10:16.560 | whether it's Spotify or Apple or Amazon

00:10:19.340 | that are the so-called DSPs or the providers.

00:10:23.860 | I think the value is really gonna reside

00:10:27.420 | in the content owners

00:10:29.740 | and that's really the artists and the label.

00:10:32.900 | - And I actually think AI is not going to be

00:10:36.540 | the primary creator of music.

00:10:38.140 | I think we're going to actually face the reality

00:10:41.980 | that it's not that music has been around

00:10:45.180 | for thousands of years,

00:10:47.460 | but musicians and music has been around.

00:10:51.020 | We actually care to know who's the musician that created it.

00:10:54.380 | Just wanna know who's the artist,

00:10:56.740 | human artist that created a piece of art.

00:10:58.980 | - I totally agree.

00:10:59.820 | And I think if you think about it,

00:11:01.180 | there's lots of other technologies and computers

00:11:05.060 | that have been used to generate music over time,

00:11:07.600 | but no one falls in love

00:11:10.160 | with a computer generated track, right?

00:11:13.900 | And Taylor Swift, incredible music,

00:11:17.140 | but it's also about the artist and her story

00:11:19.980 | and her physical presence and the live experience.

00:11:24.980 | I don't think you're gonna sit there

00:11:27.060 | and someone's gonna put a computer up on stage

00:11:29.260 | and then it's gonna play

00:11:31.020 | and people are gonna get excited around it.

00:11:32.300 | So I think AI is really gonna be a tool

00:11:35.460 | to make artists better artists.

00:11:38.720 | And I think like a synthesizer, right?

00:11:43.620 | Really created the opportunity

00:11:45.120 | for one man to have an orchestra.

00:11:46.880 | Maybe a bit of a threat to a percussionist, but maybe not.

00:11:53.340 | Maybe it drove even more demand for the live experience.

00:11:57.260 | - Unless that computer has human-like sentience,

00:12:01.460 | which I believe is a real possibility,

00:12:03.820 | but then it's really from a business perspective,

00:12:06.440 | no different than a human.

00:12:07.680 | If it has an identity,

00:12:09.220 | that's basically fame and influence,

00:12:11.940 | and there'd be a robot Taylor Swift

00:12:13.660 | and it doesn't really matter.

00:12:14.480 | - It's a copywritable asset, I would think, right, yeah.

00:12:18.500 | - And then there'll be--

00:12:19.340 | - Not sure that's the world I'm excited about.

00:12:20.980 | - Well, that's a different discussion.

00:12:23.420 | The world is not gonna ask your permission

00:12:24.980 | to become what it's becoming.

00:12:27.300 | But you can still make money on it.

00:12:29.300 | Presumably there'd be a capital system

00:12:30.860 | and there'd be some laws under which I believe

00:12:34.180 | AI systems will have rights that are akin to human rights.

00:12:37.900 | And we're gonna have to contend with what that means.

00:12:40.740 | - Well, there's sort of name and likeness rights

00:12:43.620 | that have to be protected.

00:12:44.660 | Now, can a name be attributed to a Tesla robot?

00:12:48.980 | I don't know.

00:12:50.580 | - I think so.

00:12:51.420 | I think it's quite obvious to me.

00:12:52.740 | - Okay, so there's more potential artists

00:12:54.420 | for us to represent at university.

00:12:55.580 | - Exactly, exactly.

00:12:56.900 | All right.

00:12:57.740 | - That's sort of one example.

00:12:58.560 | Another example could be just the restaurant industry, right?

00:13:00.500 | If you can look at businesses like a McDonald's, right?

00:13:03.940 | It's a, whatever,

00:13:04.780 | the company's like a 1950 vintage business,

00:13:07.840 | and here we are, it's 75 years later.

00:13:10.460 | And you can kind of predict

00:13:12.380 | what it's gonna look like over time.

00:13:13.860 | And the menu's gonna adjust over time to consumer tastes.

00:13:17.700 | But I think the hamburger and fries is probably forever.

00:13:20.500 | - The Beatles, the Rolling Stones,

00:13:23.020 | the hamburger and fries are forever.

00:13:25.060 | I was eating at Chipotle last night

00:13:27.820 | as I was preparing these notes.

00:13:29.940 | - Thank you.

00:13:31.180 | Thank you.

00:13:32.020 | - And yeah, it is one of my favorite places to eat.

00:13:34.540 | You said it is a place that you eat.

00:13:36.860 | You obviously also invest in it.

00:13:39.740 | What do you get at Chipotle?

00:13:41.460 | - I tend to get a double chicken.

00:13:43.300 | - Bowl or burrito?

00:13:45.300 | - I like the burrito,

00:13:46.140 | but I generally try to order the bowl.

00:13:48.660 | - Yeah.

00:13:49.500 | - Cut the carb apart. - For health reasons, all right.

00:13:51.060 | - And double chicken, guac, lettuce, black beans.

00:13:54.920 | - And I'm more of a steak guy,

00:13:57.260 | just putting that on the record.

00:13:59.240 | What's the actual process you go through?

00:14:03.300 | Like literally, like the process of figuring out

00:14:08.220 | what the value of a company is.

00:14:10.160 | Like how do you do the research?

00:14:12.420 | Is it reading documents?

00:14:13.720 | Is it talking to people?

00:14:15.300 | How do you do it?

00:14:16.220 | - It's all of the above.

00:14:17.140 | So Chipotle, what attracted us initially

00:14:19.060 | is the stock price dropped by about 50%.

00:14:22.580 | Great company, great concept.

00:14:24.340 | Athletes love it.

00:14:27.140 | Consumers love it.

00:14:28.660 | Healthy, sustainable, fresh food made in front of your eyes.

00:14:32.420 | And great, Steve Ells, the founder, did an amazing job.

00:14:36.740 | But ultimately, the company's lacking some of the systems

00:14:40.060 | and had a food safety issue.

00:14:42.140 | Consumers got sick, almost killed the rent.

00:14:44.360 | But the reality of the fast food quick service industry

00:14:48.900 | is almost every fast food company

00:14:51.260 | has had a food safety issue over time.

00:14:53.760 | And the vast majority have survived.

00:14:56.140 | And we said, look, such a great concept.

00:14:58.460 | But their approach was far from ideal.

00:15:02.180 | But we start with usually reading the SEC filing.

00:15:05.020 | So the companies file a 10-K or an annual report.

00:15:07.660 | They file these quarterly reports called 10-Qs.

00:15:10.140 | They have a proxy statement which describes

00:15:11.620 | kind of the governance, the board structure.

00:15:14.100 | Conference call transcripts are publicly available.

00:15:16.660 | It's kind of very helpful to go back five years

00:15:19.260 | and kind of learn the story.

00:15:20.580 | Here's how management describes their business.

00:15:23.220 | Here's what they say they're gonna do.

00:15:24.780 | And then you can follow along to see what they do.

00:15:27.020 | It's like a historical record

00:15:28.700 | of how competent and truthful they are.

00:15:33.940 | And it's a very useful device.

00:15:35.500 | And then of course, looking at competitors

00:15:38.300 | and thinking about what could dislodge this company.

00:15:42.120 | And then we'll talk to, if it's an industry

00:15:46.540 | we don't know well,

00:15:47.360 | we know the restaurant industry really well.

00:15:49.100 | Music industry, we'll talk to people in the industry.

00:15:51.360 | We'll try to understand the difference

00:15:53.740 | between publishing and recorded music.

00:15:55.380 | We'll look at the competitors.

00:15:56.880 | We'll talk to, we'll read books.

00:15:59.620 | I read a book about the music industry

00:16:01.500 | or a couple of books about the industry.

00:16:04.340 | So it's a bit like a big research project.

00:16:07.860 | And these so-called expert networks now,

00:16:10.860 | and you can get pretty much anyone on the phone.

00:16:13.140 | And they'll talk to you about an aspect of the industry

00:16:16.260 | that you don't understand and wanna learn more about.

00:16:19.540 | Try to get a sense, public filings of companies

00:16:22.020 | generally give you a lot of information,

00:16:23.620 | but not everything you wanna know.

00:16:25.300 | And you can learn more by talking to experts

00:16:27.240 | about some of the industry dynamics, the personalities.

00:16:31.020 | You wanna get a sense of management.

00:16:32.940 | I like watching podcasts.

00:16:35.820 | If a CEO were to do a podcast or a YouTube interview,

00:16:38.260 | you get a sense of the people.

00:16:40.020 | - So in the case of Chipotle, for example,

00:16:41.500 | by the way, I could talk about Chipotle all day.

00:16:43.260 | I just love it.

00:16:44.100 | I love it.

00:16:45.040 | I wish there was a sponsor.

00:16:46.340 | - I'll mention it to the CEO.

00:16:49.980 | - Don't make promises you can't keep, Bill.

00:16:51.920 | - I'm not making, I can't.

00:16:53.620 | Brian Nichols is a fantastic CEO.

00:16:55.220 | He's not gonna spend $1

00:16:56.540 | that he doesn't think is the company's best interest.

00:16:58.180 | - All right, all I want is free Chipotle.

00:16:59.900 | Come on now.

00:17:01.740 | - What was I saying?

00:17:03.480 | Oh, and so you look at a company like Chipotle

00:17:06.660 | and then you see there's a difficult moment in its history,

00:17:09.700 | like you said, that there was a food safety issue.

00:17:12.620 | And then you say, okay, well, I see a path

00:17:14.500 | where we can fix this.

00:17:16.620 | And therefore, even though the price is low,

00:17:19.420 | we can get it to where the price goes up to its value.

00:17:23.180 | - So the kind of business we're looking for

00:17:27.080 | is sort of the kind of business

00:17:28.420 | everyone should be looking for, right?

00:17:29.900 | A great business, it's got a long-term trajectory

00:17:32.740 | of growth out into the force,

00:17:35.580 | even beyond the foreseeable distance, right?

00:17:37.460 | Those are the kinds of businesses you wanna own.

00:17:38.780 | You want businesses that generate a lot of cash.

00:17:41.060 | You want businesses you can easily understand.

00:17:43.300 | You want businesses with these sort of huge barriers to entry

00:17:45.660 | where it's difficult for others to compete.

00:17:47.620 | You want companies that don't have

00:17:48.620 | to constantly raise capital.

00:17:50.060 | And these are some of the great business of the world,

00:17:52.860 | but people have figured out

00:17:54.000 | that those are the great businesses.

00:17:55.240 | So the problem is those companies

00:17:56.840 | tend to have very high stock prices

00:17:58.620 | and the value is generally built

00:18:00.460 | into the price you have to pay for the business.

00:18:02.660 | So we can't earn the kind of returns

00:18:06.180 | we wanna earn for investors

00:18:07.520 | by paying a really high price.

00:18:09.000 | Price matters a lot.

00:18:10.220 | You can buy the best business in the world,

00:18:11.500 | and if you overpay,

00:18:13.300 | you're not gonna earn particularly attractive returns.

00:18:16.220 | So we get involved in cases where a great business

00:18:19.620 | has kind of made a big mistake

00:18:22.300 | or you've a company that's kind of lost its way,

00:18:25.480 | but it's recoverable.

00:18:26.820 | And that's, we buy from shareholders who are disappointed,

00:18:29.780 | who've lost confidence,

00:18:31.460 | selling at a low price relative to what it's worth,

00:18:34.260 | if fixed, and then we try to be helpful

00:18:36.620 | in fixing the company.

00:18:37.720 | - You said that barriers to entry,

00:18:42.020 | you said a lot of really interesting qualities

00:18:45.380 | of companies very quickly in a sequence of statements

00:18:48.800 | that took like less than 10 seconds to say,

00:18:51.300 | but some of them were fascinating,

00:18:52.900 | all of them were fascinating.

00:18:53.900 | So you said barriers to entry.

00:18:55.980 | How do you know if there's a type of moat

00:18:59.380 | protecting the competitors from stepping up to the plate?

00:19:04.380 | - I mean, the most difficult analysis to do

00:19:06.900 | as an investor is that,

00:19:08.820 | is kind of figuring out how wide is the moat,

00:19:11.580 | how much at risk is the business to disruption.

00:19:16.100 | And we're in, I would say a period,

00:19:17.740 | the greatest period of disruptability in history, right?

00:19:21.260 | Technology, a couple of 19 year olds

00:19:24.580 | can leave whatever university,

00:19:26.820 | or maybe they didn't even go in the first place.

00:19:29.300 | They can raise millions of dollars.

00:19:32.260 | They can get access to infinite bandwidth storage.

00:19:36.180 | They can contract with engineers

00:19:38.820 | in low cost markets around the world.

00:19:42.020 | They could build a virtual company

00:19:43.860 | and they can disrupt businesses

00:19:45.180 | that seem super established over time.

00:19:47.400 | And then on top of that,

00:19:48.240 | you have major companies

00:19:50.040 | with multi-trillion dollar market caps

00:19:52.420 | working to find profits wherever they can.

00:19:55.020 | And so that's a dangerous world in a way to be an investor.

00:19:58.500 | And so you wanna, you have to find businesses

00:20:01.080 | that it's hard to foresee a world

00:20:03.860 | in which they get disrupted.

00:20:04.900 | And the beauty of the restaurant business,

00:20:06.420 | and we've actually,

00:20:07.360 | our best track record is in restaurants.

00:20:09.120 | We've never lost money.

00:20:10.820 | We've only made a fortune, interestingly,

00:20:12.900 | investing restaurants.

00:20:14.300 | A big part of it's a really simple business.

00:20:16.500 | And if you get Chipotle right,

00:20:19.060 | and you're at a hundred stores,

00:20:21.220 | it's not so hard to envision getting to 200 stores

00:20:23.940 | and then getting to 500 stores, right?

00:20:26.020 | And the key is maintaining the brand image,

00:20:28.620 | growing intelligently, having the right systems.

00:20:31.920 | You know, and when you go from a hundred stores

00:20:33.820 | to 3,500 stores, you have to know what you're doing.

00:20:37.180 | And there's a lot of complexity, right?

00:20:38.780 | You know, if you think about your local restaurant,

00:20:42.260 | you know, the family's working in the business,

00:20:44.300 | they're watching the cash register

00:20:46.740 | and you can probably open another restaurant,

00:20:49.180 | you know, across town.

00:20:51.180 | But there are very few restaurant operators

00:20:52.980 | that own more than a few restaurants

00:20:54.700 | and operate them successfully.

00:20:56.020 | And the quick service business is about systems

00:20:59.220 | and building a model that a stranger

00:21:02.740 | who doesn't know the restaurant industry can come in

00:21:04.980 | and enter the business and build a successful franchise.

00:21:09.600 | Now, Chipotle is not a franchise company.

00:21:11.140 | They actually own all their own stores,

00:21:12.820 | but many of the most successful restaurant companies

00:21:14.620 | are franchise models,

00:21:15.700 | like a Burger King, a McDonald's, Tim Horton's,

00:21:18.700 | you know, all these various brands, Popeyes.

00:21:20.740 | And there, it's about systems.

00:21:22.080 | But the same systems apply,

00:21:23.580 | whether you own all the stores

00:21:25.340 | and it's run by a big corporation

00:21:26.820 | or whether the owners of the restaurants

00:21:29.140 | are sort of franchisees, you know, local entrepreneurs.

00:21:32.220 | - So if the restaurant has scaled to a certain number,

00:21:35.120 | that means they've figured out

00:21:36.580 | some kind of system that works.

00:21:38.180 | - Yeah. - And it's very difficult

00:21:39.020 | to develop that kind of system.

00:21:40.220 | So that's a moat.

00:21:41.540 | - A moat is you get to a certain scale

00:21:44.020 | and you do it successfully.

00:21:45.620 | And the brand is now understood by the consumer.

00:21:50.100 | And what's interesting about Chipotle

00:21:51.820 | is what they've achieved is difficult, right?

00:21:54.780 | They're not buying frozen hamburgers, getting shipped in.

00:21:57.660 | They're buying fresh, you know,

00:21:59.460 | sustainably sourced ingredients.

00:22:01.580 | They're preparing food in the store.

00:22:03.180 | That was a first, right?

00:22:04.420 | The quality of the product at Chipotle is incredible.

00:22:06.900 | It's the highest quality food you can get for,

00:22:09.260 | you can get a serious dinner for under 20 bucks

00:22:12.580 | and eat really healthfully

00:22:14.780 | and very high quality ingredients.

00:22:17.980 | And that's just not available anywhere else.

00:22:19.860 | And it's very hard to replicate

00:22:21.140 | and to build those relationships with,

00:22:23.260 | you know, farmers around the country.

00:22:24.660 | It's a lot easier to make a deal with one of the big,

00:22:27.060 | you know, massive food producers

00:22:29.260 | and buy your pork from them

00:22:31.060 | than to buy from a whole bunch of farmers around the country.

00:22:33.380 | And so it's, that is a big moat for Chipotle.

00:22:36.540 | Very difficult to replicate.

00:22:38.100 | - And by the way, another company,

00:22:39.380 | I think you have a stake is McDonald's?

00:22:41.900 | - No, we own a company called Restaurant Brands.

00:22:44.220 | Restaurant Brands owns a number of quick service companies,

00:22:46.860 | one of which is Burger King.

00:22:48.380 | - Burger King. - Yeah.

00:22:49.300 | - Well, it's been a meme for a while,

00:22:51.860 | but I've, Burger King is great too, Wendy's, whatever.

00:22:55.380 | But usually I go McDonald's.

00:22:57.260 | I'll just eat burger patties.

00:22:58.820 | I don't know if you knew you could do this,

00:23:00.380 | but a burger patty at Burger King can do this.

00:23:03.420 | McDonald's, it's actually way cheaper.

00:23:05.540 | - They'll just sell you the patty.

00:23:06.380 | - The patty, and it's cheap.

00:23:07.740 | It's like $1.50 or $2 per patty.

00:23:10.860 | And it's about 250 calories and it's just meat.

00:23:14.100 | And despite like the criticism and memes out there,

00:23:17.220 | that's- - Pretty healthy stuff.

00:23:19.140 | - It's healthy stuff.

00:23:20.100 | And so when I go, the healthiest I feel

00:23:22.940 | is when I do carnivore.

00:23:24.700 | It doesn't sound healthy, but if I eat only meat,

00:23:26.820 | I feel really good.

00:23:28.060 | I lose weight.

00:23:29.340 | I have all this energy, it's crazy.

00:23:30.820 | And when I'm traveling, the easiest way to get meat is that-

00:23:34.100 | - So you go to McDonald's, you order six patties?

00:23:35.860 | - Exactly.

00:23:36.700 | So there's this sad meme of me just sitting alone in a car

00:23:39.940 | when I'm traveling, just eating beef patties at McDonald's.

00:23:42.620 | But I love it.

00:23:43.460 | And you gotta do what you love, what makes you happy,

00:23:45.620 | and that's what makes me happy.

00:23:46.460 | - Okay, we should maybe have Burger King feature in it.

00:23:48.660 | What about Flamed World?

00:23:49.860 | What's with these fried burgers?

00:23:50.940 | We gotta get you to Burger King grilled burgers.

00:23:53.940 | - Wait, is this like fast food trash?

00:23:56.100 | I didn't know.

00:23:56.940 | I don't know the details of how they're made.

00:23:58.500 | I'm not- - Ah, you should.

00:23:59.660 | - I don't have allegiance to McDonald's.

00:24:00.500 | - I think we got a chance to switch you to Burger King.

00:24:02.300 | - Great, we'll see.

00:24:03.580 | I'm making so many deals today, it's wonderful.

00:24:07.780 | - Okay.

00:24:08.620 | - You were talking about most,

00:24:09.460 | and this kind of remind me of Alphabet, the parent company.

00:24:13.100 | - Sure, it's a big position for us.

00:24:15.740 | - So it's interesting that you think that maybe Alphabet

00:24:20.740 | fits some of these characteristics.

00:24:24.140 | It's tricky to know with everything that's happening in AI,

00:24:29.580 | and I'm interviewing Sundar Pichai soon.

00:24:31.900 | It's interesting that you think that there's a moat.

00:24:33.940 | And it's also interesting to analyze it

00:24:35.540 | 'cause the consumer is just a fan of technology.

00:24:38.420 | Why is Google still around?

00:24:40.500 | Like, they've been, it's not just the search engine

00:24:43.420 | is doing all the basics of the business of search

00:24:47.540 | really well, but they're doing all these other stuff.

00:24:49.220 | So what's your analysis of Alphabet?

00:24:51.760 | Why are you still positive about it?

00:24:53.260 | - Sure, so it's a business we've admired as a firm

00:24:56.740 | for whatever, 15 years, but rarely got to a price

00:25:01.740 | that we felt we could own it.

00:25:03.660 | Because again, the expectations were so high,

00:25:05.260 | and price really matters.

00:25:06.500 | And really the sort of AI scare, I would call it.

00:25:10.020 | Microsoft comes out with Chat GPT.

00:25:12.420 | They do an amazing demonstration.

00:25:13.900 | People are like this most incredible product.

00:25:16.060 | And Google, which had been working on AI even earlier,

00:25:18.940 | obviously Microsoft was behind in AI.

00:25:21.300 | That was really their Chat GPT deal

00:25:23.500 | that gave them a kind of a market presence.

00:25:25.700 | And then Google does this fairly disastrous

00:25:30.660 | demonstration of BART.

00:25:32.580 | And the world says, oh my God,

00:25:34.140 | Google's fallen behind in AI, AI is the future,

00:25:36.540 | stock gets crushed.

00:25:38.140 | Google gets to a price around 15 times earnings,

00:25:41.920 | which for a business of this quality

00:25:44.100 | is an extremely, extremely low price.

00:25:46.060 | And our view on Google, one way to think about it,

00:25:49.660 | when a business becomes a verb,

00:25:52.140 | that's usually a pretty good sign

00:25:53.300 | about the mode around the business.

00:25:55.180 | So you'd open your computer and you open your search,

00:25:58.740 | and very high percentage of the world

00:26:00.940 | starts with a Google page in one line,

00:26:03.580 | where you type in your search.

00:26:07.220 | The Google advertising search YouTube franchise

00:26:10.980 | is one of the most dominant franchises in the world.

00:26:14.480 | Very difficult to disrupt, extremely profitable.

00:26:18.240 | The world is moving from offline advertising

00:26:20.460 | to online advertising.

00:26:21.500 | And that trend I think continues, why?

00:26:23.560 | Because you can actually see with your ads work.

00:26:26.000 | You know, they used to say about advertising,

00:26:27.260 | you know, you spend a fortune

00:26:30.920 | and you just don't know which 50% of it works,

00:26:33.240 | but you just sort of spend the money

00:26:34.360 | 'cause you know ultimately

00:26:36.200 | that's gonna bring in the customer.

00:26:37.440 | And now with online advertising,

00:26:39.040 | you can see with granularity which dollars I'm spending,

00:26:42.840 | you know, when people click on the search term

00:26:44.740 | and end up buying something and I pay,

00:26:47.160 | you know, it's a very high return on investment

00:26:49.660 | for the advertiser.

00:26:50.840 | And they really dominate that business.

00:26:52.960 | Now AI of course is a risk.

00:26:55.060 | If all of a sudden people start searching

00:26:56.760 | or asking questions of chat GPT

00:27:00.200 | and don't start with the Google search bar,

00:27:02.120 | that's a risk to the company.

00:27:03.360 | And so our view based on work we had done

00:27:05.800 | and talked to industry experts

00:27:07.360 | is that Google if anything had a,

00:27:10.320 | by virtue of the investment they've made,

00:27:12.480 | the time, the energy that people put into it,

00:27:14.840 | we felt their AI capabilities were

00:27:17.120 | if anything potentially greater than Microsoft chat GPT

00:27:21.080 | and that the market had overreacted.

00:27:23.420 | And because Google, you know, is a big company,

00:27:28.200 | global business regulators

00:27:30.920 | scrutinize it incredibly carefully,

00:27:32.640 | they couldn't take some of the same liberties.

00:27:34.600 | A startup like OpenAI did in releasing a product.

00:27:37.000 | And I think Google took a more cautious approach

00:27:39.760 | in releasing an early version of Bard

00:27:41.480 | in terms of its capabilities.

00:27:43.640 | And that led the world to believe that they were behind.

00:27:46.540 | And we ultimately concluded if any,

00:27:47.880 | they're tied or ahead and you're paying nothing

00:27:51.080 | for that potential business.

00:27:52.560 | And they also have huge advantages by virtue.

00:27:54.680 | You think of all the data Google has,

00:27:56.120 | like the search data, all the various applications,

00:28:00.880 | you know, email and otherwise,

00:28:02.360 | and the kind of the Google suite of products.

00:28:04.440 | It's an incredible data set.

00:28:05.680 | So they have more training data

00:28:07.920 | than pretty much any company in the world.

00:28:09.320 | They have incredible engineers,

00:28:10.440 | they have enormous financial resources.

00:28:12.680 | So that was kind of the bet.

00:28:14.400 | And we still think it's probably the cheapest

00:28:17.800 | of the big seven companies in terms of the price

00:28:20.840 | you're paying for the business relative

00:28:22.040 | to its current earnings.

00:28:23.600 | It also is a business that has a lot of potential

00:28:26.520 | for efficiency.

00:28:28.280 | You know, sometimes when you have this enormously

00:28:29.920 | profitable dominant company,

00:28:32.880 | you know, all of the technology companies

00:28:34.720 | in the post March 20 world grew enormously

00:28:38.560 | in terms of their teams and they probably overhired.

00:28:41.440 | And so you've seen some, you know,

00:28:42.960 | the Facebooks of the world,

00:28:43.960 | and now even Google starting to get a little more efficient

00:28:46.480 | in terms of their operation.

00:28:48.120 | So we've had a low multiple for the business.

00:28:52.080 | One way to think about the value of the business

00:28:53.440 | is the price you pay for the earnings,

00:28:55.960 | or alternatively, what's the yield.

00:28:58.000 | If you flip over the price over the earnings,

00:29:00.120 | it gives you kind of the yield of the business.

00:29:02.040 | So a 15 multiple is about a, almost a 7 1/2% yield.

00:29:06.560 | And that earnings yield is growing over time

00:29:09.360 | as the business grows.

00:29:10.440 | That's a, you know, compared to what you can earn

00:29:14.320 | lending your money to the government, you know, 4%,

00:29:16.360 | that's a very attractive going in yield.

00:29:18.000 | And then there's all kinds of what we call optionality

00:29:21.400 | in all the various businesses and investments

00:29:23.000 | they've made that are losing money.

00:29:24.560 | They've got a cloud business that's growing very rapidly,

00:29:27.120 | but they're investing basically 100% of the profits

00:29:29.600 | from that business in growth.

00:29:31.080 | You're in that earnings number,

00:29:32.520 | you're not seeing any earnings from the cloud business.

00:29:34.440 | And, you know, they're one of the top cloud players.

00:29:36.840 | So very interesting, generally well-managed company

00:29:41.440 | with incredible assets and resources and dominance,

00:29:44.640 | you know, and it has no debt and it's got a ton of cash.

00:29:48.720 | And so pretty good story.

00:29:50.200 | - Is there something fundamentally different about AI

00:29:54.680 | that makes all of this more complicated,

00:29:57.120 | which is the sort of the exponential possibilities

00:30:01.040 | of the kinds of products and impact that AI could create

00:30:06.040 | when you're looking at Meta, Microsoft, Alphabet, Google,

00:30:11.120 | all these companies, XAI, or maybe startups?

00:30:15.760 | Like, is there some more risk introduced

00:30:18.840 | by the possibilities of AI?

00:30:20.800 | - Absolutely, that's a great question.

00:30:22.680 | You know, business investing is about finding companies

00:30:26.000 | that can't be disrupted.

00:30:27.680 | AI is the ultimate disruptible asset or technology.

00:30:32.080 | And that's what makes investing treacherous,

00:30:35.440 | is that you own a business that's enormously profitable,

00:30:37.400 | management gets, if you will, fat and happy,

00:30:39.680 | and then a new technology emerges

00:30:41.160 | that just takes away all their profitability.

00:30:43.840 | And AI is this incredibly powerful tool,

00:30:45.680 | which is why every business is saying,

00:30:48.000 | how can I use AI in my business to make us more profitable,

00:30:51.560 | more successful, grow faster,

00:30:53.880 | and also disrupt or protect ourself from the incomings?

00:30:58.880 | You know, it's a bit like, you know,

00:31:00.840 | Buffett talks about a great business like a castle

00:31:04.760 | surrounded by this really wide moat,

00:31:06.680 | but you have all these barbarians trying to get in

00:31:08.960 | and steal the princess.

00:31:12.560 | And it happens, you know, Kodak, for example,

00:31:15.640 | was an amazing, incredibly dominant company

00:31:18.720 | until it disappeared.

00:31:20.440 | Polaroid, you know, this incredible technology.

00:31:23.680 | And that's why we have tended to stay away from companies

00:31:26.440 | that are technology companies,

00:31:27.640 | because technology companies, generally,

00:31:29.320 | the world is such a dynamic place

00:31:30.760 | that someone's always working on a better version.

00:31:33.440 | And, you know, Kodak was caught up in the analog film world,

00:31:38.440 | and then the world changed.

00:31:40.080 | - Well, Google was pretty fat and happy

00:31:42.480 | until "Tragic Petit" came out.

00:31:44.120 | - Yes. - How would you rate

00:31:44.960 | their ability to wake up, lose weight,

00:31:48.720 | and be less happy and aggressively rediscover

00:31:52.640 | their search for happiness?

00:31:55.680 | - I think you've seen a lot of that in the last year.

00:31:58.520 | And I would say some combination of embarrassment and pride

00:32:03.520 | are huge motivators for everyone from Sergey Brin,

00:32:07.840 | you know, to the management of the company.

00:32:10.320 | - And Demis Hassab is thrown into the picture,

00:32:12.800 | and all of DeepMind teams, and the unification of teams,

00:32:15.920 | and like all the shakeups.

00:32:17.040 | It was interesting to watch the chaos.

00:32:19.040 | I love it.

00:32:19.880 | I love it when everybody freaks out.

00:32:22.040 | Like you said, partly embarrassment,

00:32:24.560 | and partly that competitive drive

00:32:26.440 | that drives engineers is great.

00:32:28.680 | I can't wait to see what,

00:32:30.560 | there's been just a lot of improvement in the product.

00:32:32.440 | Let's see where it goes.

00:32:34.060 | You mentioned management.

00:32:35.360 | How do you analyze the governance structure

00:32:39.200 | and the individual humans

00:32:41.180 | that are the managers of a company?

00:32:42.720 | - So, as I like to say,

00:32:44.120 | incentives drive all human behavior.

00:32:47.680 | And that certainly applies in the business world.

00:32:50.420 | So understanding the people and what drives them,

00:32:53.240 | and what the actual financial

00:32:55.240 | and other incentives of a business are,

00:32:56.760 | very important part of the analysis

00:32:59.720 | for investing in a company.

00:33:01.080 | And you can learn a lot.

00:33:02.880 | You know, I mentioned before,

00:33:04.020 | one great way to learn about a business

00:33:05.360 | is go back a decade and read everything

00:33:08.160 | that management has written about the business,

00:33:10.100 | and see what they've done over time.

00:33:11.600 | See what they've said.

00:33:12.440 | You know, conference calls are actually relatively recent.

00:33:17.280 | When I started in the business,

00:33:18.200 | there weren't conference call transcripts.

00:33:19.840 | Now you have a written record

00:33:22.640 | of everything management has said

00:33:24.000 | in response to questions from analysts

00:33:25.920 | at conferences and otherwise.

00:33:27.600 | And so just, you learn a lot about people

00:33:29.160 | by listening to what they say,

00:33:30.800 | how they answer questions,

00:33:32.580 | and ultimately their track record

00:33:33.720 | for doing what they say they're gonna do.

00:33:35.360 | Do they under-promise and over-deliver?

00:33:37.480 | Do they over-promise and under-deliver?

00:33:39.880 | Do they say what they're gonna do?

00:33:41.280 | Do they admit mistakes?

00:33:42.700 | Do they build great teams?

00:33:46.480 | Do people wanna come work for them?

00:33:48.440 | Or are they able to retain their talent?

00:33:50.440 | You know, and then part of it is,

00:33:53.320 | do they, how much are they running the business

00:33:55.980 | for the benefit of the business?

00:33:56.920 | How much are they running the business

00:33:57.760 | for the benefit of themselves?

00:33:59.220 | And, you know, that's kind of the analysis you do.

00:34:03.520 | - Are we talking about CEO, COO?

00:34:05.840 | What does management mean?

00:34:07.600 | Oh God, how deep does it go?

00:34:09.320 | - Sure, so, this very senior management matters enormously.

00:34:13.000 | You know, we use the Chipotle example.

00:34:14.860 | Steve Ells, great entrepreneur.

00:34:16.640 | Business got to a scale he really couldn't run it.

00:34:19.480 | We recruited a guy named Brian,

00:34:20.680 | helped the company recruit a guy named Brian Nickel.

00:34:24.040 | And he was considered the best person

00:34:26.160 | in the quick service industry.

00:34:27.760 | He came in and completely rebuilt the company.

00:34:30.120 | Actually, we moved the company.

00:34:31.920 | Chipotle was moved to California.

00:34:34.240 | And sometimes one way to redo the culture of a company

00:34:37.080 | is just to move it geographically.

00:34:39.040 | And then you can kind of reboot the business.

00:34:40.520 | But a great leader has great followership.

00:34:43.240 | You know, over the course of their career,

00:34:44.720 | they'll have a team they've built

00:34:45.800 | that will come follow them into the next opportunity.

00:34:48.460 | But the key is, you know, really the top person

00:34:52.360 | matters enormously because, and then it's who they recruit.

00:34:55.460 | You know, you recruit an A plus leader

00:34:58.400 | and they're gonna recruit other A type people.

00:35:00.600 | If you're a B leader, you're not gonna recruit

00:35:02.560 | any great talent beneath them.

00:35:06.000 | - You mentioned Warren Buffett.

00:35:07.520 | You said you admire him as an investor.

00:35:10.600 | What do you find most interesting

00:35:12.200 | and powerful about his approach?

00:35:14.800 | What aspects of his approach to investing

00:35:17.760 | do you also practice?

00:35:19.800 | - Sure, so most of what I've learned

00:35:21.240 | in the investment business, I've learned from Warren Buffett.

00:35:22.880 | He's been my great professor of this business.

00:35:26.240 | My first book I read in the business

00:35:27.480 | was "The Ben Graham Intelligent Investor."

00:35:30.400 | But fairly quickly, you get to learn about Warren Buffett.

00:35:33.120 | And I started by reading the Berkshire Hathaway annual

00:35:35.080 | reports, and then I eventually got

00:35:38.000 | the Buffett partnership letters that you can see,

00:35:40.920 | which are an amazing read to go back to the mid 1950s

00:35:44.520 | and read what he wrote to his limited partners

00:35:46.720 | when he first started out and just follow that trajectory

00:35:49.040 | over a long period of time.

00:35:49.980 | So what's remarkable about him is one, duration, right?

00:35:53.680 | He's still at it at 93.

00:35:55.140 | You know, two, you know, it takes a very long-term view.

00:36:00.320 | But a big thing that you learn from him,

00:36:03.040 | investing requires this incredible dispassionate,

00:36:07.160 | unemotional quality.

00:36:08.480 | You have to be extremely economically rational,

00:36:11.680 | which is not a basic,

00:36:15.280 | it's not something you learn in the jungle.

00:36:16.680 | You know, I don't think it's something that, you know,

00:36:18.800 | if you think about the, you know, surviving the jungle,

00:36:23.800 | you know, the lion shows up, you know,

00:36:26.720 | and everyone starts running, you run with them.

00:36:29.280 | That does not work well in markets.

00:36:31.600 | In fact, you generally have to do the opposite, right?

00:36:33.520 | When the lemmings are running over the cliff,

00:36:35.560 | that's the time where you're facing the other direction

00:36:37.240 | and you're running the other direction,

00:36:38.360 | i.e. you're stepping in, you're buying stocks

00:36:40.800 | at really low prices.

00:36:41.900 | You know, Buffett's been great at that

00:36:44.720 | and great at teaching about what he calls temperament,

00:36:46.960 | which is this sort of emotional kind of,

00:36:49.720 | or unemotional quality that you need

00:36:53.000 | to be able to dispassionately look at the world and say,

00:36:55.100 | okay, is this a real risk?

00:36:57.680 | Are people overreacting?

00:37:00.200 | People tend to get excited about investments

00:37:02.160 | when stocks are going up

00:37:03.560 | and they get depressed when they're going down.

00:37:05.440 | And I think that's just inherently human.

00:37:07.640 | You have to reverse that.

00:37:08.640 | You have to get excited when things get cheaper

00:37:11.400 | and you gotta get concerned when things get more expensive.

00:37:15.280 | - You've been a part of some big battles,

00:37:17.760 | some big losses, some big wins.

00:37:20.480 | So it's been a rollercoaster.

00:37:22.600 | So in terms of temperament, psychologically,

00:37:25.420 | how do you not let that break you?

00:37:28.500 | How do you maintain a calm demeanor

00:37:32.880 | and avoid running with the lemmings?

00:37:34.680 | - I think it's something you kind of learn over time.

00:37:38.640 | A key success factor is you wanna have enough money

00:37:42.020 | in the bank that you're gonna survive,

00:37:43.920 | you know, regardless of what's going on

00:37:47.160 | with volatility in markets.

00:37:48.880 | You know, people who, one, you shouldn't borrow money.

00:37:52.440 | So if you borrow money, you own stocks on margin,

00:37:55.640 | markets are going down,

00:37:57.140 | and you have your livelihood at risk,

00:37:59.940 | it's very difficult to be rational.

00:38:01.600 | So key is getting yourself to a place

00:38:03.760 | where you're financially secure.

00:38:06.280 | You're not gonna lose your house, right?

00:38:08.240 | That's kind of a key thing.

00:38:11.000 | And then also doing your homework.

00:38:13.860 | You know, stocks can trade at any price in the short term.

00:38:17.620 | And if you know what a business is worth

00:38:20.460 | and you understand the management,

00:38:22.500 | you know it extremely well,

00:38:24.400 | it's not nearly as,

00:38:26.360 | it doesn't bother you when a stock price goes down,

00:38:28.660 | or it has much less impact on you

00:38:30.220 | because you know, you know, again, as Mr. Graham said,

00:38:33.620 | you know, the short term, the market's a voting machine.

00:38:35.460 | You have a bunch of lemmings voting one direction.

00:38:37.540 | That's concerning.

00:38:38.380 | But if it's a great business, doesn't have a lot of debt,

00:38:41.380 | and people are gonna just listen to more music next year

00:38:43.720 | than this year, you know you're gonna do well.

00:38:45.940 | So it's a bit, some combination of being personally secure

00:38:50.480 | and also just knowing what you own.

00:38:53.320 | And over time you build calluses, I would say.

00:38:58.320 | - So psychologically, just as a human being,

00:39:01.860 | speaking of lions and gazelles and all this kind of stuff,

00:39:04.660 | is there some,

00:39:06.220 | is it as simple as just being financially secure?

00:39:09.460 | Is there some just human qualities

00:39:12.740 | that you have to be born with/develop?

00:39:16.980 | - I think so.

00:39:17.820 | I think, now I'm a pretty emotional person, I would say,

00:39:21.740 | or I feel pretty strong emotions, but not in investing.

00:39:25.820 | I'm remarkably immune to kind of volatility.

00:39:29.740 | And that's a big advantage.

00:39:31.740 | And it took some time for me to develop that.

00:39:33.940 | - So you weren't born with that, you think?

00:39:35.340 | - No.

00:39:36.180 | - So being emotional, do you want to respond to volatility?

00:39:40.300 | - Yeah, and you just, it's a bit, again,

00:39:43.220 | you can learn a lot from other people's experience.

00:39:45.660 | It's one of the few businesses

00:39:47.860 | where you can learn an enormous amount

00:39:49.780 | by reading about other periods in history,

00:39:53.140 | following Buffett's career, the mistakes he made.

00:39:58.820 | If you're investing a lot of capital,

00:40:00.580 | every one of your mistakes is gonna be big, right?

00:40:02.960 | So we've made big mistakes.

00:40:05.260 | The good news is that the vast majority

00:40:07.060 | of things we've done have worked out really well.

00:40:08.900 | And so that also gives you confidence over time.

00:40:12.460 | But because we make very few investments,

00:40:15.460 | and we own eight things today,

00:40:16.660 | or seven companies of that matter,

00:40:19.620 | if we get one wrong, it's gonna be big news.

00:40:23.380 | And so the other nature of our business

00:40:25.300 | you have to be comfortable with

00:40:26.780 | is a lot of public scrutiny, a lot of public criticism.

00:40:30.540 | And that requires some experience, I'll call it that.

00:40:35.300 | - I think we'll talk about some of that.

00:40:37.780 | Financially secure is something I believe also recommend

00:40:40.700 | for even just everyday investors.

00:40:43.380 | Is there some general advice

00:40:45.380 | from the things you've been talking about

00:40:48.300 | that applies to everyday investors?

00:40:50.220 | - Sure.

00:40:51.380 | So never invest money you can't afford to lose,

00:40:55.100 | where it would, if you'd lost this money,

00:40:58.420 | you'd lose your house, et cetera.

00:41:00.280 | So having, being in a place where you're investing money

00:41:05.280 | that you don't care about the price in the short term.

00:41:08.900 | It's money for your retirement,

00:41:10.380 | and you take a really long-term view.

00:41:12.420 | I think that's key.

00:41:13.380 | Never investing where you borrow money

00:41:16.980 | against your securities.

00:41:18.180 | The markets offer you the opportunity

00:41:20.940 | to leverage your investment.

00:41:23.380 | And in most worlds, you'll be okay.

00:41:26.680 | Except if there's a financial crisis

00:41:30.340 | or a nuclear device gets detonated, God forbid,

00:41:33.480 | somewhere in the world, or there's an unexpected war,

00:41:37.160 | or someone kills a leader unexpectedly.

00:41:40.020 | Things happen that can change the course of history,

00:41:42.900 | and markets react very negatively to those kinds of events.

00:41:46.260 | And you can own the greatest business in the world,

00:41:47.900 | trading for $100 a share, and next moment, it could be 50.

00:41:51.000 | So as long as you don't borrow against securities,

00:41:54.180 | you own really high-quality businesses,

00:41:56.160 | and it's not money that you need in the short term,

00:41:58.780 | then you can actually be thoughtful about it.

00:42:02.660 | And that is a huge advantage.

00:42:04.820 | The vast majority of investors, it seems,

00:42:07.580 | tend to be the ones that panic in the downturns,

00:42:10.780 | get over-elated when markets are doing well.

00:42:14.060 | - So be able to think long-term

00:42:16.820 | and be sufficiently financially secure

00:42:18.980 | such that you can afford to think long-term.

00:42:22.140 | - Yeah, Buffett is the ultimate long-term thinker.

00:42:25.420 | And just the decisions he makes,

00:42:27.540 | the consistency of the decisions he's made over time,

00:42:32.300 | and fitting into that sort of long-term framework

00:42:34.940 | is a very educational, let's put it that way,

00:42:39.540 | for learning about this business.

00:42:42.500 | - So you mentioned eight companies,

00:42:45.560 | but what do you think about mutual funds

00:42:47.740 | for everyday investors that diversify

00:42:50.020 | across a larger number of companies?

00:42:53.820 | - I think there are very few mutual funds.

00:42:56.140 | There are thousands and thousands of mutual funds.

00:42:58.900 | There are very few that earn their keep

00:43:01.540 | in terms of the fees they charge.

00:43:03.280 | They tend to be too diversified

00:43:05.460 | and too short-term,

00:43:11.580 | and you're often much better off just buying an index fund.

00:43:14.700 | And many of them perform,

00:43:16.280 | if you look carefully at their portfolios,

00:43:19.140 | they're not so different from the underlying index itself,

00:43:23.100 | and you tend to pay a much higher fee.

00:43:25.100 | Now, all of that being said,

00:43:26.020 | there's some very talented mutual fund managers.

00:43:29.540 | A guy named Will Danoff at Fidelity

00:43:31.300 | has had a great record over a long period of time.

00:43:33.020 | The famous Peter Lynch.

00:43:34.220 | Ron Barron, another great long-term growth stock investor.

00:43:39.480 | So there's some great mutual funds,

00:43:42.140 | but I put them in the handful versus the thousands.

00:43:46.380 | And if you're in the thousands,

00:43:49.740 | I'd rather someone bought just an index fund, basically.

00:43:54.360 | - Yeah, index funds.

00:43:55.420 | But what would be the leap for an everyday investor

00:43:59.760 | to go to investing in a small number of companies,

00:44:02.740 | like two, three, four, or five companies?

00:44:05.860 | - I even recommend for individual investors

00:44:08.180 | to invest in a dozen companies.

00:44:11.060 | You don't get that much more benefit of diversification

00:44:13.580 | going from a dozen to 25, or even 50.

00:44:18.060 | Most of the benefits of diversification come in the first,

00:44:21.060 | call it 10 or 12.

00:44:22.320 | And if you're investing in businesses

00:44:24.700 | that don't have a lot of debt,

00:44:26.300 | they're businesses that you can understand yourself.

00:44:28.500 | You understand, actually individual investors

00:44:31.480 | did a much better job analyzing Tesla

00:44:33.660 | than the so-called professional investors or analysts,

00:44:36.400 | the vast majority of them.

00:44:37.360 | So if it's a business you understand,

00:44:38.780 | if you bought a Tesla,

00:44:39.620 | you understand the product and its appeal to consumers,

00:44:43.500 | it's a good place to start when you're analyzing a company.

00:44:47.100 | So I would invest in things you can understand.

00:44:49.460 | That's kind of a key.

00:44:50.540 | You like Chipotle, you understand why they're successful,

00:44:54.860 | you can go there every week and you can monitor,

00:44:58.580 | is anything changing?

00:45:00.160 | How are these new kind of, how's chicken al pastor?

00:45:03.520 | Is that a good upgrade from the basic chicken?

00:45:07.600 | The drink offering's improving, the store is clean.

00:45:12.360 | I think you should invest in companies

00:45:13.680 | you really understand, simple businesses

00:45:16.160 | where you can predict with a high degree of confidence

00:45:17.920 | what it's gonna look like over time.

00:45:19.040 | And if you do that

00:45:20.320 | in a not particularly concentrated fashion

00:45:22.000 | and you don't borrow money against your securities,

00:45:24.040 | you'll probably do much better

00:45:25.320 | than your typical mutual fund.

00:45:26.840 | - Yeah, that's interesting.

00:45:27.680 | Consumers that love a thing

00:45:29.460 | are actually good analysts of that thing,

00:45:31.540 | or I guess a good starting point.

00:45:33.020 | - And by the way,

00:45:33.860 | there's much more information available today.

00:45:34.980 | When I was first investing,

00:45:37.340 | literally we had people faxing us documents

00:45:39.500 | from the SEC filings in Washington, DC.

00:45:42.060 | Now everything's available online,

00:45:43.900 | conference call transcripts are free.

00:45:45.780 | You have AI, you have unlimited data

00:45:54.020 | and all kinds of message boards and Reddit forums

00:45:58.080 | and things where people are sharing advice.

00:46:00.720 | And everyone has their own,

00:46:02.220 | by virtue of their career or experience,

00:46:05.240 | they'll know about an industry or a business.

00:46:09.040 | And that gives them,

00:46:09.880 | I would take advantage of your own competitive advantages.

00:46:12.360 | - I'm just afraid if I invest in Chipotle,

00:46:14.440 | I'll be analyzing every little change of menu

00:46:17.480 | from a financial perspective and just be very critical.

00:46:20.720 | - If it's gonna affect your experience,

00:46:22.600 | I wouldn't buy the stock.

00:46:24.520 | - Yeah, I mean,

00:46:25.360 | I should also say that I am somebody

00:46:27.400 | that emotionally does respond to volatility,

00:46:29.800 | which is why I've never bought index funds.

00:46:32.840 | And I just noticed myself psychologically being affected

00:46:36.240 | by the ups and downs of the market.

00:46:37.740 | I want to tune out because if I'm at all tuned in,

00:46:40.660 | it has a negative impact on my life.

00:46:43.320 | - Yeah, that's really important.

00:46:45.560 | - Can you explain what activist investing is?

00:46:48.800 | You've been talking about investing

00:46:51.360 | and then looking at companies when they're struggling,

00:46:53.840 | stepping in and reconfiguring things within that company

00:46:57.760 | and helping it become great.

00:47:00.280 | So that's part of it, but let's just zoom out.

00:47:03.480 | What's this idea of activist investing?

00:47:05.720 | - I think recently in the last couple of days,

00:47:07.760 | I read an article saying that more than 50%

00:47:10.040 | of the capital in the world today

00:47:12.080 | invests in the stock markets, passive, indexed money.

00:47:15.960 | And that's the most passive form, right?

00:47:18.200 | So if you think about an index fund,

00:47:20.240 | a machine buys a fixed set of securities

00:47:24.160 | in certain proportion.

00:47:25.320 | There's no human judgment at all.

00:47:28.800 | And there's no real person behind it in a way.

00:47:32.380 | They never take steps to improve a business.

00:47:35.920 | They just quietly own securities.

00:47:38.520 | What we do is we invest our capital in a handful of things.

00:47:43.020 | We get to know them really, really well,

00:47:44.240 | 'cause you're gonna put 20% of your assets in something,

00:47:46.320 | you need to know it really well.

00:47:48.560 | But once you become a big holder,

00:47:51.560 | and if you've got some thoughts

00:47:53.720 | on how to make a business more valuable,

00:47:56.600 | you can do more than just be a passive investor.

00:47:58.400 | So our strategy is built upon finding great companies

00:48:02.520 | in some cases that have lost their way,

00:48:04.600 | and then helping them succeed.

00:48:07.320 | And we can do that with ideas from outside the boardroom.

00:48:10.160 | Sometimes we take a seat on a board or more than one,

00:48:14.360 | and we work with the best management teams in the world

00:48:18.280 | to help these businesses succeed.

00:48:20.520 | So when I first went into this business,

00:48:22.360 | no one knew who we were, and we didn't have that much money.

00:48:25.900 | And so to influence what was to us a big company,

00:48:29.940 | we had to make a fair bit more noise, right?

00:48:33.560 | So we would buy a stake, we'd announce it publicly,

00:48:36.780 | we'd attempt to engage with management.

00:48:38.320 | The first activist investment we made

00:48:39.680 | at Pershing Square was Wendy's.

00:48:41.780 | I couldn't get the CEO to ever return my call.

00:48:44.900 | Didn't return my call.

00:48:46.460 | So we actually, in that case,

00:48:49.700 | our idea was Wendy's owned a company called Tim Hortons,

00:48:51.820 | which was this coffee donut chain.

00:48:54.040 | And you could buy Wendy's for basically $5 billion.

00:48:57.760 | And they owned 100% of Tim Hortons,

00:49:00.760 | which itself was worth more than 5 billion.

00:49:03.160 | So you could literally buy Wendy's, separate Tim Hortons,

00:49:05.760 | and get Wendy's for negative value.

00:49:07.720 | That seemed like a pretty good opportunity,

00:49:09.440 | even though the business wasn't doing that well.

00:49:11.960 | So we bought the stake, called the CEO,

00:49:14.920 | couldn't get a meeting, nothing.

00:49:16.360 | So we hired, actually, Blackstone,

00:49:18.120 | which was, at that time, had an investment bank.

00:49:21.420 | And we hired them to do what's called a fairness opinion

00:49:24.180 | of what Wendy's would be worth if they followed our advice.

00:49:26.540 | And they agreed to do it, paid them a fee for it.

00:49:29.520 | And then we mailed in a letter

00:49:30.880 | with a copy of the fairness opinion,

00:49:32.080 | saying Wendy's would basically be worth 80% more

00:49:34.000 | if they did what we said.

00:49:35.280 | And six weeks later, they did what we said.

00:49:37.200 | So that's activism, at least an early form of activism.

00:49:41.080 | With that kind of under our belt,

00:49:42.800 | we had a little more credibility.

00:49:44.120 | And now we started to take stakes in companies.

00:49:46.840 | The media would pay attention.

00:49:48.920 | So the media became kind of an important partner.

00:49:51.800 | And some combination of shame, embarrassment,

00:49:54.760 | and opportunity motivated management teams

00:49:57.400 | to do the right thing.

00:49:58.440 | And then, beyond that, there's certain steps you can take

00:50:02.880 | if management's recalcitrant,

00:50:04.320 | and the shareholders are on your side.

00:50:05.680 | But it's a bit like running for office.

00:50:08.000 | You've gotta get all the constituents

00:50:09.400 | to support you and your ideas.

00:50:11.800 | And if they support you and your ideas,

00:50:13.480 | you can overthrow, if you will, the board of a company.

00:50:16.960 | You bring in new talent

00:50:18.600 | and then take over the management of a business.

00:50:21.480 | And that's the most extreme form of activism.

00:50:23.680 | So that's kind of the early days and what we did.

00:50:25.960 | And a lot of the early things that we did were,

00:50:28.620 | call it, what we call sort of like

00:50:32.120 | investment banking activism,

00:50:33.600 | where we'd go in and recommend something

00:50:35.120 | a good investment bank would have recommended.

00:50:37.320 | And if they do it, we make a bunch of money.

00:50:38.640 | And then we moved on to the next one.

00:50:40.840 | And then we realized an investment,

00:50:42.960 | a company called General Growth,

00:50:45.080 | was the first time we took a board seat on a company.

00:50:47.320 | And there was some financial restructuring

00:50:50.760 | and also an opportunity to improve

00:50:51.920 | the operations of the business,

00:50:53.400 | sit on the board of a company.

00:50:54.880 | And that was one of the best investments we ever made.

00:50:57.360 | And we said, okay, we can do more

00:50:59.000 | than just be an outside the boardroom investor.

00:51:01.480 | And we can get involved in helping select

00:51:03.920 | the right management teams

00:51:05.020 | and helping guide the right management teams.

00:51:06.880 | And then we've done that over years.

00:51:09.840 | And then I would say the last seven years,

00:51:12.200 | we haven't had to be an activist.

00:51:14.240 | An activist is generally someone who's outside

00:51:16.800 | banging on the door, trying to get in.

00:51:18.400 | We've sort of built enough credibility

00:51:20.080 | that they open the door and they say,

00:51:21.880 | "Hey, Bill, what ideas do you have?"

00:51:24.380 | So, "Welcome, would you like to join the board?"

00:51:27.040 | We're treated differently today

00:51:28.160 | than we were in the beginning.

00:51:29.800 | And that is, I would say,

00:51:33.760 | some people might just call it being an engaged owner.

00:51:37.280 | By the way, that's the way investing was done

00:51:39.440 | in the Andrew Carnegie, JP Morgan days,

00:51:42.840 | you know, 150 years ago, right?

00:51:44.960 | You had these iconic business leaders

00:51:47.520 | that would own 20% of US steel.

00:51:49.360 | And when things would go wrong,

00:51:51.080 | they'd replace the board and the management and fix them.

00:51:53.720 | And over time, we went to a world

00:51:56.280 | where mutual funds were created like in the 1920s, '30s,

00:52:01.040 | index funds with Vanguard and others.

00:52:04.320 | And that all these controlling shareholders

00:52:06.880 | would kind of gave their stock to society

00:52:09.560 | or their children and multiple generations.

00:52:11.920 | And there were no longer kind of controlling

00:52:13.520 | owners of businesses or very few.

00:52:15.640 | And that led to underperformance

00:52:17.440 | and the opportunity for activists over time.

00:52:19.420 | And what activism has done,

00:52:20.640 | and I think we've helped lead this movement,

00:52:22.920 | is it restored kind of the balance of power

00:52:25.080 | between the owners of the business

00:52:26.920 | and the managements of the company.

00:52:28.400 | And that's been a very good thing

00:52:29.760 | for the performance of the US stock market, actually.

00:52:33.560 | - So the owners, meaning the shareholders.

00:52:35.360 | - Yes.

00:52:36.180 | - So there's a more direct channel communication

00:52:39.320 | with activists investing between the shareholders

00:52:42.640 | and the people running the company.

00:52:44.160 | - Yes.

00:52:45.000 | So activists generally never own

00:52:46.300 | more than five or 10% of a business.

00:52:49.120 | So they don't have control.

00:52:51.160 | So the way they get influence

00:52:53.040 | is they have to convince the other, you know,

00:52:55.380 | but they have to get to sort of a majority

00:52:57.640 | of the other shareholders to support them.

00:53:00.200 | And if they can get that kind of support,

00:53:02.040 | they can behave almost like a controlling shareholder.

00:53:04.840 | And that's how it works.

00:53:06.160 | - So the running of a company is,

00:53:08.580 | according to Bill Ackman, is more democratic now.

00:53:11.640 | - It is, it is.

00:53:13.160 | But you need some thought leaders.

00:53:14.360 | So activists are kind of thought leaders,

00:53:16.320 | 'cause they can spend the time and the money.

00:53:19.360 | You know, a retail investor that owns 1,000 shares

00:53:21.680 | doesn't have the resources or the time.

00:53:24.860 | They got a day job.

00:53:25.700 | Whereas an activist day job

00:53:26.840 | is finding the handful of things

00:53:28.640 | where there are opportunities.

00:53:30.540 | - So on average, is it good to have such an engaged,

00:53:34.880 | powerful, influential investor

00:53:38.920 | helping control, direct the direction of a company?

00:53:42.120 | - It depends who that investor is,

00:53:44.840 | but generally I think it's a good thing.

00:53:46.800 | And that's why, you know,

00:53:49.440 | one of the problems with being CEO of a company today

00:53:51.320 | and having a very diversified shareholder base

00:53:53.900 | is the kind of short-term, long-term balance.

00:53:57.640 | And you have investors who have all different interests

00:54:00.040 | in terms of what they want to achieve

00:54:01.280 | and when they want it achieved.

00:54:03.160 | And a new CEO of an old company, let's say,

00:54:08.160 | hasn't had the chance to develop the credibility

00:54:11.880 | to make the kind of longer-term decisions

00:54:14.720 | and can be stuck in a cycle

00:54:17.020 | of being judged on a quarterly basis.

00:54:19.640 | And a business, the best businesses are forever assets.

00:54:23.840 | And decisions you make now

00:54:25.160 | have impact three, four, or five years from now.

00:54:28.160 | In order to make,

00:54:28.980 | and sometimes there are decisions we make

00:54:30.360 | that have the effect of reducing the earnings of a company

00:54:33.840 | in the short-term, because in the long-term,

00:54:36.320 | it's gonna make the business much more valuable.

00:54:38.840 | But sometimes it's hard to have that kind of credibility

00:54:41.080 | when you're a new CEO of a company.

00:54:42.480 | So when you have a major owner

00:54:43.980 | that's respected by other shareholders,

00:54:47.120 | sitting on the board saying,

00:54:48.120 | "Hey, the CEO is doing the right thing

00:54:50.040 | "and making this expensive investment in a new factory.

00:54:53.180 | "We're spending more money on R&D

00:54:55.480 | "because we're developing something

00:54:56.680 | "that's gonna pay off over time."

00:54:58.680 | That large owner on the board

00:55:01.320 | can help buy the time necessary

00:55:03.600 | for management to behave in a longer-term way.

00:55:05.640 | And that's, I think, good for all the shareholders.

00:55:07.520 | - So that's the good story, but can it get bad?

00:55:10.320 | Can you have a CEO who is a visionary

00:55:13.920 | and sees the long-term future of a company

00:55:16.640 | and an investor come in and have very selfish interest

00:55:20.480 | in just making more money in the short-term

00:55:22.880 | and therefore destroy and manipulate

00:55:27.240 | the opinions of the shareholders

00:55:28.800 | and other people on the board

00:55:30.080 | in order to sink the company,

00:55:33.000 | maybe increase the price,

00:55:37.600 | but destroy the possibility of long-term value?

00:55:41.080 | - It could theoretically happen.

00:55:42.480 | But again, the activist in your example,

00:55:46.240 | Johnny doesn't own a lot of stock.

00:55:48.240 | The shareholder basis today,

00:55:49.840 | the biggest shareholders are these index funds

00:55:51.640 | that are forever, right?

00:55:53.060 | The BlackRock, Vanguard, State Street,

00:55:55.600 | their ownership stakes are just at this point only growing

00:55:57.960 | 'cause of the inflows of capital they have from shareholders.

00:56:01.060 | So they have to think, or they should think very long-term,

00:56:04.040 | and they're gonna be very skeptical

00:56:05.520 | of someone coming in with a short-term idea

00:56:08.080 | that drives the stock price up in the next six months,

00:56:11.760 | but impairs the company's long-term ability to compete.

00:56:13.800 | And basically that ownership group

00:56:16.080 | prevents this kind of activity from really happening.

00:56:19.800 | - So people are generally skeptical

00:56:22.720 | of short-term activist investors.

00:56:25.680 | - Yes, and they're very few.

00:56:28.200 | I don't really know any short-term activist investors.

00:56:30.800 | - That's a hopeful message. - Not ones with credibility.

00:56:33.720 | - You mentioned general growth.

00:56:35.600 | I read somewhere it called arguably

00:56:37.720 | one of the best hedge fund trades of all time.

00:56:40.820 | So I guess it went from $60 million to over 3 billion.

00:56:47.240 | - It was a good one, but it wasn't a trade.

00:56:50.540 | I wouldn't describe it as a trade.

00:56:51.560 | A trade is something you buy and you flip.

00:56:53.880 | This is something where we made the investment

00:56:55.620 | initially in November of 2008.

00:56:57.640 | And we still own a company we spun off of general growth,

00:57:02.880 | and it's now 15 years later.

00:57:04.600 | - So can you describe what went into making that decision

00:57:08.520 | to actually increase the value of the company?

00:57:10.800 | - Sure, so this was at the time of the financial crisis,

00:57:13.840 | circa November 2008.

00:57:17.040 | What real estate's always been a kind of sector

00:57:19.700 | that I've been interested in.

00:57:20.620 | I began my career in the real estate business

00:57:22.240 | working for my dad actually,

00:57:24.360 | arranging mortgages for real estate developers.

00:57:25.920 | So I have kind of deep ties and interest in the business.

00:57:30.800 | And General Growth was the second largest

00:57:32.340 | shopping mall company in the country.

00:57:34.280 | Simon Properties, many people have heard of.

00:57:36.400 | General Growth was number two.

00:57:38.020 | They own some of the best malls in the country.

00:57:39.840 | And at that time, people thought of shopping malls

00:57:42.520 | as these non-disruptible things.

00:57:44.920 | Again, we talk about disruption.

00:57:46.280 | Malls have been disrupted in many ways.

00:57:48.980 | And General Growth stock, General Growth, the company,

00:57:53.560 | the CFO in particular, was very aggressive

00:57:56.080 | in the way that he borrowed money.

00:57:58.040 | And he borrowed money from a kind of Wall Street,

00:58:01.080 | not long-term mortgages,

00:58:03.760 | but generally relatively short-term mortgages.

00:58:05.600 | He was pretty aggressive.

00:58:06.480 | As the value went up,

00:58:07.760 | he would borrow more and more against the assets,

00:58:09.720 | and that helped the short-term results of the business.

00:58:12.760 | The problem was during the financial crisis,

00:58:14.880 | the market for what's called CMBS,

00:58:18.360 | Commercial Mortgage Backed Securities, basically shut.

00:58:20.920 | And the company, 'cause its debt was relatively short-term,

00:58:23.000 | had a lot of big maturities coming up

00:58:25.200 | that they had no ability to refinance.

00:58:27.280 | And the market said, "Oh my God,

00:58:28.840 | "the lenders are gonna foreclose,

00:58:30.700 | "and the company's gonna go bankrupt,

00:58:33.120 | "they're gonna get wiped out."

00:58:34.080 | Stock went from $63 a share to 34 cents.

00:58:38.240 | And there was a family, the Buxbaum family owned,

00:58:40.840 | I think about 25% of the company,

00:58:42.760 | and they had a $5 billion of stock

00:58:46.000 | that was worth 25 million or something

00:58:47.360 | by the time we bought a stake in the business.

00:58:50.460 | And what interested me was,

00:58:53.100 | I thought the assets were worth substantially more

00:58:56.720 | than the liabilities.

00:58:57.560 | The company had 27 billion of debt,

00:58:59.920 | and had $100 million value of the equity,

00:59:03.520 | down from like 20 billion, okay?

00:59:06.000 | And one, that's sort of an interesting place to start,

00:59:08.240 | with the stock down 99%.

00:59:10.400 | But the fundamental drivers of the mall business

00:59:12.480 | are occupancy, how occupied are the malls.

00:59:15.200 | Occupancy was up year on year,

00:59:16.880 | between '07 and '08, interestingly.

00:59:19.520 | Net operating income,

00:59:20.560 | which is kind of a measure of cashflow from the malls,

00:59:22.500 | that was up year on year.

00:59:24.440 | So kind of the underlying fundamentals were doing fine.

00:59:28.520 | The only problem they had

00:59:29.440 | is they had billions of dollars of debt

00:59:31.080 | that they had to repay, they couldn't repay.

00:59:33.480 | And if you kind of examine the bankruptcy code,

00:59:36.280 | it's precisely designed for a situation like this,

00:59:41.000 | where it's kind of this resting place you can go

00:59:44.040 | to kind of restructure your business.

00:59:48.520 | Now, the problem was that every other company

00:59:51.200 | that had gone bankrupt, the shareholders got wiped out.

00:59:54.440 | And so the market's seeing every previous example,

00:59:56.560 | the shareholders get wiped out,

00:59:57.600 | the assumption is the stock's gonna go to zero.

00:59:59.680 | But that's not what the bankruptcy code says.

01:00:01.400 | What the bankruptcy code says

01:00:03.080 | is that the value gets apportioned based on value.

01:00:06.880 | And if you could prove to a judge

01:00:09.300 | that there was the assets worth more than the liabilities,

01:00:12.320 | then the shareholders actually get to keep

01:00:14.080 | their investment in the company.

01:00:16.040 | And that was the bet we made.

01:00:17.680 | And so we stepped into the market,

01:00:18.960 | we bought 25% of the company in the open market for,

01:00:22.640 | we had to pay up, it started out at 34 cents.

01:00:25.200 | I think there were 300 million shares.

01:00:28.300 | So it was at $100 million value.

01:00:29.920 | By the time we were done, we paid an average of,

01:00:32.480 | we paid 60 million for 25% of the business.

01:00:34.600 | So about $240 million for the equity of the company.

01:00:38.720 | And then we had to get on the board

01:00:39.700 | to convince the director of the right thing to do.

01:00:41.400 | And the board was in complete panic.

01:00:43.760 | Didn't know what to do.

01:00:45.000 | Spending a ton of money on advisors.

01:00:46.800 | And I was a shareholder activist,

01:00:52.160 | four years into Pershing Square,

01:00:55.000 | and no one had any idea what we were doing.

01:00:56.840 | They thought we were crazy.

01:00:57.680 | Every day we'd go into the market,

01:00:59.960 | we'd buy this penny stock,

01:01:01.880 | and we'd file what's called a 13D,

01:01:03.520 | every 1% increase in our stake.

01:01:06.280 | And people just thought we were crazy.

01:01:07.560 | We're buying stock in a company that's gonna go bankrupt.

01:01:09.600 | Bill, you're gonna lose all your money.

01:01:11.960 | You know, run, okay.

01:01:14.160 | And I said, well, bankruptcy code says

01:01:16.200 | that if there's more asset value than liabilities,

01:01:18.840 | we should be fine.

01:01:20.380 | And the key moment, if you're looking for fun moments,

01:01:23.940 | is there's a woman named Maddie Buxbaum,

01:01:26.280 | who was from the Buxbaum family.

01:01:27.880 | And her cousin, John, was chairman of the board,

01:01:32.000 | CEO of the company.

01:01:33.680 | And I said, as she calls me

01:01:35.920 | after we disclosed our stake in the company,

01:01:37.640 | she's like, Billy Ackman, I'm really glad to see you here.

01:01:40.040 | And I met her like, I don't think it was a date,

01:01:42.640 | but I kind of met her in a social context

01:01:44.720 | when I was like 25 or something.

01:01:46.800 | And she said, look, I'm really glad to see you here.

01:01:48.280 | And if there's anything I can do to help you, call me.

01:01:52.160 | I said, sure.

01:01:53.240 | We kept trying to get on the board of the company.

01:01:56.080 | They wouldn't invite us on.

01:01:57.720 | Couldn't really run a proxy contest,

01:01:59.360 | you know, not with a company going bankrupt.

01:02:01.880 | And their advisors actually were Goldman Sachs,

01:02:03.720 | and they're like, you don't want the fox in the henhouse.

01:02:06.560 | And they were listening to their advisors.

01:02:08.560 | So I called Maddie up and I said,

01:02:10.440 | Maddie, I need to get on the board of the company to help.

01:02:12.560 | And she says, you know what?

01:02:13.520 | I will call my cousin and I'll get it done.

01:02:16.000 | Like, you know, she calls back a few hours later.

01:02:20.480 | You'll be going on to the board.

01:02:21.720 | I don't know what she said to her cousin.

01:02:24.760 | - But she was convincing.

01:02:25.600 | - Next thing you know, I'm invited

01:02:26.440 | to on the board of the company.

01:02:27.720 | And the board is talking about

01:02:29.320 | the old equity of general growth.

01:02:32.400 | Old equity is what you talk about

01:02:33.800 | that the shareholders are getting wiped out.

01:02:34.960 | I said, no, no, no.

01:02:35.800 | This board represents the current equity of the company.

01:02:40.200 | And I'm a major shareholder.

01:02:41.360 | John's a major shareholder.

01:02:42.560 | There's plenty of asset value here.

01:02:43.760 | This company should be able to be restructured

01:02:45.840 | for the benefit of shareholders.

01:02:47.840 | And we led a restructuring for the benefit of shareholders.

01:02:50.400 | And it took, let's say, eight months.

01:02:54.800 | And the company emerged from chapter 11.

01:02:56.760 | We made an incremental investment into the company.

01:02:59.920 | And the shareholders kept the vast majority

01:03:01.960 | of their investment.

01:03:03.160 | All the creditors got a face amount of their investment,

01:03:06.560 | par plus acute, crude interest.

01:03:09.160 | And it was a great outcome.

01:03:10.760 | All the employees kept their jobs.

01:03:12.120 | The mall stayed open.

01:03:13.480 | There was no liquidation.

01:03:14.920 | The bankruptcy system worked the way it should.

01:03:17.220 | I was in court all the time.

01:03:20.080 | And the first meeting with the judge,

01:03:22.800 | the judge was like, look, this would never have happened

01:03:24.480 | were it not for a financial crisis.

01:03:26.760 | And once the judge said it, I knew we were gonna be fine.

01:03:29.400 | Because the company had really not done

01:03:31.000 | anything fundamentally wrong.

01:03:32.200 | Maybe a little too aggressive in how they borrowed money.

01:03:34.800 | And stock went from 34 cents to $31 a share.

01:03:38.100 | And actually, fun little anecdote.

01:03:41.460 | We made a lot of people a lot of money

01:03:42.880 | who followed us into it.

01:03:44.800 | I got a lot of nice thank you notes,

01:03:46.460 | which you get on occasion in this business,

01:03:47.880 | believe it or not.

01:03:49.100 | And then one day I get a voicemail.

01:03:50.380 | This is when there was something called voicemail.

01:03:52.920 | Probably a few years later.

01:03:55.320 | And it's a guy with a very thick Jamaican accent

01:03:58.160 | leaving a message for Bill Ackman.

01:04:01.320 | So I return all my calls.

01:04:02.920 | Call the guy back.

01:04:04.600 | He's like, hi, it's Bill Ackman.

01:04:05.720 | I'm just returning your call.

01:04:07.160 | He's like, oh, Mr. Ackman.

01:04:08.640 | Thank you so much for calling me.

01:04:11.600 | I said, oh, how can I help?

01:04:13.720 | He says, I wanted to thank you.

01:04:15.080 | I said, what do you mean?

01:04:16.520 | He said, I saw you on CNBC a couple years ago

01:04:19.480 | and you were talking about this general growth.

01:04:21.680 | And the stock, I said, where was the stock at the time?

01:04:23.400 | He said, it's 60 cents or something like this.

01:04:25.720 | And I bought a lot of stock.

01:04:27.120 | And I'm like, well, how much did you invest?

01:04:31.200 | Oh, I invest all of my money in the company.

01:04:35.120 | And he was a New York City taxi driver

01:04:38.040 | and he invested like $50,000 or something like this

01:04:41.800 | at 60 cents a share.

01:04:44.040 | And he was still holding it.

01:04:45.040 | And he went into retirement

01:04:46.480 | and he made 50 times his money.

01:04:49.160 | And those are the moments

01:04:51.520 | that you feel pretty good about investing.

01:04:53.840 | - What gave you confidence through that?

01:04:55.240 | That's a penny stock

01:04:56.160 | and I'm sure you were getting a lot of naysayers

01:04:58.520 | and people saying that this is crazy.

01:05:01.400 | - It's the same thing.

01:05:02.240 | You just do the work.

01:05:03.280 | Like we got a lot of pushback from our investors actually,

01:05:05.560 | 'cause we had never invested in a bankrupt company before.

01:05:08.480 | It's a field called distressed investing

01:05:10.880 | and they're dedicated distressed investors.

01:05:14.280 | We weren't considered one of them.

01:05:16.200 | So Bill, what are you doing?

01:05:17.400 | You don't know anything about distressed investing.

01:05:18.920 | You don't know anything about bankruptcy investing,

01:05:21.080 | but I can read.

01:05:23.600 | - And you learned.

01:05:24.520 | - And I learned.

01:05:25.720 | And sometimes it's very helpful not to be a practitioner,

01:05:30.120 | an expert in something,

01:05:31.240 | 'cause you get used to the conventional wisdom.

01:05:33.200 | And so we just abstractly read the,

01:05:37.160 | step back and look at the facts.

01:05:38.880 | And it was just a really interesting setup

01:05:40.560 | for one of the best investments we ever made.

01:05:43.440 | - How hard is it to learn some of the legal aspects of this?

01:05:46.280 | Like you mentioned bankruptcy code.

01:05:48.680 | Like I imagine it's very sort of dense language

01:05:52.520 | and dense ideas and the loopholes

01:05:55.320 | and all that kind of stuff.

01:05:56.480 | Like if you're just stepping in

01:05:58.160 | and you've never done distressed investing,

01:06:00.040 | how hard is it to figure out?

01:06:01.640 | - It's not that hard.

01:06:03.520 | No, it's not that hard.

01:06:04.720 | - Okay.

01:06:05.560 | - I mean, I literally read a book on distressed investing.

01:06:07.480 | - Okay.

01:06:08.320 | - Ben Branch or something, something on distressed investing.

01:06:11.200 | - So you were able to pick up the intuition from that,

01:06:13.520 | just all the basic skills involved,

01:06:17.000 | the basic facts to know, all that kind of stuff.

01:06:19.360 | - Most of the world's knowledge

01:06:21.080 | has already been written somewhere.

01:06:22.720 | You just gotta read the right books.

01:06:24.520 | And also had great lawyers,

01:06:27.560 | built up some great relationships.

01:06:31.040 | We work with Sullivan and Cromwell

01:06:32.880 | and their lawyer there named Joe Schenker,

01:06:35.000 | who I met earlier in my career.

01:06:36.360 | Pershing Square is actually my second act

01:06:37.840 | in the hedge fund business.

01:06:38.680 | I started a fund called Gotham Partners when I was 26.

01:06:41.800 | One of my early investments

01:06:42.720 | was a company called Rockefeller Center Properties

01:06:44.960 | that was heading for bankruptcy.

01:06:46.840 | And the lawyer on the other side representing Goldman Sachs

01:06:49.440 | was a guy named Joe Schenker.

01:06:51.120 | So he was like an obvious phone call

01:06:52.720 | 'cause we had yet another real estate bankruptcy.

01:06:54.600 | And that one we did very well,

01:06:56.920 | but I missed the big opportunity.

01:06:58.480 | And I suffered severe psychological torture

01:07:02.960 | every time I walked by Rockefeller Center

01:07:04.280 | because we could have made,

01:07:05.120 | we knew more about that property than anyone else,

01:07:06.640 | but I knew less about deal-making

01:07:08.440 | and didn't have the resources.

01:07:09.600 | And I was 28 years old or 27.

01:07:12.120 | And they hired a better lawyer than we did.

01:07:15.680 | And they outsmarted us on that one in a way.

01:07:19.400 | So I said, okay, I'm gonna go hire this guy

01:07:21.000 | the next time around. (laughs)

01:07:23.000 | - Okay, we'll probably talk about Rockefeller Center

01:07:26.160 | and some failures.

01:07:28.120 | But first, you said Fox in the hen house.

01:07:31.120 | - Yes.

01:07:31.960 | - Something that the board and the chairman

01:07:33.360 | were worried about.

01:07:34.480 | Why would they call you a fox?

01:07:36.880 | So you keep saying activist investing

01:07:40.240 | is nothing to worry about.

01:07:42.000 | It's always good, mostly good.

01:07:44.920 | But that expression applied in this context.

01:07:49.140 | You know, they were still worried about that.

01:07:51.140 | - Sure.

01:07:51.980 | - And so, I mean, there's a million questions here,

01:07:54.120 | but first of all,

01:07:54.960 | what is the process of getting on the board look like?

01:07:58.360 | - So a board can always admit a member at any time

01:08:01.300 | in their discretion for a US company.

01:08:03.680 | Maybe there's some jurisdiction

01:08:07.160 | where you need a shareholder vote,

01:08:08.080 | but in most cases,

01:08:08.920 | a board can vote on any director that they want.

01:08:11.560 | If the board doesn't invite you to the party,

01:08:14.340 | you have to apply to be a member in effect.

01:08:16.960 | And that process is called,

01:08:19.400 | you know, basically it's the process

01:08:21.200 | of ultimately running a slate for a meeting

01:08:25.660 | where you propose a number.

01:08:27.180 | Any shareholder can propose to be on a board of a company

01:08:29.860 | if they own one share of stock in the business.

01:08:33.060 | And getting your name in the company's,

01:08:36.540 | you know, in the materials they sent to shareholders,

01:08:39.600 | those rules were written in a way

01:08:41.100 | that were very unfavorable and very difficult

01:08:42.980 | to get in the door.

01:08:43.820 | And those rules have been changed very recently

01:08:45.980 | where the company now has to include a candidate,

01:08:48.380 | really all the candidates in the materials

01:08:50.740 | they send to shareholders

01:08:51.580 | so the shareholders pick the best ones.

01:08:53.060 | When we applied, or when we applied,

01:08:54.540 | when we ran proxy contests in the past,

01:08:56.060 | that was not the case.

01:08:57.420 | And so you have to spend a lot of money,

01:08:58.980 | mostly mailing fees and all kinds of other legal

01:09:01.900 | and other expenses to let everyone know you're running,

01:09:04.500 | like running a political campaign.

01:09:05.940 | And then you've got to run around

01:09:06.780 | and meet with the big shareholders,

01:09:08.620 | you know, fly around the country,

01:09:10.620 | explain your case to them.

01:09:11.900 | And then there's a shareholder meeting.

01:09:14.700 | And if you get a majority of the votes, you get on.

01:09:17.260 | - What's this proxy contest/battle idea?

01:09:22.420 | What's that?

01:09:23.260 | - The battle comes when they don't want you to get on.

01:09:24.940 | - Okay.

01:09:25.780 | - And a lot of that has to do with,

01:09:27.180 | I would say pride, normal human kind of stuff.

01:09:29.940 | You know, a lot of times a board

01:09:32.540 | of an underperforming company doesn't want to admit

01:09:35.020 | that they've underperformed.

01:09:36.980 | And boards of directors 20 years ago,

01:09:39.700 | when we started Pershing Square,

01:09:40.940 | were pretty cushy jobs.

01:09:42.860 | You sit on a board of a company,

01:09:44.820 | you play golf with the CEO, you know,

01:09:46.540 | at nice golf courses,

01:09:48.140 | you make a few hundred thousand dollars a year

01:09:49.500 | to go to four meetings.

01:09:50.660 | It was kind of a rubber stamp world,

01:09:53.940 | where boards, you know, at the end of the day,

01:09:56.340 | the CEO really ran the show.

01:09:59.980 | Once shareholders could actually dislodge board members

01:10:04.780 | and they could lose their seats,

01:10:06.780 | and that's really the rise of shareholder activism,

01:10:09.260 | boards started taking their responsibilities

01:10:11.340 | much more seriously, because directors are typically,

01:10:14.300 | you know, there are many cases, they're retired CEOs.

01:10:17.580 | This is kind of how they're making a living

01:10:19.380 | in the later part of their career.

01:10:20.460 | They sit on four boards, they collect a million,

01:10:23.060 | a million and a half dollars a year in director's fees.

01:10:25.860 | If they get thrown off the board by the shareholders,

01:10:28.500 | that's embarrassing, obviously.

01:10:30.580 | And it affects their ability to get on other boards.

01:10:32.740 | So, you know, again, incentives, as I said earlier,

01:10:36.060 | drive all human behavior.

01:10:37.140 | The incentives of directors,

01:10:38.540 | they want to preserve their board seats.

01:10:40.500 | So if you have a director,

01:10:41.460 | now, the directors on board serve in various roles.

01:10:44.100 | The most vulnerable ones are ones who, for example,

01:10:46.140 | chair a compensation committee.

01:10:47.820 | And if they put in a bad plan or they overpaid management,

01:10:50.540 | you know, they're subject to attack by shareholders.

01:10:53.540 | But, you know, these contests are not dissimilar

01:10:55.420 | to political contests, where there's mudslinging

01:10:57.900 | and the other side puts out false information about you,

01:11:00.980 | you have to respond,

01:11:01.980 | and they're spending the shareholder's money.

01:11:03.660 | So they have sort of unlimited resources,

01:11:05.380 | and you're spending your and your investor's money.

01:11:08.220 | You know, when you're a small firm, finite resources.

01:11:10.580 | So they can outspend you, they can sue you.

01:11:12.820 | They can try to, you know,

01:11:15.020 | jigger the mechanics in such a way

01:11:18.820 | that you're going to lose.

01:11:19.900 | There's some unfortunate stuff that's happened in the past,

01:11:22.740 | you know, manipulative stuff.

01:11:24.340 | - So also some stuff that's public,

01:11:26.060 | like in the press and all this kind of stuff.

01:11:27.860 | - Oh, of course, you know, there'll be, you know,

01:11:29.700 | articles about, you know, the dirty days

01:11:33.260 | where they would go through your trash and, you know,

01:11:37.060 | make sure that, you know, you're not sleeping around

01:11:40.140 | and, you know, things like this, but that's okay.

01:11:43.140 | I can, I'm subject, I can survive extreme scrutiny

01:11:46.980 | 'cause I've been through this for a long time.

01:11:48.900 | - So you're saying the fat and happy hens

01:11:51.420 | can get very wolf-like when the fox is trying to break in?

01:11:58.060 | Is this how we extend the metaphor?

01:11:59.740 | - Well, the fox is a threat to the hens.

01:12:01.140 | - Yeah. - Yeah.

01:12:02.100 | - But you've just, the charismatic fox

01:12:06.580 | just explained to me why the fox is good

01:12:08.580 | for everybody in the hen house.

01:12:10.660 | - At the end of the day, it's actually very good

01:12:12.180 | on a board to have someone, you know, if you,

01:12:14.980 | there are many examples over time

01:12:16.940 | and some handful of high-profile ones

01:12:18.580 | where the board fought tooth and nail

01:12:20.020 | to keep the activists off the board.

01:12:21.940 | And then once the activists got on the board

01:12:23.260 | and they said, you know, the guy's not so bad after all,

01:12:25.100 | the shareholders voted him on, he's got some decent ideas,

01:12:28.140 | and let's all work together to have this work out.

01:12:30.180 | And so there are very few cases where after the contest,

01:12:33.820 | when the, and by the way,

01:12:34.900 | sometimes you have to replace the entire board.

01:12:36.500 | We've done that.

01:12:37.340 | But in most cases, you get a couple of seats on the board

01:12:41.700 | and it's just, you know, you wanna build a board

01:12:45.220 | comprised of diverse points of view.

01:12:47.820 | And that's how you get to the truth.

01:12:49.980 | - What was the most dramatic battle for the board

01:12:53.940 | that you have been a part of?

01:12:55.740 | - The Canadian Pacific Proxy Contest.

01:12:58.380 | So Canadian Pacific was like,

01:12:59.940 | considered the most iconic company in Canada.

01:13:02.620 | It literally built the country

01:13:05.100 | because the rail that got built over Canada

01:13:08.660 | is what united the various provinces into a country.

01:13:12.260 | And then over time,

01:13:14.580 | 'cause the railroad business is pretty good business,

01:13:16.820 | they built a ton of hotels,

01:13:18.140 | they owned a lot of real estate,

01:13:19.420 | and it became this massive conglomerate,

01:13:21.500 | but it was horribly mismanaged for decades.

01:13:25.300 | By the time we got involved,

01:13:26.740 | it was by far the worst run railroad in North America.

01:13:29.820 | They had the lowest profit margins,

01:13:31.580 | they had the lowest growth rate,

01:13:33.340 | every quarter management would make excuses

01:13:36.580 | generally about the weather

01:13:37.500 | as to why they underperformed versus,

01:13:39.340 | and there there's a direct competitor,

01:13:40.860 | a company called Canadian National,

01:13:42.380 | has a rail that goes right across the country.

01:13:44.180 | And Canadian Pacific would constantly be complaining

01:13:46.060 | about the weather.

01:13:47.260 | And basically, you know, same country, same regions,

01:13:51.660 | tracks weren't that far apart.

01:13:53.160 | But it was a really important company

01:13:57.700 | and being on this board was like an honorary thing.

01:14:00.100 | And everyone on the board was an icon of Canada.

01:14:02.260 | You know, the chairman of the Royal Bank of Canada,

01:14:04.380 | you know, the head of the most important grain,

01:14:06.780 | privately held grain company,

01:14:08.220 | the, you know, sort of an important collection

01:14:10.660 | of, you know, big time Canadian executives.

01:14:14.860 | Here we were, you know,

01:14:15.700 | this is probably about 13 years ago.

01:14:19.620 | And, you know, still maybe 44 year old from New York,

01:14:24.620 | not a Canadian, basically saying

01:14:28.340 | this is the worst run railroad in North America.

01:14:31.100 | And we bought 12% of the railroad at a really low price.

01:14:34.620 | And we brought with us to our first meeting,

01:14:38.700 | the greatest railroader ever,

01:14:40.660 | a guy named Hunter Harrison

01:14:41.660 | who had turned around Canadian National.

01:14:43.900 | So we'd like, okay, we've got a great asset.

01:14:46.220 | We've got the greatest railroad CEO of all time.

01:14:47.980 | He's come out of retirement

01:14:49.700 | to step in and run the railroad.

01:14:51.660 | And we brought him to the first meeting

01:14:53.340 | and they wouldn't even meet with him.

01:14:55.300 | And they certainly weren't gonna consider hiring him.

01:14:59.260 | And that led us to a proxy contest.

01:15:01.220 | - And this is where the engine starts churning

01:15:06.020 | just to figure out how this contest can be won.

01:15:09.100 | So what's involved?

01:15:11.220 | - Well, the key is we had to, one,

01:15:12.860 | come up with a group of directors

01:15:14.780 | who would be willing to step into a battle.

01:15:17.620 | And we didn't want a bunch of New York directors

01:15:20.420 | or even American directors.

01:15:21.420 | We wanted Canadians.

01:15:22.780 | The problem was this was the most iconic company in Canada

01:15:25.500 | and we wanted high profile people.

01:15:27.260 | So we talked to all the high profile people in Canada.

01:15:29.340 | Every one of them would say, Bill, you're entirely right.

01:15:31.460 | This thing is the worst railroad, it needs to be fixed.

01:15:34.620 | But you know, I see John at the club.

01:15:36.180 | You know, I see him at the Toronto club.

01:15:38.460 | You know, I can't, you know, I can't do this

01:15:40.180 | but you're totally right.

01:15:42.060 | And we had to, and that was the concern

01:15:44.900 | because you have to file your materials by a certain day.

01:15:47.580 | You got to put together a slate.

01:15:48.860 | We needed a big slate

01:15:49.700 | 'cause we knew that we had to replace

01:15:51.460 | basically all the directors.

01:15:53.740 | And then one, I spoke to a guy

01:15:56.140 | who was one of the wealthiest guys in Canada

01:15:58.580 | who was on the board at one point in time.

01:16:01.420 | And he said, Bill, I have an idea for you.

01:16:05.540 | There's this woman, Rebecca McDonald.

01:16:07.620 | Why don't you give her a call?

01:16:09.300 | And I called Rebecca and she was the first woman

01:16:13.460 | to take a company public in Canada as CEO.

01:16:16.300 | And she was a kind of anti-establishment,

01:16:18.940 | not afraid to take on anything kind of person.

01:16:21.660 | And I called her, we had a great conversation.

01:16:24.060 | And she was in the Dominican Republic at her house

01:16:27.340 | and I flew down to see her.

01:16:29.140 | And she said, yeah, I'm all in.

01:16:30.980 | And actually once we got her,

01:16:33.420 | that enabled us to get others.

01:16:35.020 | And then we put together our slate

01:16:37.020 | and we had some pretty interesting dialogue

01:16:40.380 | with the company.

01:16:41.220 | They tried to embarrass us all the time.

01:16:42.780 | - In the press publicly, what were you talking about?

01:16:44.540 | - Press publicly.

01:16:45.980 | You know, at one point I wrote an email saying,

01:16:48.060 | look, let's come to peace on this thing.

01:16:50.580 | But if we don't, you're really forcing my hand

01:16:54.700 | and we're gonna have to rent the largest hall in Toronto

01:16:57.580 | and invite all the shareholders.

01:16:59.100 | And it's gonna be embarrassing for management.

01:17:00.900 | And I made reference to some nuclear winter.

01:17:02.780 | Let's not have it be a nuclear winter.

01:17:05.420 | And they thought they'd embarrass me

01:17:06.540 | by releasing the email, but it only inspired us.

01:17:08.940 | And we rented the largest hall in Canada

01:17:11.460 | and we put up a presentation walking through,

01:17:14.500 | here's Canadian National, here's Canadian Pacific.

01:17:16.340 | Here's what they said, here's what they did.

01:17:18.260 | And we had Hunter get up.

01:17:19.220 | It was this incredibly charismatic guy from Tennessee.

01:17:23.420 | An amazing, you know, he's like a lion, okay?

01:17:27.420 | Incredibly deep voice, unbelievable track record,

01:17:30.420 | incredibly respected guy.

01:17:32.180 | It's like getting Michael Jordan to come out of retirement

01:17:34.980 | and come and run the company.

01:17:38.580 | And Hunter was incredible.

01:17:40.100 | And other, Paul Lau, other members of my team

01:17:42.940 | were, you know, super engaged.

01:17:45.500 | And the board, you know, Canadians are known to be nice.

01:17:49.100 | So one of the problems we had is shareholders

01:17:50.700 | would never tell management or the board

01:17:52.900 | that they were losing.

01:17:54.700 | It was not until the night before the meeting

01:17:56.100 | when the vote came in,

01:17:57.100 | the management realized that they lost.

01:17:59.060 | We got 99% of the vote and they offered us a deal.

01:18:04.940 | When they begged us to take a deal,

01:18:06.180 | they said, look, we'll resign tonight

01:18:08.460 | so that we don't have to come to the meeting tomorrow.

01:18:10.220 | That's how embarrassed they were.

01:18:11.420 | So that was kind of an interesting one.

01:18:13.820 | - So in both this proxy battle and the company itself,

01:18:18.660 | this was one of your more successful investments.

01:18:21.820 | - It was.

01:18:22.660 | I mean, the stock's up about 10 times

01:18:24.220 | and it's an industrial company.

01:18:25.980 | It's a railroad and it's not like a growth,

01:18:27.980 | like it's not Google.

01:18:29.980 | So it's a great story.

01:18:30.820 | And the company's now run by a guy named Keith Creel.

01:18:33.260 | And Keith, it was Hunter's protege.

01:18:36.140 | And in so many ways, he's actually better than Hunter.

01:18:38.980 | He's doing an incredible job.

01:18:39.980 | And the sad part here is we did very well.

01:18:43.780 | We tripled our money over several years.

01:18:45.260 | And then I went through a very challenging period

01:18:46.860 | because of a couple of bad investments.

01:18:49.260 | And we had to sell our Canadian Pacific to raise capital,

01:18:53.620 | to pay for investors who were leaving.

01:18:56.460 | But we had another opportunity to buy it back

01:19:00.020 | in the last couple of years.

01:19:01.300 | And so we're now again, a major owner of the company.

01:19:03.740 | But had we held onto original stock,

01:19:05.540 | it would have been epic, if you will.

01:19:10.340 | - So on this one, you were right.

01:19:13.260 | - Yes.

01:19:14.100 | - And I read an article about you

01:19:16.660 | and there's many articles about you.

01:19:18.060 | I read an article that said Bill is often right,

01:19:22.060 | but you approach it with a scorched earth approach

01:19:26.580 | that can often do more, sort of can do damage.

01:19:30.500 | - I haven't read the often right article,

01:19:31.940 | but the good news is we are often right.

01:19:33.580 | And I say we, because we're a team, a small team,

01:19:36.580 | but a fortunately very successful one.

01:19:38.900 | So our batting average as investors is extremely high.

01:19:42.460 | And the good news is our record's totally public.

01:19:44.620 | You can see everything we've ever done.

01:19:46.580 | But the press doesn't generally write

01:19:48.580 | about the success stories.

01:19:50.300 | They write about the failures.

01:19:51.620 | And so we've had some epic failures, big losses.

01:19:56.220 | Good news is they've been a tiny minority of the cases.

01:20:00.340 | Now, no one likes to lose money.

01:20:03.140 | It's even worse to lose other people's money.

01:20:06.220 | And I've done that occasionally.

01:20:08.180 | The good news is if you stuck with us,

01:20:10.820 | you've done very well over a long time.

01:20:13.740 | - On a small tangent, since we're talking about boards,

01:20:16.540 | did you get a chance to see what happened

01:20:19.580 | with the OpenAI board?

01:20:21.260 | 'Cause I'm talking to Sam Altman soon.

01:20:23.160 | Is there any insight you have,

01:20:25.940 | just maybe lessons you draw from this kind of,

01:20:29.460 | these kinds of events,

01:20:30.300 | especially with an AI technology company,

01:20:32.180 | such dramatic things happening?

01:20:34.780 | - Yeah, that was an incredible story.

01:20:36.340 | Look, governance really matters.

01:20:38.180 | And the governance structure of OpenAI,

01:20:40.860 | I think, leaves something to be desired.

01:20:43.520 | You know, I think Sam's point was this,

01:20:45.820 | and maybe Elon Musk's point,

01:20:48.020 | originally set up as a nonprofit.

01:20:49.660 | And it reminds me, actually,

01:20:52.700 | I invested in a nonprofit run by a former Facebook founder,

01:20:57.420 | where he was gonna create a Facebook-like entity

01:20:59.780 | for nonprofits to promote goodness in the world.

01:21:04.400 | And the problem was he couldn't hire the talent

01:21:06.260 | he wanted, 'cause he couldn't grant stock options,

01:21:08.020 | he couldn't pay market salaries.

01:21:10.180 | And ultimately, he ended up selling the business

01:21:12.300 | to a for-profit.

01:21:13.940 | So it taught me, for-profit solutions to problems

01:21:16.300 | are much better than nonprofits.

01:21:17.700 | And here you had kind of a blend, right?

01:21:19.380 | It was set up as a nonprofit,

01:21:21.260 | but I think they found the same thing.

01:21:22.860 | They couldn't hire the talent they wanted

01:21:24.060 | without having a for-profit subsidiary.

01:21:26.740 | But the nonprofit entity, as I understand it,

01:21:30.940 | owns a big chunk of OpenAI.

01:21:35.300 | And the investors own sort of a capped interest

01:21:37.820 | where their upside is capped,

01:21:40.260 | and they don't have representation on the board.

01:21:43.260 | And I think that was a setup for a problem.

01:21:47.620 | And that's clearly what happened here.

01:21:49.860 | - And there's, I guess, some kind of complexity

01:21:52.100 | in the governance.

01:21:53.900 | I mean, because of this nonprofit and cap profit thing,

01:21:58.180 | it seems like there's a bunch of complexity

01:22:00.420 | and non-standard aspects to it

01:22:04.180 | that perhaps also contributed to the problem.

01:22:08.700 | - Yeah.

01:22:10.380 | Governance really matters.

01:22:11.620 | Boards of directors really matter.

01:22:13.380 | Giving the shareholders the right to have input

01:22:18.860 | at least once a year on the structure

01:22:20.660 | of the governance of a company is really important.

01:22:23.460 | And private, you know, venture-backed boards

01:22:26.180 | are also not ideal.

01:22:27.460 | You know, I'm an active investor in ventures,

01:22:30.220 | and there are some complicated issues

01:22:33.580 | that emerge in private sort of venture-stage companies

01:22:38.180 | where board members have somewhat divergent incentives

01:22:41.980 | from the long-term owners of a business.

01:22:44.540 | And what you see a lot in venture boards

01:22:46.580 | is they're presided over generally

01:22:49.660 | by venture capital investors

01:22:51.580 | who are big investors in the company.

01:22:53.780 | And oftentimes, it's more important to them

01:22:56.140 | to have the public perception

01:22:59.740 | that they're good directors

01:23:01.460 | so they get the next best deal, right?

01:23:03.580 | If they have a reputation

01:23:05.820 | for kind of taking on management too aggressively,

01:23:08.580 | word will get out in the small community of founders,

01:23:10.820 | and they'll miss the next Google.

01:23:12.660 | And so their interests are not just

01:23:14.740 | in that particular company.

01:23:16.500 | That's also, you know, one of the problems.

01:23:19.580 | Again, it all comes back to incentives.

01:23:21.660 | - Can you explain to me the difference, you know,

01:23:23.220 | venture-backed, like, VCs and shareholders?

01:23:26.540 | So this means before the company goes public?

01:23:28.940 | - Yeah, so private venture-backed companies,

01:23:31.700 | the boards tend to be very small.

01:23:34.220 | It could be a handful of the venture investors

01:23:36.460 | and management.

01:23:37.700 | They're often very rarely independent directors.

01:23:42.020 | It's just not an ideal structure.

01:23:43.700 | - Oh, I see. You want independent.

01:23:45.340 | - It's beneficial to have people

01:23:46.820 | who have an economic interest in the business,

01:23:48.820 | and they care only about the success of that company,

01:23:51.460 | as opposed to someone who, you know,

01:23:54.860 | if you think about the venture business,

01:23:56.100 | getting into the best deals

01:23:57.940 | is more important than any one deal.

01:24:00.100 | And you see cases where, you know,

01:24:01.900 | the boards go along with, in some cases,

01:24:04.780 | bad behavior on the part of management

01:24:06.900 | because they want a reputation

01:24:08.180 | for being kind of a founder-friendly director.

01:24:11.860 | You know, that's kind of problematic.

01:24:14.060 | You don't have the same issue in public company boards.

01:24:16.540 | - So we talked about some of the big wins

01:24:18.820 | and your track record,

01:24:20.700 | but you said there were some big losses.

01:24:22.900 | So what's the biggest loss of your career?

01:24:27.100 | - Biggest loss of my career

01:24:28.060 | is a company called Valiant Pharmaceuticals.

01:24:29.940 | We made an investment in a business

01:24:30.980 | that didn't meet our core principles.

01:24:32.780 | The problem with the pharmaceutical industry,

01:24:35.020 | and there are many problems, as I've learned,

01:24:37.180 | is it's a very volatile business, right?

01:24:39.540 | It's based on drug discovery.

01:24:41.060 | It's based on, you know,

01:24:43.460 | predicting kind of the future revenues of a drug

01:24:46.300 | before it goes off patent.

01:24:47.580 | You know, lots of complexities.

01:24:50.820 | And we thought we had founded a pharmaceutical company

01:24:53.540 | we could own because of a very unusual founder

01:24:56.100 | and the way he approached his business.

01:24:57.980 | It was a company where another activist

01:25:02.060 | was on the board of directors of the company

01:25:03.660 | and kind of governing and overseeing the day-to-day decisions

01:25:06.300 | and we ended up making a passive investment in the company.

01:25:08.780 | And up until this point in time,

01:25:09.820 | we really didn't make passive investments.

01:25:12.380 | And the company made a series of decisions

01:25:14.220 | that were, you know, disastrous.

01:25:16.820 | And then we stepped in to try to solve the problem.

01:25:18.820 | It was the first time I ever joined a board

01:25:20.340 | and the mess was much larger than I realized

01:25:22.260 | from the outside.

01:25:23.180 | And then I was kind of stuck.

01:25:25.140 | And it was very much a confidence-sensitive strategy

01:25:29.300 | 'cause they built their business

01:25:30.820 | by acquiring pharmaceutical assets.

01:25:33.300 | And they often issued stock when they acquired targets.

01:25:36.980 | And so once the market lost confidence in management,

01:25:40.140 | the stock price got crushed and it impaired their ability

01:25:43.180 | to continue to acquire low costs, you know, drugs.

01:25:46.980 | And we lost $4 billion.

01:25:49.980 | - $4 billion.

01:25:51.020 | - Yeah.

01:25:51.860 | How's that for a big loss?

01:25:53.460 | It's up there.

01:25:54.300 | - So I'm sweating this whole conversation,

01:25:56.900 | both the wins and the losses and the stakes involved.

01:25:59.860 | - And by the way, that loss catalyzed other,

01:26:03.100 | what I call mark-to-market losses.

01:26:05.260 | So very high profile, huge number, disastrous press.

01:26:09.980 | Then people said, okay, Bill's gonna go out of business.

01:26:14.100 | So we're gonna bet against everything he's doing.

01:26:16.100 | And we know his entire portfolio

01:26:17.460 | 'cause we only own 10 things.

01:26:19.180 | And we were short a company called Herbalife,

01:26:21.420 | very famously.

01:26:23.980 | We've only really shorted two companies.

01:26:25.540 | The first one, there's a book.

01:26:27.100 | The second one, there's a movie.

01:26:28.580 | We no longer short companies.

01:26:30.780 | But so people pushed up the price of Herbalife,

01:26:34.180 | which is when you're a short seller, that's catastrophic.

01:26:38.460 | I can explain that.

01:26:39.420 | And then they also shorted the other stocks that we owned.

01:26:42.980 | And so that valiant loss led to an overall

01:26:45.900 | more than 30% loss in the value of our portfolio.

01:26:49.460 | The valiant loss was real and was crystallized.

01:26:53.060 | We ended up selling the position, taking that loss.

01:26:55.980 | Most of the other losses were

01:26:57.780 | what I would call mark-to-market losses.

01:26:59.180 | They were temporary.

01:27:00.740 | But many people go out of business

01:27:02.220 | because as I mentioned before, large move in a price,

01:27:05.380 | if investors are redeeming or you have leverage,

01:27:08.100 | you know, it can put you out of business.

01:27:09.620 | And people assumed if we got put out of business,

01:27:11.580 | we'd have to sell everything or cover our short position.

01:27:15.060 | And that would make the losses even worse.

01:27:16.260 | So Wall Street is kind of ruthless.

01:27:17.740 | - So they can make money off of that whole thing.

01:27:19.900 | - Absolutely.

01:27:20.740 | - So they use the opportunity of valiant

01:27:21.980 | to try to destroy you.

01:27:23.740 | - Yes.

01:27:24.580 | - Reputation, financially, and then capitalizing.

01:27:27.500 | - Yes.

01:27:28.340 | - Make money off of that.

01:27:29.160 | - Yes.

01:27:30.000 | - Well, that's a terrifying spot to be in.

01:27:32.180 | What was it like going through that?

01:27:34.220 | - That was pretty grim.

01:27:35.500 | It was, it's actually much worse than that

01:27:38.020 | because I had a lot of stuff going on personally as well.

01:27:40.700 | So, and these things tend to be correlated.

01:27:42.740 | The valiant mistake came at a time

01:27:45.280 | where I was contemplating my marriage.

01:27:47.620 | And I was also, you know,

01:27:51.020 | the problem with the hedge fund business

01:27:53.260 | is when you get to a certain scale,

01:27:55.120 | the CEO becomes like the chief marketing officer

01:27:57.100 | of the business.

01:27:57.940 | And I'm really an investor as opposed to a marketing guy.

01:28:00.300 | But when you have investors who give you

01:28:01.900 | a few hundred million dollars, they want to see you,

01:28:04.300 | you know, once a year, Bill, I'd love to see you for an hour.

01:28:06.880 | But if you've got a couple hundred of those,

01:28:08.820 | you find yourself on a plane to the Middle East,

01:28:11.380 | to Asia, flying around the country.

01:28:14.300 | This is pre-Zoom.

01:28:15.280 | And that takes you away from the investment process.

01:28:20.700 | You have to delegate more.

01:28:22.340 | That was a contributor to the valiant mistake.

01:28:25.340 | So, now we lose a ton of money on valiant.

01:28:28.020 | My ex-wife and I were, you know,

01:28:29.700 | talking about separating, getting divorced.

01:28:32.100 | I put that on hold.

01:28:32.980 | So I didn't want to make a decision

01:28:34.380 | in the middle of this crisis.

01:28:36.480 | And things just kept getting worse.

01:28:39.340 | We were also sued.

01:28:40.740 | When you lose a lot of money,

01:28:41.940 | we didn't get sued by our investors,

01:28:42.980 | but we got sued by a shareholder

01:28:44.700 | because when the stock price goes down, shareholders sue.

01:28:47.740 | We'd done nothing wrong other than make a big mistake.

01:28:49.740 | But, you know, so you have litigation.

01:28:52.580 | Your investors are taking their money out.

01:28:54.620 | I'm in the middle of a divorce.

01:28:57.580 | The divorce starts to proceed.

01:28:59.580 | My ex-wife's lawyers' expectations

01:29:02.860 | of what my net worth was was about three times

01:29:05.260 | what it actually was.

01:29:06.860 | And it was going lower, right in the middle of this.

01:29:10.020 | And I remember the lawyers saying,

01:29:12.420 | "Look, Bill, you know, we've estimated your net worth at X,

01:29:16.460 | but don't worry, we only want a third."

01:29:18.900 | But X was three X.

01:29:20.500 | So a third was a hundred percent.

01:29:22.200 | And then we had litigation.

01:29:26.480 | And actually never before publicly disclosed,

01:29:30.420 | and I'll share it with you now.

01:29:32.620 | We had a public company that owned

01:29:36.700 | about a third of our portfolio

01:29:38.900 | that was called our version of Berkshire Hathaway.

01:29:41.620 | I tried to learn from Mr. Buffett over time.

01:29:44.940 | And it was, so to speak, permanent capital.

01:29:47.100 | The beauty of, the problem with hedge funds

01:29:48.380 | is people can take their money out every quarter.

01:29:51.320 | What Buffett has is a company

01:29:53.300 | where people wanna take their money out,

01:29:54.460 | they sell the stock, but the money stays.

01:29:56.580 | So we set up a similar structure in October of 2014.

01:30:00.060 | And then a year later, Valiant happens.

01:30:02.380 | And then a year later, we're in the middle of the mess.

01:30:04.700 | And we're still in the mess.

01:30:05.860 | You know, like by kind of mid 2017,

01:30:09.700 | we've got litigation underway.

01:30:12.100 | And another activist investor,

01:30:14.540 | a firm called Elliott Associates,

01:30:17.180 | which is run by a guy named Paul Singer,

01:30:20.140 | took a big position in our public company

01:30:23.260 | that was the bulk of our capital.

01:30:25.220 | And they shorted all the stocks that we owned,

01:30:27.860 | and they went long the short,

01:30:29.340 | probably went long the short that we were short.

01:30:32.140 | And they were making a bet that we'd be forced to liquidate.

01:30:34.820 | And then they would make money on,

01:30:36.700 | you know, our public company was trading at a discount

01:30:39.100 | to what all the securities were worth.

01:30:40.060 | So they bought the public company,

01:30:42.500 | they shorted the securities.

01:30:44.260 | And then they, you know, came to see us

01:30:46.540 | and to try to, you know, be activists

01:30:48.380 | and force us to liquidate.

01:30:50.300 | And that's sort of-

01:30:52.660 | - Oh, wow.

01:30:54.180 | - So I thought this was gonna be-

01:30:55.180 | - Wow.

01:30:56.300 | - I envisioned an end

01:30:57.900 | where the divorce takes all of my resources,

01:31:01.220 | the permanent capital vehicle ends up getting liquidated,

01:31:04.100 | and another activist in my industry puts me out of business.

01:31:07.580 | And I had met Neri Oxman right around this time,

01:31:11.900 | and I had fallen completely in love with her.

01:31:14.100 | And I was envisioning a world where I was bankrupt,

01:31:17.380 | a judge found me guilty of, you know, whatever.

01:31:20.460 | You know, he sends me off to jail,

01:31:22.220 | or not that judge 'cause he was a civil judge,

01:31:23.740 | but another judge sues the SEC Department of Justice.

01:31:26.980 | And I find myself in this incredible mess.

01:31:29.220 | And I decided I didn't want things to end that way.

01:31:32.100 | So I did something I'd never done before.

01:31:35.460 | I talked all before about you don't borrow money,

01:31:37.300 | I borrowed money.

01:31:38.540 | And I borrowed $300 million from JP Morgan

01:31:43.380 | in the middle of this mess.

01:31:44.820 | And I give JP Morgan enormous credit in seeing through it.

01:31:49.700 | And also, you know, I had been a good client

01:31:54.020 | over a long period of time,

01:31:54.860 | and it's like, you know, it's a handshake bank,

01:31:57.500 | and they bet that I would succeed.

01:31:59.140 | And I took that money to buy enough stock

01:32:00.980 | in my public company that I could prevent an activist

01:32:04.180 | from taking over and effectively buy control

01:32:07.020 | of our little public company.

01:32:08.460 | And I got that done.

01:32:10.860 | And that I knew was the moment, the turning point.

01:32:13.900 | And I resolved my divorce.

01:32:16.020 | And divorces get easier to resolve

01:32:17.420 | when things are going badly.

01:32:18.700 | I was able to resolve that.

01:32:19.700 | We settled the litigation.

01:32:21.500 | I was buying blocks of our stock in the market.

01:32:23.420 | I remember a day I bought a big block of stock

01:32:25.060 | in the market.

01:32:26.260 | And I get a call from Gordon Singer,

01:32:28.180 | who is Paul Singer's son,

01:32:29.540 | who runs their London part of their business.

01:32:33.220 | He's like, "Bill, was that you buying that block?"

01:32:35.260 | I said, "Yes."

01:32:37.100 | And he's like, "Fuck."

01:32:38.340 | (laughing)

01:32:39.380 | - So he knew--

01:32:40.540 | - He knew that once I got that,

01:32:42.060 | they were not gonna be able to succeed,

01:32:43.740 | and they went away.

01:32:44.780 | And that was the bottom.

01:32:47.180 | And then I, we've had an incredible run since then.

01:32:51.500 | - And there you were able to protect your reputation

01:32:53.380 | from the valiant failure still?

01:32:56.620 | - I mean, you know, this is a business

01:32:58.500 | where you're gonna make some mistakes.

01:32:59.740 | It was a big one.

01:33:01.140 | It was very reputationally damaging.

01:33:03.460 | The press was a total disaster.

01:33:05.660 | But I'm not a quitter.

01:33:08.420 | And actually, the key moments for us,

01:33:11.020 | we had never taken our core investment principles

01:33:14.060 | and actually really written them down.

01:33:16.660 | Something we talked about at meetings,

01:33:18.980 | investor, you know, kind of our investment team meetings.

01:33:21.820 | I had a member of the team, I said,

01:33:22.660 | "Look, go find a big piece of granite and a chisel.

01:33:26.260 | "And let's take those core principles.

01:33:27.860 | "I want them like Moses's 10 commandments.

01:33:30.060 | "Okay, we're gonna chisel them,

01:33:30.900 | "then we're gonna put it up on the wall."

01:33:32.460 | And once we produced those,

01:33:33.580 | we put one on everyone's desk.

01:33:34.820 | I said, "Look, if we ever again veer

01:33:36.820 | "from the core principles, you know,

01:33:39.220 | "hit me with a baseball bat."

01:33:40.700 | - Yeah.

01:33:41.540 | - And that was the bottom.

01:33:42.360 | And ever since then, we've done,

01:33:43.460 | we've had the best six years in the history of the firm.

01:33:45.180 | - So refocus on the fundamentals.

01:33:47.860 | That's a hell of a story.

01:33:50.500 | - Love helps.

01:33:51.340 | I literally met Neri at the absolute bottom.

01:33:53.180 | Our first date was September 7th of 2017.

01:33:55.820 | That was very close to the bottom.

01:33:57.200 | Actually, there's one other element to the story.

01:33:59.060 | So this went on for a few months after I met her.

01:34:01.900 | The other element is that one day I got a call from Neri.

01:34:05.020 | She's like, "Bill, guess what?"

01:34:06.780 | I'm like, "What?"

01:34:07.780 | "Brad Pitt is coming to the Media Lab.

01:34:10.140 | "He wants to see my work."

01:34:12.100 | I'm like, "That's beautiful, sweetheart.

01:34:13.540 | "I didn't know Brad Pitt was interested in your work."

01:34:16.180 | - As a man, that's a difficult phone call to take.

01:34:19.780 | - And apparently, he's really interested in architecture.

01:34:22.980 | I'm like, "Okay."

01:34:24.620 | Now, Neri and I, we would WhatsApp all day, every day.

01:34:28.240 | We'd talk throughout the day.

01:34:29.740 | Brad Pitt shows up at the Media Lab at 10 o'clock.

01:34:32.900 | I talked to her in the morning.

01:34:34.940 | I'd kinda text her to see how things are going.

01:34:37.460 | Don't hear back.

01:34:38.580 | And on WhatsApp, you can see

01:34:40.340 | whether the other person's read it or not.

01:34:43.100 | No response.

01:34:44.420 | Couple hours later, send her another text.

01:34:45.820 | No response.

01:34:47.100 | Six o'clock, no response.

01:34:48.700 | Eight o'clock, no response.

01:34:49.960 | 10 o'clock, no response.

01:34:52.060 | And you know, she finally calls me at 10.30,

01:34:56.100 | tells me how great Brad Pitt is.

01:34:58.840 | So I had this scenario.

01:34:59.680 | Okay, a judge is gonna find me.

01:35:02.100 | We're gonna lose to the judge.

01:35:03.600 | All my assets will disappear.

01:35:07.500 | And then Brad Pitt's gonna take my girlfriend.

01:35:08.860 | - Yeah, Brad Pitt's your competition.

01:35:10.940 | This is great.

01:35:11.780 | - So it was like a moment.

01:35:13.260 | That was sort of the bottom.

01:35:15.380 | And then sort of the motivational thing.

01:35:17.100 | I didn't wanna lose to an activist.

01:35:18.500 | Didn't wanna lose my girl to some other guy, so.

01:35:21.520 | - Brad Pitt.

01:35:23.580 | And you emerged from all of that the winner on all fronts.

01:35:26.980 | - I'm a very fortunate guy.

01:35:28.740 | Very fortunate and lucky.

01:35:30.020 | - You talked about some of the technical aspects of that,

01:35:33.020 | but psychologically, just, is there a,

01:35:35.600 | like, what are you doing at night by yourself?

01:35:39.300 | - That was a hard time.

01:35:40.140 | Hard time 'cause I was separated from my wife and my kids.

01:35:42.940 | I was living in, you know, not the greatest apartment.

01:35:48.120 | You know, I had a beautiful home.

01:35:50.680 | And so I had to go find like a bachelor place.

01:35:53.160 | And I was, I didn't wanna be away from my kids.

01:35:56.440 | I moved like 10 blocks away and I wasn't seeing them

01:35:59.000 | and they didn't like it.

01:35:59.840 | So I ended up buying an apartment I didn't like

01:36:02.680 | in the same building as my kids,

01:36:03.960 | like with a different entrance so I could be near them.

01:36:06.800 | But I was home alone.

01:36:07.800 | I got a dog.

01:36:08.880 | That was a Babar.

01:36:12.000 | We call him Babar, not the elephant.

01:36:14.760 | He's a black Labradoodle.

01:36:16.160 | - Nice.

01:36:17.000 | - He was supposed to be a mini, but he's not as mini.

01:36:19.720 | (Dave laughs)

01:36:21.640 | But I got him at six weeks old and he would keep me company.

01:36:24.800 | And I started meditating, actually.

01:36:27.320 | And a friend recommended TM.

01:36:30.940 | And I would meditate 20 minutes in the morning,

01:36:33.560 | 20 minutes in the evening.

01:36:34.800 | And I also, big believer in exercise and weightlifting.

01:36:38.840 | And I play tennis.

01:36:39.780 | And I had been, this is not my first, you know,

01:36:43.920 | proximity to disaster.

01:36:46.600 | I had another moment in my career, like, you know, 2002.

01:36:51.600 | And I learned this method for dealing with

01:36:54.880 | these kinds of moments,

01:36:55.720 | which is you just make a little progress every day.

01:36:59.080 | So today I'm gonna wake up, I'm gonna make progress.

01:37:02.440 | You know, I'll make progress on the litigation,

01:37:03.960 | make progress on the portfolio.

01:37:05.680 | I'll make progress with my life.

01:37:08.000 | And progress compounds, a bit like money compounds.

01:37:12.240 | You don't see a lot of progress in the first few weeks,

01:37:14.760 | but like 30 days in, like, oh, okay.

01:37:17.040 | You know, you can't look up at the mountaintop

01:37:18.720 | where you used to be, 'cause then you'll give up, right?

01:37:21.880 | But you just, okay, just make step by step by step.

01:37:24.660 | And then 90 days in, you're like,

01:37:26.700 | okay, I was way down there.

01:37:28.560 | Okay, I'm not, okay, I don't look up.

01:37:30.760 | Just keep making, you know, progress, progress, progress.

01:37:34.480 | And progress really does compound.

01:37:36.240 | And one day you wake up and like, wow,

01:37:37.720 | it's amazing how far I've come.

01:37:39.420 | And if you look at a chart of Pershing Square, our company,

01:37:44.000 | you can see the absolute bottom.

01:37:45.760 | You can see where we were, you can see the drop,

01:37:49.200 | and you can see where we are now.

01:37:51.040 | And that huge drop that felt like

01:37:54.240 | a complete, unbelievable disaster

01:37:56.680 | looks like a little bump on the curve.

01:38:00.040 | And it really gives you perspective on these things.

01:38:03.200 | You just have to power through.

01:38:04.900 | And I think the key is, you know,

01:38:07.200 | I've always been fortunate,

01:38:08.480 | like, from a mental health point of view.

01:38:11.520 | And, you know, nutrition, sleep, exercise,

01:38:15.000 | and a little progress every day, you know, that's it.

01:38:17.920 | And, you know, good friends and family.

01:38:19.520 | You know, I had, you know,

01:38:20.960 | go take a walk with a friend every night,

01:38:24.360 | you know, and a sister who loves me,

01:38:26.920 | and parents who were supportive.

01:38:28.140 | But they were, you know,

01:38:29.320 | they were all worried about their son, their brother.

01:38:32.280 | You know, it was a moment.

01:38:34.520 | And also, by the way, the other thing to think about

01:38:36.440 | is when you recover from something like this,

01:38:40.460 | you really appreciate it, you know?

01:38:43.940 | And also the, you know, as much as the media loves,

01:38:48.340 | okay, when some successful person falls.

01:38:51.360 | They love writing the story of success.

01:38:53.460 | They love even more the story of failure.

01:38:55.480 | But when you recover from that,

01:38:56.680 | it's kind of like the American story, right?

01:38:59.560 | America, you know, you think of the great entrepreneurs

01:39:02.640 | and how many failures they had before they succeeded.

01:39:04.900 | You know, how many rocket launches, you know,

01:39:07.320 | did SpaceX have explode on the pad, right?

01:39:10.740 | And then you look at success.

01:39:11.780 | I mean, that's why Musk is so admired.

01:39:14.180 | - You mentioned Herbalife.

01:39:15.220 | Can you take me through the saga of that?

01:39:17.860 | It's historic.

01:39:21.560 | - So we at Pershing Square shorted very few stocks.

01:39:27.460 | And the reason for that is short selling

01:39:29.620 | is just inherently treacherous.

01:39:31.820 | So if you buy a stock, it's called going long, right?

01:39:35.180 | You're buying something.

01:39:36.680 | Your worst case scenario is you lose your whole investment.

01:39:38.400 | You buy a stock for a hundred,

01:39:39.240 | it goes to zero, you lose a hundred dollars, right?

01:39:41.040 | Per share.

01:39:41.880 | You buy one share, you lose a hundred.

01:39:43.160 | You short a stock at a hundred.

01:39:44.960 | What it means is you borrow the security from someone else.

01:39:48.480 | The analogy I gave that made it easy

01:39:50.440 | for people to understand.

01:39:52.080 | It's a bit like you think, you know,

01:39:53.840 | silver coins are gonna go down in value.

01:39:56.240 | And you have a friend who's got a whole pile

01:39:57.960 | of these 1880 silver US dollars.

01:40:02.800 | And you think they're gonna go down in value.

01:40:03.640 | You say, "Hey, can I borrow 10 of those dollars from you?"

01:40:06.940 | He's like, "Sure, but what are you gonna pay me to borrow?"

01:40:08.820 | I'll pay you interest on the value of the dollars today.

01:40:13.820 | So you borrow the dollars

01:40:16.180 | that are worth a hundred dollars each today.

01:40:18.460 | You pay them interest while you're borrowing them.

01:40:20.500 | And then you go sell them in the market for a hundred dollars

01:40:22.220 | that's what they're worth.

01:40:23.620 | And then they go down in price to 50.

01:40:26.400 | You go back in, you buy the silver dollars back at $50

01:40:29.500 | and you give them back to your friend.

01:40:30.540 | Your friend is fine.

01:40:31.780 | You borrowed 10, you gave him the 10 back

01:40:33.880 | and he got interest in the meantime.

01:40:35.020 | He's happy, he made money on his coin collection.

01:40:37.960 | You however made $50 times the 10 coins.

01:40:40.200 | You made 500 bucks, that's pretty good.

01:40:42.680 | The problem with that is, what if you sell them

01:40:45.880 | and they go from a hundred to a thousand?

01:40:48.000 | Now you're gonna have to go buy them back

01:40:50.000 | and you're gonna pay, you know, whatever,

01:40:52.840 | $10,000 to buy back coins, you know,

01:40:55.180 | that you sold for 500, you're gonna lose $9,500.

01:40:59.040 | And there's no limit, right?

01:41:00.940 | To how high a stock price can go.

01:41:02.420 | Companies go to $3 trillion in value, right?

01:41:04.780 | Tesla, a lot of people shorted Tesla saying,

01:41:06.860 | "Oh, it's overvalued.

01:41:08.180 | He's never gonna be able to make a successful electric car."

01:41:11.520 | Well, I'm sure there are people went bankrupt shorting Tesla.

01:41:15.040 | That's why we didn't short stocks.

01:41:16.660 | But I was presented with this actually reporter

01:41:20.640 | that covered the other short investment we made early

01:41:24.100 | in the career, a company called MBIA came to me and said,

01:41:26.300 | "Bill, I found this incredible company.

01:41:27.500 | You gotta take a look at it.

01:41:28.380 | It's a total fraud and they're scamming poor people."

01:41:30.740 | - And we should say that MBIA was a very successful short.

01:41:33.500 | - It was.

01:41:34.340 | Big part of it was that we used a different kind

01:41:37.020 | of instrument to short it, where we reversed that sort of,

01:41:40.620 | we made the investment asymmetric in our favor,

01:41:43.100 | meaning put up a small amount of money.

01:41:44.700 | If it works, we make a fortune.

01:41:46.700 | Whereas short selling is you kind of sell something

01:41:48.900 | and you have to buy it back at a higher price.

01:41:51.140 | Herbalife didn't have the, what's called credit default swaps

01:41:54.660 | that you could purchase.

01:41:56.180 | Not a big enough company.

01:41:57.220 | It didn't have enough debt outstanding

01:41:58.460 | to be able to implement it.

01:41:59.620 | You had to short the stock in order to make it a successful,

01:42:03.100 | to bet against the company.

01:42:04.780 | And the more work I did in the company, the more I was like,

01:42:06.460 | "Oh my God, this thing's an incredible scam."

01:42:08.740 | You know, that they purport to sell weight loss shakes.

01:42:12.180 | But in reality, they're selling, you know,

01:42:13.860 | kind of a fake business plan.

01:42:15.260 | And the people that adopt it lose money

01:42:17.980 | and they go after poor people.

01:42:20.460 | They go after actually in many cases,

01:42:22.420 | undocumented immigrants who were pitched

01:42:25.900 | on the American dream opportunity.

01:42:28.860 | And because they have few other options,

01:42:30.780 | because they can't get legal employment,

01:42:33.660 | they become Herbalife distributors.

01:42:35.300 | And it's a business where you,

01:42:37.340 | so-called multi-level marketing or pyramid, you know,

01:42:39.980 | multi-level marketing is sort of the name

01:42:42.860 | for a legitimate company like this.

01:42:45.260 | Or it's a pyramid scheme where basically your sales

01:42:47.340 | are really only coming from people who are,

01:42:49.140 | you convince them to buy the product

01:42:50.420 | by getting them into the business.

01:42:51.980 | That's precisely what this company is.

01:42:54.060 | And like, okay, shorting a pyramid scheme seems like,

01:42:57.460 | one, we'll make a bunch of money,

01:42:59.180 | but, you know, two, the world will be behind us

01:43:02.220 | because they're harming poor people.

01:43:03.780 | You know, regulators will get interested

01:43:05.180 | in a company like this.

01:43:06.140 | And we thought, you know,

01:43:07.020 | the FTC is gonna shut this thing down.

01:43:09.380 | And we did a ton of work.

01:43:10.820 | And I gave this sort of epic presentation,

01:43:14.420 | laying out all the facts.

01:43:16.140 | Stock got completely crushed and we were on our way.

01:43:19.860 | And the government actually got interested early on,

01:43:21.980 | launched an investigation pretty early,

01:43:23.580 | SEC and other otherwise.

01:43:25.700 | But then a guy named Carl Icahn showed up

01:43:31.220 | and we have a little bit of a backstory,

01:43:34.860 | but his motivations here were not really

01:43:36.420 | principally driven by thinking Herbalife was a good company.

01:43:38.580 | He thought it was a good way to hurt me.

01:43:42.540 | So he basically bought a bunch of stock

01:43:44.780 | and said it was a really great company.

01:43:46.220 | And, you know, Carl, at least at the time,

01:43:48.020 | threw his weight around a bit.

01:43:49.500 | I was a credible investor, had a lot of resources.

01:43:52.900 | And that began the saga.

01:43:56.220 | - So he was, we should say,

01:43:58.500 | a legendary investor himself.

01:44:03.100 | - I'd say legendary in a sense, yes, for sure.

01:44:05.660 | An iconic.

01:44:06.940 | - Iconic.

01:44:07.780 | - Carl Icahn.

01:44:08.620 | - Oh, that's very well done.

01:44:09.940 | - So definitely a iconic investor.

01:44:11.860 | - So what was the backstory between the two of you?

01:44:15.100 | - So I mentioned that I had another period of time

01:44:17.900 | where significant business challenges.

01:44:19.860 | This was my first fund called Gotham Partners.

01:44:21.860 | And we had a court stop a transaction

01:44:23.740 | between a private company we owned and a public company.

01:44:27.220 | It's another long story.

01:44:28.780 | If you want to go there.

01:44:30.380 | - I would love to hear it as well.

01:44:32.060 | - But it was really my deciding to wind up my former fund.

01:44:34.820 | And we owned a big stake

01:44:36.620 | in a company called Hallwood Realty Partners,

01:44:38.540 | which was a company that owned real estate assets.

01:44:40.780 | It was worth a lot more than where it was trading,

01:44:42.780 | but it needed an activist to really unlock the value.

01:44:45.860 | And we were, in fact, going out of business

01:44:48.780 | and didn't have the time or the resources to pursue it.

01:44:51.380 | So I sold it to Carl Icahn.

01:44:53.140 | But, and I sold it to him at a premium

01:44:56.340 | to where the stock was trading.

01:44:57.260 | I think the stock was like 66, I sold to him for 80,

01:44:59.860 | but it was worth about 150.

01:45:02.100 | And I said, look, and part of the deal was,

01:45:05.140 | Carl's like, look, I'll give you schmuck insurance.

01:45:08.020 | I'll make sure you don't look bad.

01:45:10.300 | And I had another deal at a higher price

01:45:13.100 | without schmuck insurance.

01:45:14.740 | But I deal with Carl at a lower price

01:45:16.020 | with schmuck insurance.

01:45:16.860 | And the way the schmuck insurance went,

01:45:17.940 | he said, look, Bill, if I sell the stock

01:45:20.460 | in the next three years, you know, for a higher price,

01:45:24.420 | I'll give you 50% of my profit.

01:45:26.100 | Well, that's a pretty good deal.

01:45:29.660 | So we made that deal.

01:45:31.140 | And 'cause I was dealing with Carl Icahn,

01:45:33.020 | who had a reputation for, you know, being difficult.

01:45:36.860 | I was, you know, very focused on the agreement.

01:45:38.820 | And we didn't want him to be able to be cute.

01:45:41.940 | So the agreement said, if we sell,

01:45:44.860 | if he sells or otherwise transfers his shares,

01:45:48.860 | we came up with a definition,

01:45:49.900 | include every version of sale, okay?

01:45:51.820 | 'Cause you know, it's Carl.

01:45:53.180 | Well, he then buys the stake

01:45:57.420 | and then makes a bid for the company.

01:45:59.660 | And, you know, plan is for him to get the company.

01:46:02.140 | And he bids like 120 a share.

01:46:04.020 | And the company hires Morgan Stanley to sell itself.

01:46:07.420 | And he raises a bid to 125 and the 130,

01:46:10.500 | eventually gets sold, I don't remember the exact price.

01:46:13.140 | Let's say $145 a share.

01:46:15.180 | And Carl's not the winning bidder.

01:46:18.700 | And he sells his stock or he loses or transfers his shares

01:46:23.700 | for $145 a share.

01:46:25.580 | So he owes, actually our investors,

01:46:27.660 | the difference between 145 and 80 times 50%.

01:46:31.100 | And I had like, you know,

01:46:31.940 | lawyers never like you to put like a arithmetic example.

01:46:34.900 | I put like a formula, you know,

01:46:36.660 | like out of a math book in the document.

01:46:39.260 | So there can be no confusion.

01:46:40.180 | There's only an eight page, really simple agreement.

01:46:42.940 | So the deal closes and he's supposed to pay us

01:46:45.420 | in two business days or three business days.

01:46:47.980 | I wait a few business days, no money comes in.

01:46:50.100 | I call Carl.

01:46:50.940 | I'm like, Carl, congratulations on the Hollywood Realty.

01:46:55.740 | Thanks, Bill.

01:46:57.020 | I said, Carl, I just wanna remind you.

01:46:58.260 | I know it's been a few years, but you know,

01:47:01.500 | we have this agreement.

01:47:02.500 | Remember the schmuck insurance?

01:47:04.140 | He's like, yeah.

01:47:05.380 | I said, well, you owe us our schmuck insurance.

01:47:08.300 | He said, what do you mean?

01:47:09.380 | I didn't sell my shares.

01:47:10.860 | I said, do you still have the shares?

01:47:14.260 | He says, no.

01:47:15.340 | I said, what happened to them?

01:47:16.900 | Well, the company did a merger for cash

01:47:21.420 | and they took away my shares, but I didn't sell them.

01:47:24.380 | You understand what happened.

01:47:26.980 | So I had, I said, Carl, I'm gonna have to sue you.

01:47:29.020 | He said, sue me.

01:47:30.260 | I'm gonna sue you, he says.

01:47:32.500 | So I sued him.

01:47:35.460 | And the legal system in America can take some time.

01:47:38.660 | And what he would do is we sued and then we won

01:47:41.340 | in the whatever, New York Supreme Court.

01:47:43.460 | And then he appealed.

01:47:47.060 | And you can appeal like six months after the case.

01:47:49.900 | We waited to the 179th day and then he would appeal.

01:47:53.660 | And then we fought it at the next level.

01:47:56.380 | And then he would appeal.

01:47:57.220 | And he appealed all the way to the Supreme Court.

01:47:58.340 | Of course, the Supreme Court wouldn't take the case.

01:48:00.260 | It took years.

01:48:01.300 | Now we had, as part of our agreement,

01:48:02.500 | we got 9% interest on the money that he owed us.

01:48:05.580 | So I viewed it as my Carl Icahn money market account

01:48:08.180 | with a much higher interest rate.

01:48:10.260 | And eventually I won.

01:48:12.380 | What was the amount?

01:48:13.460 | Just tiny.

01:48:14.500 | Now, it was material to my investors.

01:48:16.380 | So my first fund, I wound it down.

01:48:19.580 | But I wanted to maximize everything for my investors.

01:48:22.580 | These are the people who backed me at 26 years old.

01:48:24.780 | I was right out of business school.

01:48:25.620 | I had no experience.

01:48:27.220 | And they supported me.

01:48:28.060 | So I'm gonna go to the end of the earth for them.

01:48:30.980 | And 4.5 million relative to our fund at the end

01:48:33.740 | was maybe 400 million.

01:48:35.100 | So it wasn't a huge number.

01:48:36.420 | But it was a big percentage of what was left

01:48:38.820 | after I sold all our liquid security.

01:48:40.540 | So I was fighting for it.

01:48:42.180 | So we got 4.5 million plus interest

01:48:43.620 | for eight years or something.

01:48:44.940 | That's how long the litigation took.

01:48:47.020 | So we got about double.

01:48:48.220 | So he owed me $9 million.

01:48:51.180 | Which to Carl Icahn,

01:48:52.300 | who had probably a $20 billion net worth at the time,

01:48:55.340 | this was nothing.

01:48:56.700 | But to me, it was like, okay, this is my investor's money.

01:48:58.540 | I'm gonna get it back.

01:48:59.660 | And so, you know, eventually we won.

01:49:03.540 | Eventually he paid.

01:49:06.420 | And then he called me.

01:49:07.820 | He said, Bill, congratulations.

01:49:10.100 | Now we can be friends.

01:49:12.500 | And we can do some investing together.

01:49:15.820 | I'm like, Carl, fuck you.

01:49:18.220 | - You actually said fuck you?

01:49:19.500 | - Yes.

01:49:20.340 | And I'm not that kind of person generally.

01:49:21.820 | But, you know, he made eight years to pay me.

01:49:26.700 | Not me, even me.

01:49:27.660 | My investor's money they owed.

01:49:29.180 | And so I, yeah.

01:49:30.140 | So he probably didn't like that.

01:49:33.540 | So he kind of hung around in the weeds,

01:49:35.940 | waiting for an opportunity.

01:49:37.300 | And then from there, I, you know, started purging.

01:49:39.060 | We had a kind of straight line up.

01:49:40.580 | You know, we were up in the first 12 years.

01:49:42.300 | We could do nothing wrong.

01:49:43.940 | Then Valiant, Herbalife, right?

01:49:48.940 | He sees an opportunity and he buys the stock.

01:49:51.900 | He figures he's gonna run me off the road.

01:49:55.100 | And so that was the beginning of that.

01:49:56.900 | And kind of the moment,

01:49:58.660 | and I think it's the, I'm told by CNBC,

01:50:01.140 | it's the most watched segment

01:50:03.780 | in business television history.

01:50:05.340 | They're interviewing me about

01:50:07.540 | the Herbalife investment on CNBC.

01:50:09.740 | And then Carl Icahn calls into the show.

01:50:12.580 | And we have kind of a interesting conversation

01:50:15.620 | where he calls me all kinds of names and stuff.

01:50:17.180 | So it was a moment.

01:50:18.540 | It was a moment in my life.

01:50:20.260 | - It wasn't public information

01:50:21.540 | that he was long on Herbalife?

01:50:24.020 | - He didn't yet disclose he had a stake.

01:50:26.380 | - Yeah.

01:50:27.220 | - But he was just telling me how stupid I was

01:50:28.580 | to be short this company.

01:50:30.180 | - So for him it wasn't about the fundamentals of the company

01:50:33.580 | it was about, it was just personal.

01:50:36.100 | - 100%.

01:50:37.620 | - Is there part of you that regrets saying fuck you

01:50:41.220 | on that phone call to Carl Icahn?

01:50:44.460 | - No.

01:50:45.300 | (laughing)

01:50:47.620 | I generally have no regrets

01:50:50.580 | because I'm very happy with where I am now.

01:50:53.220 | And I feel like it's a bit like you step on the butterfly

01:50:57.820 | in the forest and the world changes

01:50:59.180 | because every action has a reaction.

01:51:02.740 | You know, if you're happy with who you are,

01:51:04.180 | where you are in life,

01:51:05.420 | every decision you've made good or bad

01:51:07.020 | over the course of your life

01:51:07.900 | got you to precisely where you are.

01:51:09.020 | I wouldn't change anything.

01:51:10.700 | - He said you lost money on Herbalife.

01:51:12.580 | So what, so he did the long-term battle.

01:51:16.060 | - What he did is he got on the board of the company

01:51:19.620 | and used the company's financial resources

01:51:21.460 | plus his stake in the business to squeeze us.

01:51:26.580 | And a squeeze in short selling

01:51:28.180 | is where you restrict the supply of the securities.

01:51:31.340 | So that there's a scarcity.

01:51:33.700 | And then you encourage people to buy the stock

01:51:35.660 | and you drive the stock up.

01:51:37.340 | And as I explained before,

01:51:38.180 | you're short those coins at 10, they go to 100.

01:51:40.980 | You can lose a theoretically an unlimited amount of money.

01:51:43.220 | And that's scary.

01:51:45.060 | That's why we don't short stocks.

01:51:47.660 | That's why I didn't short stocks before this.

01:51:50.060 | But this was, unfortunately,

01:51:51.460 | I had to have the personal lesson.

01:51:53.140 | - So how much was for him personal

01:51:55.300 | versus part of sort of the game of investing?

01:51:59.420 | - Well, he thought he could make money doing this.

01:52:01.660 | He wouldn't have done it if he did otherwise.

01:52:03.540 | He thought his bully pulpit,

01:52:05.500 | his ability to create a short squeeze,

01:52:07.140 | his control over the company

01:52:08.540 | would enable him to achieve this.

01:52:11.820 | And he made a billion, we lost a billion.

01:52:14.060 | - So you think it was a financial decision, not a personal?

01:52:16.460 | - It was a personal decision to pursue it,

01:52:18.660 | but he was waiting for an opportunity

01:52:19.900 | where he can make money at our expense.

01:52:21.140 | And it was kind of a brilliant opportunity for him.

01:52:23.380 | Now the irony is, well, first of all,

01:52:25.580 | the FTC found a few interesting facts.

01:52:28.140 | So one, the government launched an investigation.

01:52:30.620 | They ended up settling with the company

01:52:32.100 | and the company paid $220 million in fines.

01:52:35.260 | I met a professor from Berkeley a couple of years ago

01:52:39.860 | who told me that he had been hired by the government

01:52:43.060 | as their expert on Herbalife.

01:52:45.140 | And he got access to all their data,

01:52:46.780 | was able to prove that they're a pyramid scheme.

01:52:49.140 | But the government ultimately settled with Carl

01:52:52.100 | 'cause they were afraid they could possibly lose in court.

01:52:55.460 | So they settled with him.

01:52:56.700 | But if you look at the stock,

01:52:59.060 | if we'd been able to stay short the entire time,

01:53:01.180 | we would have made a bunch of money

01:53:02.660 | 'cause the stock had a $6 billion market cap

01:53:04.740 | and we shorted it today, it's probably a billion,

01:53:07.780 | billion and a half.

01:53:08.820 | - So you left the short position

01:53:10.260 | or whatever that's called, closed.

01:53:11.940 | - Covered, closed it out.

01:53:13.940 | When we sold Valiant, we covered Herbalife,

01:53:16.900 | that was the resetting moment for the firm

01:53:18.980 | 'cause it would just psychologically...

01:53:21.500 | And the beauty of investing

01:53:23.380 | is you don't need to make it back the way you lost it.

01:53:25.700 | You can just take your loss.

01:53:27.620 | By the way, losses are valuable

01:53:28.780 | and that the government allows you to take a tax loss

01:53:31.540 | and that can shelter other gains.

01:53:32.820 | And we just refocused.

01:53:35.220 | - Can you say one thing you really like about Carl Icahn

01:53:38.420 | and one thing you really don't like about him?

01:53:40.820 | - Sure.

01:53:41.660 | So he's a very charming guy.

01:53:44.300 | So in the midst of all this,

01:53:47.340 | the Hollywood one, he took me out for dinner

01:53:49.940 | to his favorite Italian restaurant.

01:53:51.380 | - Really?

01:53:52.220 | - Yeah.

01:53:53.060 | We were in the middle of the litigation

01:53:54.020 | to see if he could resolve it.

01:53:55.500 | And he offered 10 million to my favorite charity.

01:53:57.900 | The problem was that it wasn't my money,

01:54:01.020 | it was my investor's money.

01:54:01.980 | So I couldn't settle with him on that basis.

01:54:04.660 | But I had the chance to spend real time with him at dinner.

01:54:10.060 | He's funny, he's charismatic, he's got incredible stories.

01:54:15.220 | And actually I made peace with him over time.

01:54:17.300 | We had a little hug out on CNBC,

01:54:19.980 | even had him to my house, believe it or not.

01:54:22.580 | I hosted something called the Finance Cup,

01:54:25.620 | which is a tennis tournament

01:54:26.620 | between people in finance in Europe and the US.

01:54:30.300 | And we had the event at my house

01:54:32.660 | and one guy thought to invite Carl Icahn.

01:54:35.220 | And so we had Carl Icahn there to present awards.

01:54:37.820 | And again, I have to say, I kind of liked the guy.

01:54:40.700 | (laughing)

01:54:43.020 | But I didn't like him much during this.

01:54:46.300 | - Is there, because at least from the outsider perspective,

01:54:49.460 | there's a bit of a personal vengeance here

01:54:52.060 | or anger can build up.

01:54:55.460 | Do you ever worry the personal attacks

01:54:57.500 | between powerful investors can cloud your judgment?

01:55:01.300 | What is the right financial decision?

01:55:03.940 | - I think it's possible.

01:55:04.780 | But again, I try to be extremely economically rational.

01:55:07.140 | And actually the last seven years been quite peaceful.

01:55:10.940 | I really have not been an activist

01:55:13.540 | in the old form for many years.

01:55:17.900 | And the vast majority of even our activist investments

01:55:21.060 | historically were very polite, respectful cases.

01:55:25.220 | The press of course, focuses on the more interesting ones.

01:55:27.940 | Like Chipotle was one of the best investments we ever made.

01:55:30.820 | We got four of eight board seats

01:55:34.900 | and we worked with management and it was a great outcome.

01:55:37.020 | I don't think there's ever been a story about it.

01:55:39.100 | And the stock's up almost 10 times

01:55:41.540 | from the time we hired Brian Nichols, CEO.

01:55:44.860 | But it's not interesting because there was no battle.

01:55:47.820 | Whereas Herbalife, of course, was like an epic battle,

01:55:50.580 | even Canadian Pacific.

01:55:52.260 | So for a period there,

01:55:53.940 | most people when they meet me in person,

01:55:55.260 | they're like, "Wow, but you seem like a really nice guy."

01:55:56.940 | (laughing)

01:55:59.860 | So, but things have been pretty calm

01:56:01.540 | for the last seven years.

01:56:03.460 | - Of course, there's more than just investing

01:56:06.940 | that your life is about.

01:56:08.420 | Especially recently.

01:56:09.620 | Let me just ask you about what's going on in the world first.

01:56:14.500 | What was your reaction and what is your reaction

01:56:19.380 | and thoughts with respect to the October 7th attacks

01:56:24.380 | by Hamas on Israel?

01:56:26.460 | - You know, it's a sad world that we live in.

01:56:29.620 | That one, we have terrorists

01:56:31.940 | and two, that we could have such barbaric terrorism.

01:56:36.220 | And yeah, just a reminder of that.

01:56:38.060 | - So there's several things I can ask here.

01:56:40.060 | First, on your views on the prospects of the Middle East,

01:56:44.780 | but also on the reaction to this war in the United States,

01:56:49.780 | especially on university campuses.

01:56:54.020 | So first, let me just ask,

01:56:55.300 | you've said that you're pro-Palestinian.

01:56:57.780 | Can you explain what you mean by that?

01:56:59.860 | - You know, with all of my posts about Israel,

01:57:03.180 | I'm obviously very supportive of the country of Israel,

01:57:06.580 | Israel's right to exist, Israel's right to defend itself.

01:57:10.140 | My Arab friends, my Palestinian friends,

01:57:13.580 | you know, were kind of saying, "Hey Bill, where are you?

01:57:16.060 | "You know, what about Palestinian lives?"

01:57:19.500 | And I was, pretty early in my life,

01:57:23.180 | a guy named Marty Peretz, who's been important to me

01:57:24.820 | over the course of my life,

01:57:25.660 | a professor, first investor in my fund,

01:57:27.780 | introduced me to Nary.

01:57:29.020 | Asked me when I was right out of school

01:57:31.860 | to join this nonprofit called the Jerusalem Foundation,

01:57:35.300 | which was a charitable foundation

01:57:37.740 | that supported Teddy Kolek

01:57:38.780 | when he was mayor of Jerusalem.

01:57:40.940 | I ended up becoming the youngest chairman

01:57:42.380 | of the Jerusalem Foundation in my 30s,

01:57:43.660 | and I spent some time in Israel.

01:57:45.580 | And the early philanthropic stuff I did

01:57:49.220 | with the Jerusalem Foundation,

01:57:50.980 | the thing I was most interested in

01:57:52.260 | was kind of the Palestinian, the plight of the Palestinians,

01:57:56.340 | and kind of peaceful coexistence.

01:57:58.740 | And so I had kind of an early kind of perspective,

01:58:01.900 | and you know, as chairman of the Jerusalem Foundation,

01:58:03.420 | I would go into, you know, Arab communities,

01:58:06.180 | I would meet the families in their homes.

01:58:08.460 | You know, you get a sense of the humanity of a people,

01:58:12.180 | and I care about humanity.

01:58:14.660 | I generally take the side of people

01:58:16.860 | who've been disadvantaged.

01:58:18.100 | You know, almost all of our philanthropic work

01:58:21.220 | has been in that capacity.

01:58:23.740 | So it's sort of my natural perspective.

01:58:26.980 | But I don't take the side of terrorists ever, obviously.

01:58:31.220 | And you know, the whole thing is just a tragedy.

01:58:34.420 | - So to you, this is about Hamas, not about Palestine.

01:58:37.900 | - Yes, I mean, you know, the problem, of course,

01:58:41.180 | is when Hamas controls, you know,

01:58:44.020 | for the last almost 20 years, has controlled Gaza,

01:58:47.820 | you know, including the education system.

01:58:50.540 | They're educating, you know, you see these, you know,

01:58:53.060 | training videos of kindergartners

01:58:56.300 | indoctrinating them into hating Jews and Israel.

01:59:00.380 | So it's, of course, you don't like to see

01:59:03.180 | Palestinians celebrating, you know,

01:59:06.500 | some of those early videos of October 7th

01:59:09.140 | with, you know, dead bodies in the back of trucks

01:59:11.020 | and people, you know, cheering.

01:59:13.980 | So it's a really unfortunate situation.

01:59:16.260 | But I, you know, I think about, you know,

01:59:18.140 | a Palestinian life is important and is valuable

01:59:21.100 | as a Jewish life, as a American life.

01:59:24.380 | And, you know, what do people really want?

01:59:27.900 | They want a place, they want a home.

01:59:29.740 | They want to be able to feed their family.

01:59:32.300 | They want a job that generates the resources

01:59:35.940 | to feed their family.

01:59:36.780 | They want their kids to have a better life than they've had.

01:59:40.060 | They want peace.

01:59:41.300 | I think these are basic human things.

01:59:43.300 | I'm sure the vast majority of Palestinians

01:59:45.500 | share these views, but it's such an embedded situation

01:59:49.340 | with hatred and, as I say, indoctrination.

01:59:53.740 | And then, you know, going back to incentives,

01:59:55.540 | you know, terrorists generate their resources

01:59:58.420 | by committing terrorism, and that's how they get funding.

02:00:01.900 | And that's, you know, there's a lot of graft.

02:00:04.140 | You know, it's a plutocracy, right?

02:00:07.580 | The top of the terrorist pyramid, you know,

02:00:10.020 | if you accept the numbers that are in the press,

02:00:12.380 | you know, the top leaders, you know,

02:00:14.060 | have billions of dollars, you know,

02:00:15.260 | 40 billion or so has gone into Gaza over the last,

02:00:17.860 | and the West Bank over the last 30 years,

02:00:21.580 | a number like that.

02:00:23.220 | And a lot of it's disappeared into some combination

02:00:26.700 | of corruption or tunnels or weapons.

02:00:31.060 | And the tragedy is, you know,

02:00:32.540 | you look at what Singapore has achieved

02:00:34.900 | in the last 30 years, right?

02:00:37.380 | - Do you think that's still possible

02:00:38.820 | if we look into the future of 10, 20, 50 years from now?

02:00:42.700 | - Absolutely.

02:00:43.620 | - So not just peace, but-

02:00:46.380 | - Peace comes with prosperity.

02:00:49.620 | You know, people are, you know,

02:00:51.420 | under the leadership of terrorists.

02:00:53.660 | You're not gonna have prosperity,

02:00:55.260 | and you're not gonna have peace.

02:00:56.820 | And I think the, you know, the Israelis withdrew in 2005,

02:01:01.460 | and fairly quickly, Hamas took control of the situation.

02:01:04.020 | That should never have been allowed to happen.

02:01:06.940 | And I think, you know, if you think about,

02:01:09.020 | I had the opportunity to spend,

02:01:11.940 | well, call it an hour with Henry Kissinger

02:01:14.020 | a few months before he passed away,

02:01:16.980 | and we were talking about Gaza

02:01:19.820 | or in the early stage of the war.

02:01:20.980 | He said, "Look, you know, this is not,

02:01:22.860 | "you can think about Gaza as a test

02:01:27.940 | "of a two-state solution.

02:01:28.980 | "It's not looking good."

02:01:30.460 | These were his words.

02:01:32.140 | So the next time around, you know,

02:01:34.940 | Palestinian people should have their own state,

02:01:38.300 | but it can't be a state where, you know,

02:01:40.820 | 40 billion resources goes in

02:01:42.420 | and is spent on weaponry and missiles

02:01:44.740 | and rockets going into Israel.

02:01:47.420 | And I do think a consortium of the Gulf States,

02:01:52.380 | you know, the Saudis and others,

02:01:54.260 | have to ultimately oversee the governance of this region.

02:01:57.900 | If I think if that can happen,

02:01:59.580 | I think you can have peace, you can have prosperity.

02:02:02.180 | And, you know, I'm fundamentally an optimist.

02:02:06.220 | - So coalition of governance.

02:02:09.500 | - Governance matters, you know,

02:02:10.620 | going back to what we talked about before.

02:02:13.260 | And, you know, that kind of approach

02:02:16.940 | can give the people a chance to flourish.

02:02:20.140 | - 100%, 100%.

02:02:20.980 | I mean, look at what Dubai has accomplished

02:02:23.860 | with, you know, nomads in the desert, right?

02:02:27.500 | And that's become a major, it's a tourist destination.

02:02:31.420 | Gaza could have been a tourist destination.

02:02:33.580 | - Take me through the saga of university presidents

02:02:37.460 | testifying on this topic,

02:02:40.780 | on the topic of protests on college campuses,

02:02:44.500 | protests that call for the genocide of Jewish people

02:02:47.340 | and the university presidents,

02:02:50.100 | maybe you could describe it more precisely,

02:02:54.580 | but they fail to denounce the calls for genocide.

02:02:59.580 | - So it begins on October 8th, probably.

02:03:04.980 | And, you know, you can do a compare and contrast

02:03:09.860 | with how Dartmouth managed the events of October 7th

02:03:13.980 | and the aftermath and how Harvard did.

02:03:16.020 | And on October 8th or shortly thereafter,

02:03:20.660 | you know, the Dartmouth president who had been in her job

02:03:23.740 | for precisely the same number of months

02:03:26.220 | that the Harvard president had been in her job.

02:03:28.500 | The first thing she did is she got

02:03:30.620 | the most important professors of Middle East studies

02:03:33.900 | who were Arab and who were Jews and convened them.

02:03:39.820 | And held a, you know, an open session Q and A

02:03:44.020 | for students to talk about what's going on in the Middle East

02:03:46.820 | and began an opportunity for common understanding

02:03:50.340 | among the student body.

02:03:51.940 | And Dartmouth has been a relatively benign environment

02:03:55.900 | on this issue.

02:03:56.740 | And students are able to do work

02:04:01.220 | and there aren't disruptive protests

02:04:03.020 | with people with bullhorns walking into classrooms,

02:04:05.700 | interfering with, you know, people pay today $82,000 a year

02:04:09.220 | which itself is crazy to go to Harvard.

02:04:11.660 | But imagine your family borrows the money

02:04:14.340 | or you borrow the money as a student

02:04:16.540 | and your learning is disrupted by constant protests

02:04:19.580 | and the university does nothing.

02:04:20.980 | You know, when George Floyd died,

02:04:23.500 | you know, the Harvard president wrote a very strong letter

02:04:27.580 | denouncing what had taken place

02:04:29.660 | and, you know, calling this an important moment

02:04:31.980 | in American history and took it incredibly seriously.

02:04:36.900 | Her first letter about October 7th was not that,

02:04:39.500 | let's put it that way.

02:04:41.060 | And then her second letter was not that.

02:04:43.700 | And then ultimately, you know,

02:04:45.460 | she was sort of forced by the board or the pressure

02:04:48.340 | to make a more public statement.

02:04:51.700 | But it was clear that it was hard for her

02:04:53.860 | to come to an understanding of this terrorist act.

02:04:58.300 | And then the protests erupted on campus

02:05:00.620 | and they started out reasonably benign.

02:05:02.860 | And then the protesters got more and more aggressive

02:05:06.060 | in terms of violating university rules

02:05:08.580 | on things like bullying.

02:05:10.740 | And the university did nothing.

02:05:12.580 | And that obviously for the Jewish students,

02:05:14.980 | the Israeli students, the Israeli faculty,

02:05:17.460 | Jewish faculty created an incredibly

02:05:19.660 | uncomfortable environment.

02:05:21.460 | And the president seemed indifferent.

02:05:24.660 | And, you know, I went up to campus

02:05:26.900 | and I met with hundreds of students

02:05:29.020 | in small groups and larger groups.

02:05:30.740 | And they're like, Bill, why is the president doing nothing?

02:05:33.300 | Why is the administration doing nothing?

02:05:35.740 | And that was really the beginning.

02:05:37.140 | And that, you know, I reached out to the president,

02:05:39.500 | reached out to the board of Harvard.

02:05:42.180 | I said, look, this thing is heading in the wrong direction

02:05:45.020 | and you need to fix it.

02:05:46.900 | And I have some ideas, love to share.

02:05:49.700 | And I got the Heisman, as they say.

02:05:54.260 | You know, they just kept pushing off the opportunity

02:05:56.620 | for me to meet with the president and meet with the board.

02:06:01.620 | And a certain point in time I pushed, you know,

02:06:05.180 | I'm kind of a activist when you push me.

02:06:08.380 | It reminded me of, you know, early days of activism

02:06:11.340 | where I couldn't get the CEO of Wendy's to return my call.

02:06:14.780 | I couldn't get the CEO of Harvard, you know, to take a meeting.

02:06:19.340 | And then finally I spoke to the chairman of the board,

02:06:21.300 | a woman by the name of Penny Pritzker,

02:06:23.140 | who I, you know, knew from,

02:06:24.620 | I'm on a business school board with her.

02:06:27.300 | And it was, as I described,

02:06:29.460 | one of the more disappointing conversations of my life.

02:06:31.220 | And it did not seem, she seemed a bit like,

02:06:33.900 | if you will, deer in the headlights.

02:06:35.740 | They couldn't do this, they couldn't do that.

02:06:38.740 | The law was preventing them from doing various things.

02:06:41.780 | And that led to my first letter to the university.

02:06:44.420 | And I sort of ended the letter, you know,

02:06:47.540 | sort of giving this president of Harvard

02:06:49.180 | a dare to be great speech.

02:06:50.140 | This is your opportunity.

02:06:51.780 | You know, you can fix this.

02:06:53.260 | This could be your legacy.

02:06:57.500 | And I sent it to the, I emailed it to the president

02:07:00.660 | and the board members whose email addresses I had.

02:07:03.820 | I posted it on Twitter.

02:07:06.380 | And I got no response, no acknowledgement, nothing.

02:07:09.420 | And in fact, the open dialogue I had

02:07:12.300 | with a couple of people on the board

02:07:13.380 | basically got shut down after that.

02:07:15.900 | And that led to letter number two.

02:07:17.580 | And then when the Congress, led by Elise Stefanik,

02:07:23.580 | announced an investigation of anti-Semitism on campus

02:07:28.740 | and concern about, you know, violations of law,

02:07:33.060 | the president was called to testify along with two other,

02:07:35.460 | you know, the president of MIT,

02:07:37.580 | you know, the president of University of Pennsylvania,

02:07:40.180 | who were having similar issues on campus.

02:07:43.300 | I reached out to the president of Harvard and said,

02:07:45.620 | well, one, the Israeli government had gotten in touch

02:07:48.340 | and offered the opportunity for me to see the Hamas,

02:07:51.900 | if you will, GoPro film.

02:07:53.820 | And I said, you know what, I'd love to show it at Harvard.

02:07:55.740 | And they thought that would be a great idea.

02:07:57.660 | And so I partnered with the head of Harvard Chabad,

02:08:01.780 | a guy named Rabbi Hershey,

02:08:03.820 | and we were putting the film up on campus.

02:08:06.620 | And I thought, you know,

02:08:07.460 | if the president were to see this,

02:08:08.540 | it would give her a lot of perspective on what happened

02:08:10.420 | and she should see it before her testimony.

02:08:13.140 | And so I reached out to her or actually Rabbi Hershey did,

02:08:17.780 | and he was told she would be out of town

02:08:20.540 | and couldn't see it.

02:08:22.620 | And then I reached out to her again,

02:08:24.820 | said, look, I'll facilitate your attendance in the Congress,

02:08:29.980 | you know, come see the film, "I'll Fly You Down."

02:08:32.820 | That was rejected.

02:08:34.340 | And then she testified.

02:08:35.500 | And I watched, you know, a good percentage,

02:08:38.940 | 80% of the testimony of all three presidents.

02:08:41.660 | And it was an embarrassment to the country,

02:08:44.500 | embarrassment to the universities.

02:08:46.260 | You know, they were evasive.

02:08:47.500 | They didn't answer questions.

02:08:48.720 | They were rude.

02:08:49.560 | They smirked.

02:08:50.800 | You know, they looked very disrespectful to our Congress.

02:08:55.800 | And then of course there was that several minutes

02:08:59.820 | where finally at least Stefanik

02:09:01.140 | was not getting answers to her questions.

02:09:02.940 | And she said, you know, let me be, you know, kind of clear.

02:09:06.720 | What if protesters are calling for genocide for the Jews,

02:09:10.780 | does that violate your rules on bullying and harassment?

02:09:14.860 | And the three of them basically gave the same answer.

02:09:16.860 | You know, it depends on the context

02:09:18.760 | and not until they actually executed on the genocide

02:09:23.420 | does the university have the right to intervene.

02:09:26.120 | And the thing that perhaps bothered me the most

02:09:28.000 | was the incredible hypocrisy.

02:09:29.880 | You know, Harvard was, you know,

02:09:31.940 | each of these universities are ranked

02:09:33.500 | by this entity called FIRE,

02:09:35.580 | which is a nonprofit that focuses on free speech on campus.

02:09:38.700 | And Harvard, it's been in the bottom quartile

02:09:42.120 | for the last five years and dropped to last

02:09:44.780 | before October 7th out of like 250.

02:09:47.300 | - I should mention briefly

02:09:48.380 | that I've interviewed on this podcast,

02:09:50.340 | the founder of FIRE and the current head of FIRE.

02:09:52.700 | We've discussed this in length,

02:09:54.940 | including running for the board of Harvard

02:09:57.700 | and the whole procedure of all that.

02:09:59.380 | It's quite a fascinating investigation of free speech.

02:10:04.380 | For people who care about free speech absolutism,

02:10:06.620 | that's a good episode to listen to

02:10:08.620 | because those folks kind of fight for this idea.

02:10:11.460 | It's a difficult idea actually to internalize

02:10:15.140 | what does free speech in college campuses look like.

02:10:17.780 | - Harvard has become a place where free speech

02:10:19.940 | is not tolerated on campus,

02:10:21.260 | or at least free speech that's not part

02:10:24.220 | of the accepted dialogue.

02:10:26.020 | Or this whole notion of speech codes and microaggressions

02:10:31.020 | really emerged on the elite,

02:10:32.780 | the Harvard-Yale campuses of the world.

02:10:36.580 | And the president of Harvard's,

02:10:40.340 | then president of Harvard's explanation

02:10:41.960 | for why you could call for the genocide

02:10:44.980 | of the Jewish people on campus

02:10:46.180 | was Harvard's commitment to free expression.

02:10:49.100 | And one of the more hypocritical statements of all time.

02:10:53.300 | And you really can't have it both ways.

02:10:54.820 | Either Harvard has to be a place where it's a free speech.

02:10:56.860 | She basically said we're a free speech absolutist place,

02:10:59.460 | which is why we have to allow this.

02:11:01.580 | And Harvard could not be further from that.

02:11:04.180 | And so that was a big part of it.

02:11:07.180 | And I was in the barber chair, if you will, getting haircut.

02:11:11.980 | And I had a guy on my team send me

02:11:14.500 | the three minute section.

02:11:16.140 | I said, "Cut that line of questioning."

02:11:19.580 | And I put out a little tweet on that.

02:11:22.220 | And I call it my greatest hits of posts.

02:11:26.220 | It's got something like 110 million views.

02:11:28.660 | And everyone looked at this and said,

02:11:31.500 | what is wrong with university campuses?

02:11:34.460 | And their leadership.

02:11:37.900 | And their governance, by the way.

02:11:39.140 | In a way, this whole conversation's been about governance.

02:11:41.900 | Harvard has a disastrous governance structure,

02:11:44.440 | which is why we have the problem we have.

02:11:46.260 | - And just to linger on the testimony,

02:11:50.220 | you mentioned smirks and this kind of stuff.

02:11:53.220 | And you mentioned dare to be great.

02:11:55.700 | I, myself, am kind of a sucker for great leadership.

02:11:59.300 | And those moments, you mentioned Churchill or so on.

02:12:02.780 | Even great speeches.

02:12:04.820 | People talk down on speeches like it's maybe just words.

02:12:08.860 | But I think speeches can define a culture

02:12:13.380 | and define a place, define a people that can inspire.

02:12:18.100 | And I think, actually, the testimony before Congress

02:12:21.360 | could have been an opportunity to redefine what Harvard is.

02:12:26.360 | Dare to be great, dare to be a great leader.

02:12:29.940 | - President Harvard had a huge opportunity

02:12:31.780 | 'cause she went third.

02:12:33.460 | The first two gave the world's most disastrous answers

02:12:36.140 | to the question.

02:12:37.620 | And she literally just copied their answer,

02:12:39.660 | which is itself kind of ironic

02:12:43.920 | in light of ultimately what happened.

02:12:45.820 | - It's tough because you can get busy as a president,

02:12:50.820 | as a leader, and so on.

02:12:52.140 | There's these meetings, so you think Congress,

02:12:54.220 | maybe you're smirking at the ridiculousness of the meeting.

02:12:57.140 | You need to remember that many of these are opportunities

02:13:02.140 | to give a speech of a lifetime.

02:13:05.020 | - Sure.

02:13:06.300 | - If there is principles which you want to see

02:13:09.300 | an institution become and embody

02:13:12.420 | in the next several decades,

02:13:14.420 | there's opportunities to do that.

02:13:16.380 | And you, as a great leader, also need to have a sense

02:13:19.380 | of when is the opportunity to do that.

02:13:21.840 | And October 7th really woke up the world

02:13:24.460 | on all sides, honestly.

02:13:27.980 | Like, there is serious issue going on here.

02:13:31.860 | And then the protests woke up the university.

02:13:35.220 | There's a serious issue going on here.

02:13:37.620 | It's an opportunity to speak on free speech

02:13:40.920 | and on genocide, both.

02:13:43.980 | - Yes.

02:13:44.820 | - Do you see the criticism that you are a billionaire donor

02:13:50.300 | and you sort of used your power and financial influence

02:13:54.340 | unfairly to affect the governing structure of Harvard,

02:13:58.100 | in this case?

02:13:59.020 | - First of all, I never threatened to use financial

02:14:01.180 | or other resources.

02:14:02.220 | The only thing I did here was I wrote public letters.

02:14:05.620 | I spoke privately to a couple members of the board.

02:14:08.300 | I spoke for 45 minutes to the chairman.

02:14:10.700 | None of those conversations were effective

02:14:12.560 | or went anywhere, as far as I could tell.

02:14:14.780 | I think my public letters and then some of the posts I do,

02:14:19.780 | and that little three-minute video excerpt had an impact.

02:14:25.420 | But it wasn't about, I mean, you can criticize me

02:14:30.480 | for being a billionaire, but that had, you know,

02:14:32.800 | it was really the words.

02:14:34.540 | It's a bit like, again, going back to the corporate analogy,

02:14:37.880 | it's not the fact that you own 5% of the company

02:14:39.940 | that causes people to vote in your favor.

02:14:42.180 | It's the fact that your ideas are right.

02:14:44.500 | And I think, you know, I was disappointed

02:14:47.380 | after the congressional testimony,

02:14:48.620 | the board of Harvard said that they were 100% behind,

02:14:50.940 | unanimously 100% behind President Gay.

02:14:54.600 | And so clearly I was ineffective.

02:14:56.940 | And ultimately what took her down was other,

02:15:01.220 | I would say activists who identified issues

02:15:03.560 | with academic integrity.

02:15:05.780 | And then she lost the confidence of the faculty.

02:15:08.060 | And once that happens, it's hard to stay.

02:15:11.220 | And I wanted her to be fired basically,

02:15:14.080 | or be forced to resign because of failures of leadership,

02:15:17.620 | 'cause that would have sent a message

02:15:18.780 | about the importance of leadership.

02:15:20.100 | You know, failure to stop a emergence

02:15:22.460 | of antisemitism on campus.

02:15:24.180 | And, you know, there's some news today,

02:15:26.180 | the protests are getting worse.

02:15:28.100 | - Is there some tension between free speech

02:15:30.340 | on college campuses and disciplining students

02:15:33.060 | for calls of genocide?

02:15:34.740 | - Yes, there's certainly a tension.

02:15:36.820 | And I think, first of all,

02:15:39.660 | I think free speech is incredibly important

02:15:41.260 | and I'm on the side,

02:15:42.100 | I'm a lot closer to absolutism on free speech

02:15:44.220 | than otherwise.

02:15:45.580 | The issue I had was the hypocrisy, right?

02:15:48.020 | They were restricting other kinds of speech on campus,

02:15:52.340 | principally conservative speech, conservative views.

02:15:54.940 | So it wasn't a free speech absolutist campus.

02:15:58.980 | And the protests were actually quite threatening to students.

02:16:02.560 | And there are limits to even absolutist free speech.

02:16:05.740 | And they begin where people feel, you know,

02:16:08.940 | intimidation, harassment, and, you know,

02:16:12.380 | threat to bodily harm, et cetera.

02:16:14.860 | You know, that kind of speech is generally,

02:16:17.300 | and again, it's pretty technical,

02:16:19.180 | but as people feel like they're in imminent harm

02:16:21.300 | by virtue of the protest,

02:16:22.420 | that speech is at risk of not meeting the standards

02:16:25.100 | for free speech.

02:16:26.420 | But Harvard is a private corporation.

02:16:28.940 | And as a private corporation,

02:16:30.660 | they can put on what restrictions they want.

02:16:32.340 | And Harvard had introduced only a few months

02:16:34.380 | before bullying and harassment policies.

02:16:36.700 | And that's why Representative Stefanik focused on,

02:16:39.180 | does this, it's not like she said,

02:16:40.740 | does calling for genocide against the Jews

02:16:42.200 | violate your free speech policy?

02:16:43.500 | She says, does calling for genocide against the Jews

02:16:46.060 | violate your policies on bullying and harassment?

02:16:48.940 | And I think everyone looked at this

02:16:50.460 | when they said, it depends on the context.

02:16:52.060 | And they said, look,

02:16:52.900 | if you replace Jews with some other ethnic group,

02:16:54.900 | students have been, who've used the N word, for example,

02:16:58.020 | have been thrown off campus, were suspended.

02:17:00.940 | You know, students who've, you know,

02:17:02.580 | hate speech directed at LGBTQ people

02:17:06.900 | has led to disciplinary action.

02:17:09.380 | But, you know, attacking, spitting on Jewish students,

02:17:13.340 | or, you know, kind of roughing them up a bit,

02:17:15.580 | seemed like, you know,

02:17:18.220 | or calling for their elimination

02:17:20.840 | didn't seem to violate the policy.

02:17:22.180 | So it's, you know, look,

02:17:24.260 | I think a university should be a place

02:17:26.300 | where you have broad views and open viewpoints

02:17:29.020 | and broad discussion.

02:17:31.660 | But it should also be a place

02:17:32.540 | where students don't feel threatened going to class,

02:17:34.940 | where their learning is not interrupted,

02:17:37.180 | when final exams are not interrupted,

02:17:39.500 | by, you know, people coming in and with loud protest.

02:17:42.940 | Students asked me when I went up there,

02:17:44.380 | what would you do if you were Harvard president?

02:17:45.660 | I said, and this was before I knew what was happening

02:17:47.420 | on the Dartmouth campus.

02:17:48.260 | I said, I would, I'd convene everyone together.

02:17:50.340 | This is Harvard.

02:17:51.220 | We have access to the best minds in the world.

02:17:53.140 | Let's have a better understanding of the history.

02:17:55.220 | Let's understand the backdrop.

02:17:56.700 | Let's focus on solutions.

02:17:58.220 | Let's bring Arab and Jewish and Israeli students together.

02:18:00.860 | Let's form groups to create communication.

02:18:03.700 | That's how you solve this kind of problem.

02:18:05.920 | And none of that stuff has been done.

02:18:07.940 | It's not that hard.

02:18:09.260 | - Do you think this reveals a deeper problem

02:18:12.740 | in terms of ideology and the governance of Harvard

02:18:18.500 | in maybe the culture of Harvard?

02:18:21.860 | - Yes.

02:18:23.580 | So on governance, the governance structure is a disaster.

02:18:26.500 | So the way it works today

02:18:27.540 | is Harvard has two principal boards.

02:18:29.420 | There's the board of the corporation,

02:18:31.100 | the so-called Fellows of Harvard.

02:18:33.140 | It's a board of, I think, 12 independent directors

02:18:36.020 | and the president.

02:18:36.940 | There's no shareholder vote.

02:18:39.900 | There's no proxy system.

02:18:41.640 | It's really a self-perpetuating board

02:18:44.340 | that effectively elects its own members.

02:18:47.040 | So there's, you know, once it becomes,

02:18:48.980 | once the balance tips politically one way or another,

02:18:52.140 | they can, you know, it can be kept that way forever.

02:18:55.540 | There's no kind of rebalancing system.

02:18:57.280 | You know, if a US corporation goes off the rails,

02:18:59.260 | so to speak, the shareholders can get together

02:19:01.540 | and vote off the directors.

02:19:02.700 | There's no ability to vote off the directors.

02:19:04.820 | Then there's the board of overseers,

02:19:06.020 | which is, I think, 32 directors.

02:19:09.000 | And there, a few years ago,

02:19:11.140 | if you could put together 600 signatures,

02:19:13.140 | you could run for that board

02:19:14.220 | and put up a bunch of candidates

02:19:15.780 | and about five or six get elected each year.

02:19:18.300 | And a group did exactly that.

02:19:20.740 | And it was an oil and gas kind of disinvestment group.

02:19:24.940 | They got the signatures.

02:19:25.780 | A couple of them got elected

02:19:27.180 | and Harvard then changed the rules.

02:19:29.700 | And they said, now we need 3,200 signatures.

02:19:33.320 | And by the way,

02:19:35.620 | if there are these dissident directors on the board,

02:19:38.380 | we're only gonna allow, we're gonna cap them at five.

02:19:41.280 | So if three were elected in the oil and gas thing,

02:19:43.860 | now there are only two seats available.

02:19:46.060 | And then a group of former students,

02:19:48.420 | kind of younger alums, one of whom I knew,

02:19:50.940 | approached me and said,

02:19:51.780 | "Look, Bill, we should run for the board."

02:19:53.260 | And they decided this pretty late,

02:19:55.460 | only a few weeks before the signatures were due.

02:19:57.900 | And they love your support.

02:19:59.580 | I took a look at their platform.

02:20:00.700 | I thought it looked great.

02:20:01.580 | I said, "Look, happy to support."

02:20:03.300 | And I posted about them, did a Zoom with them.

02:20:06.760 | And they got thousands of signatures.

02:20:08.660 | Collectively, the four got, whatever,

02:20:10.260 | 12,000 signatures or something like this.

02:20:12.340 | And they missed by about 10% the threshold.

02:20:16.380 | And what did Harvard do in the middle of the election?

02:20:18.580 | They made it very, very difficult to sign up for a vote.

02:20:23.380 | And it just makes them look terrible.

02:20:25.040 | And they've got now thousands of alums upset that...

02:20:29.180 | And again, this wasn't an election.

02:20:30.700 | This was just to put the names on the slate.

02:20:32.940 | So the only candidates on the slate

02:20:34.420 | are the ones selected by the existing members.

02:20:38.500 | And so it's...

02:20:39.940 | Businesses fail because of governance failures.

02:20:44.760 | Universities fail because of governance failures.

02:20:48.140 | It's not really the president's fault

02:20:50.020 | because the job of the board

02:20:51.880 | is to hire and fire the president

02:20:54.220 | and help guide the institution academically and otherwise.

02:20:57.060 | So that's governance.

02:20:58.000 | On ideology, I was like, "How can this be?"

02:21:01.540 | October 7th, the event that woke me up

02:21:03.980 | was 30 student organizations

02:21:05.820 | came out with a public letter on October 8th,

02:21:08.300 | literally the morning after this letter was created,

02:21:10.260 | and said, "Israel is solely responsible

02:21:14.700 | "for Hamas's violent acts."

02:21:16.620 | Again, Israel had not even mounted a defense at this point.

02:21:20.340 | And there were still terrorists running around

02:21:22.200 | in the southern part of Israel.

02:21:23.800 | And I'm like, "Harvard students,

02:21:28.860 | "34 Harvard student organizations signed this letter."

02:21:33.620 | And I'm like, "What is going on?"

02:21:35.580 | WTF, right?

02:21:36.740 | And that's when I went up on campus

02:21:41.000 | and I started talking to the faculty.

02:21:43.020 | And that's when I started hearing about,

02:21:44.340 | "Actually, Bill, it's this DEI ideology."

02:21:47.500 | I'm like, "What?"

02:21:49.040 | (laughing)

02:21:51.000 | Diversity, equity, inclusion.

02:21:53.280 | Obviously, I'm familiar with these words

02:21:55.800 | and I see this in the corporate context.

02:21:59.400 | And they say, "Yeah."

02:22:00.240 | And they started talking to me

02:22:01.060 | about this oppressor, oppressed framework,

02:22:04.640 | which is effectively taught on campus

02:22:08.160 | and represents the backdrop

02:22:09.840 | for many of the courses that are offered

02:22:11.320 | and the various, some of the studies

02:22:14.880 | and other degree offerings.

02:22:16.480 | I'm like, "I had not even heard of this."

02:22:19.780 | And I'm a pretty aware person,

02:22:22.380 | but I was completely unaware.

02:22:23.820 | And basically, they're like,

02:22:24.740 | "Look, Israel is deemed an oppressor

02:22:26.780 | "and the Palestinians are deemed the oppressed.

02:22:30.020 | "And you take the side of the oppressed

02:22:32.740 | "and any acts of the oppressed to dislodge the oppressor,

02:22:37.120 | "regardless of how vile or barbaric, okay."

02:22:40.340 | I'm like, "Okay, this is a super dangerous ideology."

02:22:44.460 | And so, I wrote a questioning post about this.

02:22:48.280 | I'm like, "Here's what I'm hearing.

02:22:50.120 | "Is this right?"

02:22:51.520 | Then I had someone, a friend of mine sent me

02:22:53.720 | Christopher Rufo's book, "America's Cultural Revolution,"

02:22:57.820 | which is sort of a sociological study

02:23:01.040 | of the origins of the DEI movement

02:23:02.920 | and critical race theory.

02:23:04.960 | And I found it actually

02:23:07.160 | one of the more important books I've read.

02:23:09.480 | And also, I found it quite concerning.

02:23:13.200 | And really, it's sort of a,

02:23:15.520 | ultimately, DEI comes out of a kind of a Marxist,

02:23:19.180 | socialist backdrop way to look at the world.

02:23:24.000 | And so, I think there are a lot of issues with it,

02:23:26.020 | but unfortunately, it's advancing,

02:23:27.920 | I ultimately concluded,

02:23:29.220 | racism as opposed to fighting it,

02:23:34.000 | which is what I thought it was ultimately about.

02:23:36.980 | - So, maybe you can speak to that book a little bit.

02:23:39.200 | So, there's a history that traces back across decades,

02:23:43.560 | and then that infiltrated college campuses.

02:23:47.800 | - So, basically, what Rufo argues

02:23:49.920 | is that the Black Power movement of the '60s really failed.

02:23:54.240 | It was a very violent movement,

02:23:55.940 | and many of the protagonists ended up in jail.

02:23:59.280 | And out of that movement,

02:24:01.880 | a number of kind of thought leaders,

02:24:05.640 | this guy named Marcuse and others,

02:24:09.200 | built this framework, kind of an approach.

02:24:12.120 | Said, "Look, if we're gonna be successful,

02:24:14.080 | "it can't be a violent movement, number one.

02:24:16.420 | "And number two, we need to infiltrate,

02:24:18.120 | "if you will, the universities.

02:24:20.120 | "And we need to become part of the faculty.

02:24:22.920 | "And we need to teach the students.

02:24:25.980 | "And then once we take over the universities

02:24:29.020 | "with this ideology, then we can go into government,

02:24:32.380 | "and then we can go into corporations,

02:24:34.140 | "and we can change the world."

02:24:35.600 | - So, I thought, important book.

02:24:37.120 | And the more I dug in,

02:24:39.440 | the more I felt there was credibility to this,

02:24:42.400 | not just the kind of sociological backdrop,

02:24:45.720 | but to what it meant on campus.

02:24:47.960 | And Harvard faculty were telling me

02:24:50.600 | that there really is no such thing as free speech on campus,

02:24:54.880 | and that there was a survey done a year or so ago,

02:24:58.520 | the Harvard faculty, and only 2% of the faculty admitted,

02:25:02.180 | even in an anonymous survey,

02:25:03.800 | admitted to having a conservative point of view.

02:25:07.000 | So, we have a campus that's 98% non-conservative,

02:25:09.680 | liberal, progressive, that's adopted this DEI construct.

02:25:15.600 | And then I learned from a member of the search committee

02:25:20.240 | for the Harvard president,

02:25:21.480 | that they were restricted in looking at candidates,

02:25:25.440 | only those who met the DEI offices criteria.

02:25:28.440 | And I shared this in one of my postings,

02:25:30.920 | and I was accused of being a racist.

02:25:33.220 | Um, but, uh, and that's someone who believes in,

02:25:38.220 | that diversity is a very good thing for organizations,

02:25:42.000 | and that equity and fairness is really important,

02:25:44.480 | and having an inclusive culture is critical, you know,

02:25:47.920 | for a functioning of our organization.

02:25:49.880 | You know, so here I was, someone who was like,

02:25:52.080 | "Okay, DEI sounds good to me,"

02:25:54.240 | at least in the small D, small E, I version of events,

02:25:59.240 | but this DEI ideology is really problematic.

02:26:02.560 | - So what's a way to fix this in the next few years?

02:26:06.720 | Uh, the infiltration of DEI

02:26:11.520 | with the uppercase version of universities,

02:26:14.600 | and the things that have troubled you?

02:26:16.520 | The things you saw at Harvard and elsewhere.

02:26:20.040 | - The same way this was an eye-opening event for me,

02:26:22.360 | it has been for a very broad range of other people.

02:26:24.880 | I've never gotten, you know, I mentioned general growth,

02:26:27.520 | I got a lot of nice letters from people

02:26:28.720 | for making money on a stock that went up a hundred times.

02:26:31.640 | Uh, but I literally get hundreds of emails,

02:26:36.640 | letters, texts, handwritten letters,

02:26:39.160 | typed letters from people, the ages of 25 to 85,

02:26:43.280 | saying, "Bill, this is so important,

02:26:45.160 | "thanks for speaking out on this.

02:26:46.900 | "You were saying what, you know, so many of us believe,

02:26:49.620 | "but have been afraid to say."

02:26:51.000 | You know, it's a, I described it

02:26:52.280 | as almost a McCarthy-esque kind of movement,

02:26:54.960 | and that if you challenge the DEI construct,

02:26:58.360 | people accuse you of being a racist,

02:26:59.600 | it's happened to me already.

02:27:01.620 | You know, I'm perhaps, you know,

02:27:04.200 | I'm much less vulnerable than a university professor

02:27:06.680 | who can get shouted off campus and canceled.

02:27:10.560 | I'm sort of difficult to cancel,

02:27:12.500 | but that doesn't mean people aren't gonna try.

02:27:15.400 | And, you know, I've been the victim

02:27:17.800 | of a couple of interesting articles in the last few days,

02:27:22.600 | or at least one in particular in the Washington Post,

02:27:25.580 | written by what I thought was a well-meaning reporter,

02:27:27.620 | but it's just clear that, you know,

02:27:29.360 | I've taken on some big parts

02:27:31.500 | of at least the progressive establishment, DEI.

02:27:34.900 | I'm also a believer that Biden should have stepped aside

02:27:37.940 | a long time ago, and it's only getting worse.

02:27:40.200 | You know, so I'm attacking the president, DEI,

02:27:45.220 | elite universities, and you make some enemies doing that.

02:27:51.180 | - But I should say, you know, I'm still at MIT,

02:27:54.080 | and I love MIT, and I believe in the power

02:27:57.060 | of great universities to explore ideas,

02:28:01.980 | to inspire young people to think,

02:28:05.100 | to inspire young people to lead.

02:28:07.980 | - Let me ask, okay, how can you explore how to think

02:28:12.660 | when you're only shared a certain point of view, right?

02:28:17.200 | How can you learn about leadership

02:28:19.260 | when the governance and leadership

02:28:22.020 | of the institution is broken, and exposure to ideas?

02:28:25.700 | If you're limited in the ideas that you're exposed to.

02:28:28.040 | So I think universities are at risk.

02:28:29.140 | I mean, the concerning thing, right,

02:28:31.380 | is if 34 student organizations that each have,

02:28:34.060 | I don't know, 30 members or maybe more, right,

02:28:36.580 | that's 1,000, okay, that's a meaningful percentage

02:28:39.140 | of the campus, perhaps, that ultimately respond.

02:28:42.820 | Now, 10 or so of the 30 withdrew the statement

02:28:45.960 | once many of the members realized what they had written.

02:28:50.300 | So I don't think, it seems like the statement

02:28:52.340 | was signed by the leadership

02:28:54.020 | and not necessarily supported by all the various students

02:28:56.860 | that were members.

02:28:59.340 | But if the university teaches people these precepts,

02:29:03.580 | this is the next generation of leaders.

02:29:05.420 | Normally, if you think about,

02:29:07.100 | I wrote my college thesis on university admissions,

02:29:09.860 | the reason why controlling the gates

02:29:13.100 | of the Harvard institution,

02:29:16.060 | the admissions office is important,

02:29:17.260 | is that many of these people who graduate end up with

02:29:20.380 | the top jobs in government and ultimately become judges.

02:29:25.380 | They permeate through society.

02:29:29.500 | So it really matters what they learn.

02:29:31.340 | And if they're limited to one side of the political aisle

02:29:36.340 | and they're not open to a broad array of views,

02:29:40.780 | and this represents some of the most elite institutions

02:29:42.860 | in our country, I think it's very problematic

02:29:45.340 | for the country long-term.

02:29:47.180 | - Yeah, I 100% agree.

02:29:48.860 | And I also felt like the leadership

02:29:51.300 | wasn't even part of the problem

02:29:56.220 | as much as they were almost out of touch,

02:29:58.260 | like unaware that this is an important moment,

02:30:03.260 | it's an important crisis, it's an important opportunity

02:30:07.980 | to step up as a leader

02:30:09.140 | and define the future of an institution.

02:30:11.260 | So I don't even know where the source of the problem is.

02:30:13.620 | It could be literally government structure

02:30:17.500 | as we've been-

02:30:18.340 | - I think it's two things.

02:30:19.180 | I think it's governance structure.

02:30:20.500 | I also think universities are selecting,

02:30:23.380 | they're not selecting leaders.

02:30:24.940 | - Yeah.

02:30:25.780 | - It's not clear to me that university

02:30:31.780 | should necessarily be run by academics, right?

02:30:35.540 | The dean of a university,

02:30:38.860 | the person who helps,

02:30:41.780 | there's sort of the business of the university, right?

02:30:46.860 | And then there's the academics of the university

02:30:49.340 | and having a, I would argue,

02:30:51.500 | having a business leader run these institutions

02:30:55.340 | and then having a board that's involved,

02:30:57.860 | a board that has itself diverse viewpoints

02:31:01.140 | and by the way, permanently structured

02:31:03.100 | to have diverse viewpoints

02:31:04.500 | is a much better way to run a university

02:31:07.500 | than picking an academic that the faculty supports.

02:31:10.540 | Because one of the things I learned

02:31:12.180 | about how faculty get hired at universities,

02:31:14.020 | ultimately it's signed off by the board,

02:31:17.340 | but the new faculty are chosen

02:31:20.340 | by each of the various departments.

02:31:22.300 | And once the departments tip,

02:31:25.300 | there's sort of a tipping point politically

02:31:26.820 | where once they tip in one direction,

02:31:29.500 | the faculty recruit more people like themselves.

02:31:33.260 | And so the departments become more and more progressive,

02:31:36.660 | if you will, with the passage of time.

02:31:38.060 | And they only advance candidates that match their,

02:31:40.740 | that meet their political objectives.

02:31:42.980 | It's not a great way to build an institution

02:31:47.140 | which allows for--

02:31:48.540 | - Small D diversity.

02:31:50.260 | - Allows for, yeah, diversity.

02:31:53.020 | And diversity, by the way, is not just race and gender.

02:31:56.820 | And that's also something I feel very strongly about.

02:31:59.480 | - Well, luckily engineering robotics

02:32:02.660 | is touched last by this.

02:32:04.140 | It is touched, but you know,

02:32:05.680 | when I'm at the computing building,

02:32:10.620 | Stata and the new one, politics doesn't infiltrate,

02:32:14.340 | or I haven't seen it infiltrate quite as deeply as elsewhere.

02:32:17.460 | - It's in the biology department at Harvard,

02:32:19.860 | 'cause biology is controversial now.

02:32:22.060 | - Yes, yes, yes.

02:32:23.100 | - 'Cause biology and gender, you know,

02:32:25.340 | there are faculty, there's a woman at Harvard

02:32:27.980 | who was literally canceled from faculty as a member,

02:32:31.300 | I think she was at the med school,

02:32:33.000 | and she was, you know, she made the argument

02:32:36.380 | that there are basically, you know,

02:32:38.260 | two genders determined by biology.

02:32:40.780 | She wasn't allowed to stay.

02:32:42.140 | That's another topic for another time.

02:32:45.540 | - That's another topic.

02:32:47.380 | - You should do a show on that one.

02:32:49.020 | That'd be an interesting one.

02:32:50.900 | - So as you said, technically, Claudine Gay,

02:32:53.780 | the president of Harvard, resigned over plagiarism,

02:32:58.080 | not over the thing that you were initially troubled by.

02:33:01.620 | - It's hard to really know, right?

02:33:03.540 | It's not like a provable fact.

02:33:05.140 | I would say at a certain point in time,

02:33:06.420 | she lost the confidence of the faculty,

02:33:08.740 | and that was ultimately the catalyst.

02:33:10.420 | And whether that was, how much of that

02:33:12.580 | was the plagiarism issue, and how much of that

02:33:14.900 | was some of the things that preceded it,

02:33:16.500 | or was it all of these issues in their entirety,

02:33:18.460 | we don't really, there's no way to do a calculus.

02:33:21.240 | - Can you explain the nature of this plagiarism

02:33:23.620 | from what you remember?

02:33:25.140 | - So Aaron Subbarium and Christopher Ruffo,

02:33:28.140 | one from the Free Beacon, and Chris, you know,

02:33:30.580 | surfaced some allegations on or identified

02:33:33.520 | some plagiarism issues that I would say

02:33:35.860 | the initial examples were use of the same words

02:33:40.860 | with proper attribution, some missing footnotes.

02:33:45.260 | And then over time, with, I guess, more digging,

02:33:49.380 | they released, I think, ultimately,

02:33:52.020 | something like 76 examples of what they call plagiarism

02:33:57.020 | in, I think, eight of 11 of her articles.

02:34:01.520 | And one of the other things that came forth here

02:34:03.900 | is, as president of the university,

02:34:06.180 | she had sort of the thinnest transcript,

02:34:07.940 | academically, of any previous president.

02:34:10.500 | You know, very small, relatively small body of work.

02:34:13.220 | And then when you couple that with the amount

02:34:14.740 | of plagiarism that was pervasive,

02:34:16.660 | and then, I guess, some of the other examples

02:34:18.980 | that surfaced were not missing quotation marks,

02:34:20.680 | where the authors of the work felt

02:34:23.780 | that their ideas had been stolen.

02:34:26.360 | And really, plagiarism is academic fraud.

02:34:29.260 | There are indicia, one indicia of plagiarism

02:34:32.000 | is a missing footnote.

02:34:33.140 | That could also be a clerical error.

02:34:35.040 | And so, when a professor's accused of plagiarism,

02:34:39.540 | the university does sort of a deep dive.

02:34:41.060 | They have these administrative boards,

02:34:43.800 | and it can take six months, nine months, a year,

02:34:46.740 | to evaluate, you know, intent matters.

02:34:50.740 | Was this intentional theft of another person's idea?

02:34:53.660 | That's academic fraud.

02:34:55.060 | Or was this sloppy, you know, you missed,

02:34:57.260 | or just humanity, right, you miss a footnote here or there.

02:35:01.260 | And I think once it got to a place

02:35:04.600 | where people felt it was theft

02:35:06.500 | of someone else's intellectual property,

02:35:09.740 | that's when it became intolerable

02:35:11.980 | for her to stay as president of Harvard.

02:35:13.900 | - So is there a spectrum for you

02:35:15.500 | between the different kinds of plagiarism,

02:35:18.320 | maybe plagiarizing words, and plagiarizing ideas,

02:35:23.320 | and plagiarizing novel ideas?

02:35:28.540 | - Of course.

02:35:29.580 | The common understanding of plagiarism,

02:35:31.220 | if you look in the dictionary, it's about theft.

02:35:34.140 | Theft requires a intent.

02:35:37.700 | Did the person intentionally take

02:35:40.180 | someone else's ideas or words?

02:35:42.940 | Now, if you're writing a novel, right, words matter more.

02:35:47.940 | Right, if you're taking Shakespeare

02:35:49.780 | and presenting it as your own words.

02:35:52.060 | If you're, you know, writing about ideas,

02:35:55.880 | you know, ideas matter,

02:35:56.760 | but you're not supposed to take someone else's words

02:35:58.520 | without properly acknowledging them,

02:36:00.980 | whether it's quotation marks or otherwise.

02:36:03.780 | But in the context of a academic's life's work before AI,

02:36:08.080 | everyone's gonna have missing quotation marks and footnotes.

02:36:14.020 | I remember writing my own thesis.

02:36:15.980 | You know, I would write, I would take,

02:36:18.100 | there were books you couldn't take out of Widener Library,

02:36:20.140 | so I'd have index cards,

02:36:21.860 | and I'd write stuff on index cards,

02:36:23.660 | and I'd put a little citation

02:36:24.720 | to make sure I remember to cite it properly.

02:36:27.860 | And, you know, scrambling to do your thesis,

02:36:30.500 | get it in on time.

02:36:32.480 | What's the chances you forget at what point

02:36:34.460 | what are your words versus the author's words,

02:36:36.700 | and you forgot to put quotation marks?

02:36:38.860 | Just the humanity, you know, the human fallibility of it.

02:36:42.780 | So, you know, you don't get,

02:36:44.780 | it's not academic fraud to have human fallibility,

02:36:48.100 | but it's academic fraud if you take someone else's ideas

02:36:50.700 | that are an integral part of your work.

02:36:53.460 | - Is there a part of you that regrets that,

02:36:56.500 | at least from the perception of it,

02:36:59.020 | the president of Harvard stepped down over plagiarism

02:37:01.660 | versus over refusing to say

02:37:05.420 | that the calls for genocide are wrong?

02:37:09.020 | - Again, I think it would have sent a better message

02:37:11.980 | if a leader fails as a leader,

02:37:15.880 | and that's the reason for their resignation or dismissal,

02:37:20.380 | then she gets, if you will, caught on a technical violation

02:37:24.220 | that had nothing to do with failed leadership,

02:37:26.300 | because I don't know what lesson that,

02:37:29.100 | you know, what lesson that teaches the board

02:37:31.580 | about selecting the next candidate.

02:37:32.780 | I mean, the future of Harvard,

02:37:34.500 | a lot of it's gonna depend on who they pick

02:37:36.100 | as the next leader.

02:37:37.920 | Here's an interesting anecdote

02:37:40.620 | that I think has not surfaced publicly.

02:37:44.560 | So a guy named Larry Bacow

02:37:46.540 | was the previous president of Harvard.

02:37:48.580 | Larry Bacow was on the search committee,

02:37:50.900 | and they were looking for a new president.

02:37:53.700 | And what was strange was they picked an old white guy

02:37:57.340 | to be president of Harvard

02:37:59.900 | when there was a call for a more diverse president.

02:38:03.060 | And what I learned was Harvard actually ran a process,

02:38:07.860 | had a diverse new president of Harvard,

02:38:11.320 | and in the due diligence on that candidate

02:38:14.340 | shortly before the announcement of the new president,

02:38:17.300 | they found out that that presidential candidate

02:38:19.780 | had a plagiarism problem.

02:38:22.220 | And the search had gone on long enough.

02:38:23.900 | They couldn't restart a search to find another candidate.

02:38:26.780 | So they picked Larry Bacow off the board,

02:38:29.340 | off the search committee to be the next president of Harvard

02:38:32.060 | as kind of an interim solution.

02:38:33.660 | And then there was that much more pressure

02:38:37.220 | to have a more diverse candidate this time around,

02:38:39.700 | 'cause it was a big disappointment to the DEI office,

02:38:42.220 | if you will, and I would say to the community at large.

02:38:44.940 | Harvard, of all places, couldn't have a,

02:38:47.780 | you know, a racially diverse president.

02:38:50.340 | It's an important message.

02:38:51.740 | So the strange thing is that they didn't do due diligence

02:38:58.500 | on President Gay,

02:39:00.700 | and that it was a relatively quick process.

02:39:03.340 | So the whole thing I think is worthy

02:39:05.420 | of further, you know, exploration.

02:39:08.340 | - So this goes deeper than just the president.

02:39:10.820 | - Yeah, for sure.

02:39:11.700 | When a company fails, most people blame the CEO.

02:39:15.200 | I generally blame the board, right?

02:39:18.460 | 'Cause the board's job is to make sure

02:39:19.860 | the right person's running the company,

02:39:21.060 | and if they're failing, help the person.

02:39:23.100 | If they can't help the person, make a change.

02:39:25.780 | That's not what's happened here.

02:39:27.220 | The board's hand was sort of forced from the outside,

02:39:30.260 | whereas they should have made their own decision

02:39:31.420 | from the inside.

02:39:32.860 | - Do you still love Harvard?

02:39:34.540 | - Sure.

02:39:35.580 | It's a 400-odd-year institution.

02:39:39.420 | It's enormously helpful to me in my life, I'm sure.

02:39:43.900 | My sister also went to Harvard.

02:39:47.780 | And, you know, the experiences,

02:39:51.660 | learnings, friendships, relationships.

02:39:54.880 | You know, again, I'm very happy with my life.

02:39:58.780 | Harvard was an important part of my life.

02:40:00.220 | I went there for both undergrad and business school.

02:40:02.220 | I learned a ton, met a lot of faculty,

02:40:04.900 | a lot from a number of my closest friends,

02:40:06.580 | who I still really keep in touch with, high, mid, then.

02:40:10.500 | So yeah, it's a great place, but it needs a reboot.

02:40:15.500 | - Yeah, I still have hope.

02:40:17.660 | I think universities are really important institutions.

02:40:21.020 | - You know, when I went to Harvard,

02:40:21.860 | there were 1,600 people in my class.

02:40:23.420 | I think today's class is about the same size.

02:40:26.420 | And their online education

02:40:28.700 | really has not sort of taken off, right?

02:40:31.660 | So I heard Peter Thiel speak at one point in time,

02:40:34.180 | and he's like, what great institution do you know

02:40:38.380 | that's truly great that hasn't grown in 100 years, right?

02:40:44.620 | And the incentives, in some sense, of the alums are for,

02:40:49.020 | it's a bit like a club.

02:40:50.900 | If you're proud of the elitism of the club,

02:40:53.100 | you don't want that many new members.

02:40:54.820 | But the fact that the population has grown of the country

02:40:57.980 | is so, you know, significantly,

02:41:00.540 | since certainly I was a student in 1984,

02:41:03.880 | and the fact that Harvard recruits people

02:41:05.940 | from all over the world,

02:41:07.460 | it's really serving a smaller and smaller percentage

02:41:09.740 | of the population today.

02:41:11.460 | And, you know, some of our most talented

02:41:13.140 | and successful entrepreneurs, anyway.

02:41:16.860 | You know, it's a token of success

02:41:19.900 | that they didn't make it through their undergraduate years.

02:41:22.580 | You know, they left as a freshman,

02:41:24.020 | or they didn't attend at all.

02:41:25.460 | - For entrepreneurs, yes, but it's still a place.

02:41:28.220 | - Very important for research,

02:41:30.500 | very important for advancing ideas.

02:41:32.540 | And yes, in shaping dialogue

02:41:36.340 | and the next generation of Supreme Court justices.

02:41:40.700 | And, you know, members of government, politicians.

02:41:45.160 | So yes, it's critically important,

02:41:46.660 | but it's not doing the job it should be doing.

02:41:51.660 | - Neri Oxman, somebody you mentioned several times

02:41:55.900 | throughout this podcast,

02:41:56.740 | somebody I had a wonderful conversation with,

02:42:00.180 | a friendship with, I've known,

02:42:02.580 | looked up to her, admired her,

02:42:03.940 | has been a fan, I've been a fan of hers for a long time,

02:42:06.660 | of her work, and of her as a human being.

02:42:10.660 | Looks like you're a fan of hers as well.

02:42:12.540 | - Yes.

02:42:13.380 | - What do you love about Neri?

02:42:16.380 | What do you admire about her as a scientist,

02:42:18.020 | artist, human being?

02:42:19.540 | - I think she's the most beautiful person I've ever met.

02:42:23.940 | And I mean that from like the center of her soul.

02:42:26.620 | She's the most caring, warm, considerate,

02:42:32.460 | you know, thoughtful person I've ever met.

02:42:36.980 | And she couples those remarkable qualities

02:42:41.980 | with brilliance, incredible creativity,

02:42:45.420 | beauty, elegance, grace.

02:42:48.760 | Yeah, I'm talking about my wife,

02:42:51.860 | but I'm talking incredibly dispassionately.

02:42:55.240 | But I mean what I say.

02:42:58.620 | She's the most remarkable person I've ever met.

02:43:01.300 | And I've met a lot of remarkable people.

02:43:03.580 | And I'm incredibly fortunate to spend

02:43:06.220 | a very high percentage of my lifetime with her,

02:43:09.580 | ever since I met her, you know, six years ago.

02:43:13.980 | - So she's been a help to you

02:43:15.540 | through some of the rough moments you described?

02:43:17.580 | - For sure.

02:43:18.420 | I mean, I met her at the bottom,

02:43:19.880 | which is not a bad place to meet someone, if it works out.

02:43:23.660 | - Is there some degree of yin and yang

02:43:27.700 | with the two personalities you have?

02:43:29.300 | You have described yourself as emotional and so on,

02:43:33.060 | but it does seem the two of you

02:43:35.860 | have slightly different styles

02:43:37.420 | about how you approach the world.

02:43:39.020 | - Oh, well, interestingly, we have a lot alike.

02:43:41.420 | You know, we come from very similar places in the world.

02:43:45.620 | You know, there are times where you feel like

02:43:47.020 | we've known each other for centuries.

02:43:48.980 | You know, I met her parents for the first time,

02:43:51.340 | you know, a long time ago, almost six years ago as well.

02:43:55.780 | And I knew her parents were from Eastern Europe originally.

02:43:59.740 | So I asked her father, like, what, you know,

02:44:01.780 | what city did her family come from originally?

02:44:05.220 | And I called my father and asked him, you know,

02:44:08.540 | "Dad, what's, you know, Grandpa Abraham,

02:44:10.580 | where's he from, what's the name of the city?"

02:44:13.460 | And then I put the two cities into Google Maps

02:44:16.940 | and they were 52 miles apart, which I thought was pretty cool.

02:44:20.260 | Then of course, at some point we did genetic testing,

02:44:23.580 | (both laughing)

02:44:24.820 | make sure we weren't related, which we were not.

02:44:27.660 | But we share incredible commonality on values.

02:44:31.360 | We are attracted to the same kind of people.

02:44:35.060 | You know, she loves my friends, I love hers.

02:44:37.780 | We love doing the same kind of things.

02:44:40.340 | We're attracted to, you know,

02:44:43.020 | we like spending time the same ways.

02:44:44.820 | And she has, yes, more emotion, more elegance.

02:44:51.060 | She doesn't like battles, but she's very strong.

02:44:57.140 | But she's more sensitive than I am.

02:44:58.780 | - Yeah, you are constantly in multiple battles

02:45:02.380 | at the same time, and there's often the media,

02:45:07.380 | social media, it's just fire everywhere.

02:45:11.220 | - You know, that hasn't really been the case for a while.

02:45:14.520 | I've had relative peace for a long time,

02:45:16.740 | 'cause as I stopped being, as I haven't had to be

02:45:19.260 | the kind of activist I was earlier in my career,

02:45:22.420 | I think since October 7th, yes,

02:45:23.940 | I do feel like I've been in a war.

02:45:25.740 | - Can you tell me the saga of the accusations against Neri?

02:45:30.740 | - So I did not actually surface the plagiarism allegations

02:45:36.220 | against President Gay that were surfaced by, you know,

02:45:39.100 | Aaron and maybe Christopher Ruffo as well,

02:45:42.060 | or maybe Chris helped promote what Aaron

02:45:45.100 | and some anonymous person identified.

02:45:50.100 | But I certainly, it was a point in time

02:45:51.860 | where the board had said we're 100% behind her,

02:45:54.480 | and unanimously, and I really felt she had to go.

02:45:58.020 | So it didn't bother me at all

02:45:59.660 | that they had identified problems with her work.

02:46:02.340 | So I shared, I reposted those posts,

02:46:05.980 | and then when the board, she ultimately resigned,

02:46:08.340 | and she got a $900,000 a year professorship

02:46:11.340 | continuing at Harvard, I said, look,

02:46:12.940 | in light of her limited academic record

02:46:15.820 | and these plagiarism allegations, she had to go.

02:46:21.660 | I knew when I did so, I assumed,

02:46:24.520 | I was actually a bit paranoid

02:46:26.080 | about that thesis I had written.

02:46:28.320 | I only had one academic work,

02:46:29.780 | but I hadn't checked it for plagiarism,

02:46:32.720 | and I thought that's gonna happen.

02:46:35.480 | Actually, I had someone, I did not have a copy on hand,

02:46:39.680 | so I got a copy of my thesis, and I remember writing it.

02:46:44.160 | Harvard at the time was pretty,

02:46:46.080 | they kind of give you a lecture

02:46:47.080 | about making sure you have all your footnotes

02:46:49.000 | and quotation marks.

02:46:50.600 | I learned later that apparently they had a copy

02:46:53.340 | of my thesis at the New York Public Library,

02:46:55.900 | and a member of the media told me he was there online

02:47:00.900 | with a dozen other members of the media,

02:47:03.820 | all trying to get a copy of my thesis

02:47:06.420 | to run it through some AI.

02:47:08.340 | They had to first do optical character recognition

02:47:10.200 | to convert the paper document into digital,

02:47:13.640 | but fortunately, through a miracle, I didn't have an issue.

02:47:19.700 | I didn't think about Nary, of course,

02:47:21.500 | who has whatever, 130 academic works,

02:47:25.660 | and so we were just at the end of a vacation

02:47:28.680 | for Christmas break, and I was early in the morning

02:47:33.680 | for vacation time, and all of a sudden,

02:47:36.660 | I hear my phone ringing in the other room,

02:47:38.460 | or vibrating in the other room multiple times.

02:47:40.260 | I'm like, "Hmm."

02:47:41.460 | I pick up the phone.

02:47:42.640 | It's our communication guy, Fran McGill,

02:47:45.480 | and he's like, "Bill, Business Insider

02:47:47.900 | has apparently identified a number of instances

02:47:49.820 | of plagiarism in Nary's dissertation.

02:47:52.260 | Let me send you this email."

02:47:53.220 | He sent me the email, and they had identified

02:47:58.060 | four paragraphs in her 330-page dissertation

02:48:01.260 | where she had cited the author,

02:48:03.200 | but she had used the vast majority of the words,

02:48:06.260 | and those paragraphs were from the author,

02:48:08.260 | and she should have used quotation marks,

02:48:10.460 | and then there was one case

02:48:11.420 | where she paraphrased correctly an author,

02:48:15.700 | but did not footnote that it was from his work,

02:48:20.020 | and so we were presented with this,

02:48:23.340 | and told they're gonna publish in a few hours,

02:48:25.060 | and we're like, "Well, can we get to the next day?

02:48:26.500 | We're just about to head home,"

02:48:28.180 | and they're like, "No, we're publishing by noon.

02:48:30.620 | We need an answer by noon,"

02:48:32.260 | and so we downloaded the copy of her thesis

02:48:35.860 | on the slow internet, and Nary checked it out,

02:48:39.960 | and she said, "You know what?

02:48:40.900 | Looks like they're right," and I said,

02:48:43.000 | "Look, you should just admit your mistake,"

02:48:45.180 | and she wrote a very simple, gracious,

02:48:48.580 | "Yes, I should have used quotation marks,"

02:48:51.940 | and on the author I failed to cite,

02:48:54.900 | she pointed out that she cited them eight other times

02:48:56.820 | and wrote a several-paragraph section of her thesis

02:48:59.740 | acknowledging his work,

02:49:01.780 | and none of these were important parts of her thesis,

02:49:05.160 | but she acknowledged her mistake,

02:49:06.220 | and she said, "I apologize for my mistake,"

02:49:08.420 | and I apologized to the author who I failed to cite,

02:49:11.840 | and I stand on the shoulders

02:49:12.980 | of all the people who came before me

02:49:15.620 | and looking to advance work,

02:49:17.660 | and we sort of thought it was over.

02:49:19.540 | We head home.

02:49:20.380 | In flight on the way home,

02:49:23.780 | although we didn't realize this till we got back

02:49:25.700 | the following day, Business Insider published

02:49:27.980 | another article and said,

02:49:29.560 | "Nary Oxman admits to plagiarism."

02:49:32.900 | Plagiarism, of course, is academic fraud,

02:49:35.420 | and this thing goes crazy viral.

02:49:37.300 | Oh, Bill, the title is Bill Ackman's Wife.

02:49:41.100 | Celebrity academic Nary Oxman,

02:49:44.060 | and they use the term celebrity

02:49:45.380 | because there are limits

02:49:48.700 | to what legitimate media can go after,

02:49:51.740 | but celebrities, there's a lot more leeway in the media

02:49:55.900 | and what they can say,

02:49:56.740 | so that's why they call her a celebrity.

02:49:58.420 | First time ever she'd been called a celebrity,

02:50:00.680 | and they basically, she's admitting to academic fraud,

02:50:06.580 | and then they said, and then the next day,

02:50:10.700 | at 5.19 p.m., I remember the timeline pretty well,

02:50:14.160 | an email was sent to Fran McGill saying,

02:50:17.500 | you know, we've identified, you know,

02:50:21.820 | two dozen other instances of plagiarism in her work,

02:50:25.580 | 15 of which are Wikipedia entries

02:50:27.380 | where she copied definitions,

02:50:29.380 | and the others were mostly software,

02:50:32.180 | hardware manuals for various devices

02:50:34.980 | or software she used in her work,

02:50:37.100 | most of which were in footnotes

02:50:38.220 | where she described a nozzle for a 3D printer

02:50:40.860 | or something like this,

02:50:42.020 | and they said, we're publishing, you know, tonight.

02:50:45.660 | The email they sent to us was 6,900 words,

02:50:50.420 | it was 12 pages, it was practically indecipherable,

02:50:53.180 | you couldn't even read it in an hour,

02:50:55.820 | and we didn't have some of the documents

02:50:57.140 | they were referring to,

02:50:59.000 | and I'm like, Nary, you know what I'm gonna do?

02:51:01.140 | I think it'll be useful to provide context here.

02:51:05.260 | I'm gonna do a review

02:51:06.100 | of every MIT professor's dissertations,

02:51:08.820 | every published paper, AI has enabled this,

02:51:11.240 | and so that was, I put out a tweet basically saying that,

02:51:15.340 | and we're doing a test run now,

02:51:17.100 | 'cause we have to get it right,

02:51:18.100 | and I think it'll be a useful exercise,

02:51:20.060 | provide some context, if you will,

02:51:21.820 | and then this thing goes crazy viral,

02:51:25.180 | and, you know, Nary is a pretty sensitive person,

02:51:30.580 | pretty emotional person,

02:51:32.460 | and someone who's a perfectionist,

02:51:35.060 | and having everyone in the world

02:51:36.420 | thinking you committed academic fraud

02:51:37.820 | is a pretty damning thing.

02:51:39.340 | Now, they did say they did a thorough review

02:51:41.740 | of all of her work, and this is what they found,

02:51:43.900 | and I'm like, sweetheart, that's remarkable,

02:51:46.220 | right, you did 130 works, 73 of which were peer-reviewed,

02:51:49.420 | blah, blah, blah, and she's published in Nature Science

02:51:51.380 | and all these different publications,

02:51:53.020 | so that's actually, that's a pretty good batting average,

02:51:56.120 | but, you know, they can't, this is wrong, right?

02:52:00.060 | This is not academic fraud, okay,

02:52:01.920 | these are inadvertent mistakes,

02:52:03.220 | and the Wikipedia entries,

02:52:04.460 | Nary actually used Wikipedia as a dictionary,

02:52:06.420 | this is the early days of Wikipedia,

02:52:08.380 | and they also referred to the MIT handbook,

02:52:11.260 | which has a whole section on plagiarism, academic handbook,

02:52:14.820 | and if you read it, which I ultimately did,

02:52:17.900 | they make clear a few things.

02:52:20.220 | Number one, there's plagiarism, academic fraud,

02:52:23.540 | and there's what they call inadvertent plagiarism,

02:52:26.180 | which is clerical errors where you make a mistake,

02:52:28.740 | and it depends on intent,

02:52:30.500 | and there's a link that you can go to,

02:52:33.460 | which is a section on, if you get investigated at MIT,

02:52:36.260 | what happens, what's the procedure,

02:52:37.760 | what's the initial stage, what's the investigative stage,

02:52:40.060 | what's the procedure, if they identify it,

02:52:42.940 | and they make very clear that academic fraud is,

02:52:46.740 | and they list plagiarism, you know, research theft,

02:52:49.940 | a few other things, but it does not include honest errors.

02:52:54.140 | Honest errors are not plagiarism under MIT's own policies,

02:52:57.980 | and in the handbook, they also have a big section

02:53:00.660 | on what they call common knowledge,

02:53:03.100 | and common knowledge depends

02:53:04.500 | on who you're writing your thesis for,

02:53:06.420 | and so if it's a fact that is known by your audience,

02:53:12.100 | you're not required to quote or cite,

02:53:14.460 | and so all those Wikipedia entries

02:53:16.100 | were for things like sustainable design,

02:53:17.900 | computer-aided design.

02:53:18.940 | She just took a definition from Wikipedia,

02:53:21.260 | common knowledge to her readers,

02:53:24.500 | no obligation under the handbook, totally exempt.

02:53:28.060 | On the, using the same words, she referred to,

02:53:31.540 | like, whatever, some kind of 3D printer.

02:53:33.820 | She was, the Stratasys 3D printer,

02:53:36.060 | and she quoted from the manual, right away.

02:53:38.380 | Stratasys is a company you've consulted for,

02:53:40.060 | they're very, you don't need to, that's not something,

02:53:42.500 | you're not stealing their ideas,

02:53:43.580 | you're describing a nozzle for a device

02:53:46.180 | you use in your work in a footnote.

02:53:48.060 | That's not a theft of idea, right?

02:53:50.720 | And so I'm like, this is crazy,

02:53:54.160 | and so this has gotta stop.

02:53:56.780 | And so I reach out to the, a guy I knew

02:54:01.220 | was on the board of Business Insider, the chairman,

02:54:03.420 | and his name is gonna come public shortly.

02:54:05.860 | I committed to that time to keep his name confidential.

02:54:09.500 | It's now surfaced publicly in the press.

02:54:11.620 | - Can I just pause real quick here?

02:54:13.580 | Just to, I don't know, there's a lot of things

02:54:17.300 | I wanna say, but you made it pretty clear,

02:54:20.460 | but just as a member of the community,

02:54:24.100 | there's also a common sense test.

02:54:27.060 | I think you're more precisely legal and looking at,

02:54:31.700 | but there's just a bullshit test,

02:54:34.060 | and nothing that Nary did is plagiarism

02:54:38.520 | in the bad meaning of the word.

02:54:41.260 | Plagiarism right now is becoming another ism,

02:54:43.740 | like racism or so on, using as an attack word.

02:54:47.100 | I don't care what the meaning of it is,

02:54:48.760 | but there's the bad academic fraud, like theft.

02:54:52.300 | Theft of an idea, and maybe you can say

02:54:55.540 | a lot of definitions and this kind of stuff,

02:54:57.540 | but then there's just a basic bullshit test

02:54:59.860 | where everyone knows this is a thief,

02:55:02.720 | and this is definitely not a thief.

02:55:05.340 | And there's nothing about anything that Nary did,

02:55:08.580 | anything, in her thesis or in her life,

02:55:12.420 | everyone that knows her, she's a rock star, right?

02:55:16.340 | I just wanna make it clear, it really hurt me

02:55:19.540 | that the internet, whatever is happening,

02:55:21.620 | could go after, could go after a great scientist,

02:55:26.620 | 'cause I love science,

02:55:29.380 | and I love celebrating great scientists,

02:55:32.040 | and it's just really messed up that whatever the machine,

02:55:37.420 | we could talk about business inside or whatever,

02:55:40.660 | social media, mass hysteria, whatever is happening,

02:55:45.420 | like we need the great scientists of the world,

02:55:48.580 | 'cause that's like the future depends on them,

02:55:50.620 | and so we need to celebrate them and protect them

02:55:52.820 | and let them flourish and let them do their thing,

02:55:56.300 | and keep them out of this, whatever shitstorm

02:56:00.240 | that we're doing to get clips and advertisements

02:56:03.020 | and drama and all this, we need to protect them.

02:56:05.860 | So I just wanna say there's nobody I know,

02:56:08.620 | and a million friends that are scientists,

02:56:13.380 | world-class scientists, Nobel Prize winners,

02:56:15.460 | they all love Nary, they all respect Nary,

02:56:18.340 | she did zero wrong, and then the rest of the conversation

02:56:22.460 | we're gonna have about how broken journalism is and so on,

02:56:25.180 | but I just wanna say that there's nothing

02:56:28.260 | that Nary did wrong, it's not a gray area or so on.

02:56:31.780 | I also personally don't love that Claudine Gay

02:56:35.940 | is a discussion about plagiarism,

02:56:37.940 | 'cause it distracts from the fundamentals that is broken,

02:56:42.200 | this becomes some weird technical discussion,

02:56:46.860 | but in the case of Nary, did nothing wrong,

02:56:49.900 | great scientist, great engineer at MIT and beyond,

02:56:53.300 | she's doing a cool thing now, so anyway.

02:56:55.900 | - Could not have said it better myself.

02:56:57.140 | Now, obviously, I'm focusing on the technical part.

02:56:59.340 | - Right, 'cause you wanna be precise here.

02:57:02.500 | - Well, it's not even that, I mean, yes,

02:57:04.500 | I have said that we're gonna sue Business Insider,

02:57:06.900 | and in 35 years of my career of someone

02:57:10.820 | who has not every article has been a favorable one,

02:57:13.780 | not every article has been an accurate one,

02:57:16.100 | I've never threatened to sue the media,

02:57:18.720 | and I've never sued the media, but this is so egregious.

02:57:23.720 | It's not just that she did nothing wrong,

02:57:26.100 | but they accused her of academic fraud,

02:57:29.100 | they did it knowing, they referenced MIT's own handbook,

02:57:33.440 | so they had to read all the same stuff

02:57:35.340 | that I read in the handbook, they did that work.

02:57:38.240 | Then after I escalated this thing to the,

02:57:43.700 | Henry Blodgett, the chairman of Business Insider,

02:57:46.380 | to the CEO of Axel Springer,

02:57:49.140 | I even reached out to Henry Kravis

02:57:50.620 | at a certain point in time,

02:57:51.540 | one of the controlling shareholders of the company

02:57:53.180 | through KKR, laying out the factual errors in the article.

02:57:58.180 | Business Insider went public after they said

02:58:02.780 | Neri committed academic fraud and plagiarism,

02:58:05.520 | and said we didn't challenge any,

02:58:07.700 | the facts remain undisputed in the article.

02:58:11.620 | So it's basically Neri committed plagiarism,

02:58:15.420 | that's story one, Neri admits to plagiarism,

02:58:18.140 | she admits to plagiarism,

02:58:19.540 | she admitted to making a few clerical errors,

02:58:22.340 | that's the only thing she admitted to,

02:58:24.140 | and she graciously apologized,

02:58:25.500 | so they said Neri admits to plagiarism,

02:58:27.580 | apologizes for plagiarism, that's incredibly damning.

02:58:30.140 | And by the way, we're doing an investigation,

02:58:32.500 | 'cause we're concerned that there might've been

02:58:34.140 | inappropriate process, but the facts of the story

02:58:38.660 | have not been disputed by Neri Oxman or Bill Ackman,

02:58:41.300 | and that was totally false, I had done it privately,

02:58:44.900 | I'd done it publicly on Twitter, on X,

02:58:48.260 | I laid out, I have a whole text stream,

02:58:51.060 | a WhatsApp stream with the CEO of the company,

02:58:53.220 | and they doubled down, they doubled down again,

02:58:55.940 | and so I don't sue people lightly.

02:58:58.100 | And you stay tuned.

02:59:02.860 | - So you're, at least for now, moving forward with--

02:59:07.860 | - It's a certainty we're moving forward.

02:59:11.060 | There's a step we can take prior to suing them,

02:59:13.780 | where we basically send them a letter

02:59:18.300 | demanding they make a series of corrections,

02:59:20.600 | that if they don't make those corrections,

02:59:24.460 | the next step is litigation.

02:59:26.620 | I hope we can avoid the next step,

02:59:28.700 | and I'm just making sure that when we present the demand

02:59:32.100 | to Business Insider and ultimately to Axel Springer,

02:59:35.820 | that it's incredibly clear how they defamed her,

02:59:40.620 | the factual mistakes in her stories,

02:59:42.480 | and what they need to do to fix it.

02:59:45.180 | And if we can fix it there,

02:59:46.380 | we can move on from this episode,

02:59:48.180 | and hopefully avoid litigation.

02:59:50.540 | So that's where we are.

02:59:51.460 | - I don't know, you're smarter than me,

02:59:52.860 | there's technical stuff, there's legal stuff,

02:59:54.820 | there's journalistic stuff,

02:59:56.100 | but just fuck you, Business Insider, for doing this.

03:00:00.100 | I don't know much in this world,

03:00:03.540 | but journalists aren't supposed to do that.

03:00:06.820 | - No, look, we're gonna surface

03:00:08.140 | all of this stuff publicly, ultimately.

03:00:10.380 | The email was not to Neri,

03:00:13.500 | saying there was plagiarism in her work.

03:00:15.240 | The email came from a reporter named Catherine Long.

03:00:17.900 | And the headline was, "Your wife committed plagiarism.

03:00:21.180 | "Shouldn't she be fired from MIT?"

03:00:24.500 | Just like you caused Claudine Gay

03:00:25.980 | to be fired from Harvard.

03:00:27.980 | It was a political agenda.

03:00:30.860 | She doesn't like me, okay?

03:00:32.940 | And she was trying to hurt me,

03:00:34.980 | and they couldn't find plagiarism in my thesis.

03:00:37.180 | And being the subject of short,

03:00:40.860 | being a short seller,

03:00:42.100 | the Herbalife battle went on for years,

03:00:44.940 | they tried to do everything to destroy my reputation.

03:00:47.580 | So they'd already gone through my trash,

03:00:49.020 | they'd already done all that work.

03:00:50.820 | So anything they could possibly find,

03:00:53.980 | I've always lived a very clean life, okay, thankfully.

03:00:59.540 | And if you're gonna be an activist short seller,

03:01:01.060 | you better, 'cause they're gonna find out

03:01:02.620 | dirt on you if it exists.

03:01:05.020 | And so they're like, "How can we really hurt Bill?"

03:01:07.700 | By the way, Neri had left MIT years earlier.

03:01:10.340 | When the reporter found out

03:01:11.420 | she was no longer a member of the MIT faculty,

03:01:13.620 | they were enraged.

03:01:14.620 | They didn't believe us.

03:01:15.940 | They made us like,

03:01:17.300 | prove to us she's no longer on the MIT faculty,

03:01:19.420 | 'cause they wanted to get her fired.

03:01:20.700 | And by the way, malice is one of the important factors

03:01:25.700 | in determining whether defamation's taking place.

03:01:28.380 | And this was a malice-driven,

03:01:31.460 | this was not about news.

03:01:33.380 | And the unfortunate thing about journalism

03:01:36.220 | is Business Insider made a fortune from this.

03:01:38.500 | This story was published and republished

03:01:41.700 | by thousands of media organizations around the world.

03:01:44.620 | It was the number one trending thing on Twitter

03:01:46.500 | for like two days.

03:01:47.880 | Every newspaper,

03:01:50.980 | it was on the front page of every Israeli newspaper,

03:01:53.940 | you know, it was on the front page of the Financial Times.

03:01:56.580 | Okay, so this, and she's building a business.

03:01:59.860 | And you know, if you're CEO of a science company

03:02:03.900 | and you committed academic fraud,

03:02:05.340 | that's incredibly damaging.

03:02:07.340 | But I ultimately convinced her that this was good.

03:02:10.940 | I said, sweetheart, you're amazing.

03:02:13.780 | You're incredible.

03:02:14.620 | You're incredibly talented,

03:02:15.680 | but you're mostly known in the design world.

03:02:17.780 | Now, everyone in the universe, okay,

03:02:20.660 | has heard of Neri Oxman, okay?

03:02:22.780 | We're gonna get this thing cleared up.

03:02:24.660 | You're gonna be doing an event in six months

03:02:27.620 | where you're gonna tell the world,

03:02:29.140 | you're gonna go out of stealth mode,

03:02:30.140 | you can tell the world about all the incredible things

03:02:31.780 | that you're building and you're designing

03:02:33.540 | and you're creating.

03:02:35.460 | And you're gonna, it's gonna be like the iPhone launch

03:02:37.940 | 'cause everyone's gonna be paying attention

03:02:39.740 | and they're gonna wanna see your work.

03:02:42.380 | And you know, that's how I tried to cheer her up.

03:02:44.740 | But I think it's true.

03:02:45.740 | - It is true, and you're doing your,

03:02:48.580 | your job is a good part

03:02:49.700 | in seeing the silver lining of all of this.

03:02:52.140 | How has, just from observing her,

03:02:54.460 | how did she, you know,

03:02:59.060 | stay strong through all of this psychologically?

03:03:01.380 | 'Cause at least I know she's pushing ahead with the work.

03:03:04.620 | - Oh, she's full speed ahead in her work.

03:03:06.100 | She's built an amazing team.

03:03:07.100 | She's hired 30 scientists, roboticists,

03:03:11.500 | people who, biologists, plant specialists,

03:03:14.900 | material scientists, engineers, really incredible crew.

03:03:19.900 | She's built this 36,000 square foot lab in New York City.

03:03:22.180 | That's a one of a kind.

03:03:23.340 | It's still, you know, they're working out of it.

03:03:25.140 | It's still under construction

03:03:26.060 | while they're working out of it.

03:03:28.740 | And so she's gonna do amazing things.

03:03:30.740 | But as I said, she's an extremely sensitive person.

03:03:34.800 | She's a perfectionist, okay?

03:03:36.700 | Imagine thinking that the entire world

03:03:39.460 | thinks you've committed academic fraud.

03:03:41.620 | And so that was very hard for her.

03:03:44.060 | She's a very positive person, but I saw her,

03:03:46.260 | and I would say her darkest emotional period, for sure.

03:03:51.260 | She's doing much better now.

03:03:54.020 | But you can kill someone.

03:03:56.260 | You can kill someone by destroying their reputation.

03:03:59.860 | People commit suicide.

03:04:01.500 | People go into these deep, dark depression.

03:04:05.580 | - Well, my worry, primarily,

03:04:07.940 | when I saw what Business Insider was doing,

03:04:09.860 | is that they might dim the light

03:04:14.580 | of a truly special scientist and creator.

03:04:20.220 | - It's not gonna happen.

03:04:21.940 | - But I also worry about others, like Nary,

03:04:26.460 | young Naries, that this sends a signal to

03:04:30.980 | that might scare them.

03:04:32.680 | And, you know, journalism shouldn't scare

03:04:36.380 | aspiring young scientists.

03:04:38.180 | - The problem is the defamation law in the U.S.

03:04:41.940 | is so favorable to the publisher, to the media,

03:04:45.960 | and so unfavorable to the victim.

03:04:50.220 | And the incentives are all wrong.

03:04:52.340 | You know, when you went from paper version

03:04:54.580 | of journalism to digital,

03:04:56.300 | and you could track how many people click,

03:04:58.400 | and it's a medium that advertising drives the economics,

03:05:04.360 | and if you can show an advertiser more clicks,

03:05:06.880 | you can make more money, right?

03:05:08.720 | So a journalist is incentivized to write a story

03:05:12.180 | that will generate more clicks.

03:05:13.260 | How do you write a story that'll generate more clicks?

03:05:15.480 | You get a billionaire guy, okay?

03:05:18.460 | And then you go after his wife,

03:05:20.460 | and you make a sensationalist story,

03:05:22.660 | and you give them no time to respond, right?

03:05:25.580 | You know, look at the timing here.

03:05:27.940 | On the first story, you know, they gave us three hours.

03:05:31.580 | On the second one, the following day, 5.19 p.m.,

03:05:35.060 | the email comes in, not to Nary, not to her firm,

03:05:37.740 | but to my communications person,

03:05:39.660 | who tracks us down by 5.30, you know, 10 minutes later.

03:05:43.300 | And they publish their story 92 minutes after,

03:05:47.100 | and they sent us, we're gonna surface all these documents

03:05:49.540 | in our demand.

03:05:50.700 | Read the email they sent,

03:05:53.980 | whether you could even decipher it.

03:05:55.820 | You know, it's, there was no,

03:05:59.100 | and by the way, there's a reason why academic institutions,

03:06:02.820 | when a professor's accused of plagiarism,

03:06:05.040 | why they have these very careful processes

03:06:07.280 | with multiple stages, and they take,

03:06:09.340 | they can take a year or more,

03:06:11.380 | because it depends on intent.

03:06:12.900 | Was this intentional?

03:06:15.580 | In order to be a crime, an academic crime,

03:06:18.900 | you gotta prove that they intentionally stole.

03:06:21.060 | Look, in some cases it's obvious,

03:06:22.300 | in some cases it's very subtle,

03:06:24.140 | and they take this stuff super seriously.

03:06:26.100 | But they basically accused Nary of academic crime,

03:06:29.500 | and then 92 minutes later,

03:06:30.820 | they said she committed an academic crime,

03:06:33.220 | and that should be a crime,

03:06:34.580 | and that should be punishable with litigation,

03:06:37.660 | and there should be a real cost,

03:06:39.900 | and we're gonna make sure there's a real cost,

03:06:42.140 | reputationally and otherwise to Business Insider,

03:06:44.420 | and to Axel Springer,

03:06:45.820 | 'cause ultimately you gotta look to the controlling owner.

03:06:48.540 | You know, they're responsible.

03:06:50.540 | - I'll just say that you, in this regard,

03:06:52.500 | are inspiring to me for facing basically

03:06:57.500 | an institution that's whole purpose is to write articles.

03:07:07.740 | So you're like going into the fire.

03:07:10.380 | - My kid's school, the epithet for the school,

03:07:13.180 | or the saying, is go forth unafraid.

03:07:15.940 | (laughs)

03:07:16.780 | I think it's a good way to live.

03:07:18.500 | And again, words can't harm me.

03:07:21.460 | You know, the power of X,

03:07:24.900 | and we do owe Elon enormous thanks for this,

03:07:29.660 | is now, so for example,

03:07:31.860 | The Washington Post wrote a story

03:07:32.940 | about me a couple days ago,

03:07:34.820 | and I didn't think the story was a fair story.

03:07:38.820 | So within a few hours of the story being written,

03:07:41.500 | I'm able to put out a response to the story

03:07:44.060 | and send it to a million, 200,000 people,

03:07:46.340 | and it gets read and reread.

03:07:48.580 | I haven't checked,

03:07:49.420 | but probably 5 million people saw my response.

03:07:53.260 | Now, those are the people on X.

03:07:54.700 | It's not everyone in the world.

03:07:55.900 | There's still, there's a disconnection

03:07:57.740 | between the X world and the offline world.

03:08:00.580 | But, you know, reputation in my business

03:08:04.780 | is basically all you have.

03:08:06.740 | And as they say, you can take a lifetime

03:08:09.020 | to build a reputation

03:08:09.860 | and take five minutes to have it disappear,

03:08:11.340 | and the media plays a very important role,

03:08:13.660 | and they can destroy people.

03:08:15.140 | At least we now have some ability to fight back.

03:08:18.780 | We have a platform we can surface our views.

03:08:20.940 | You know, the typical old days,

03:08:22.740 | they write an incredibly damning article

03:08:24.140 | and you point out factual errors,

03:08:25.620 | and then like two months later,

03:08:26.660 | they bury a little correction on page whatever.

03:08:28.620 | By then the person was fired

03:08:29.820 | or their life was destroyed or their reputation's damaged.

03:08:33.740 | You know, I was with Warren Buffett talking about media,

03:08:35.940 | and it's something he, a business he really loves.

03:08:38.900 | And he says, "You know what, Bill?"

03:08:40.820 | He said, "A thief with a dagger."

03:08:42.820 | The only person who can cause you more harm

03:08:44.300 | than a thief with a dagger is a journalist with a pen.

03:08:47.340 | And those were very powerful words.

03:08:50.620 | - So you think X, formerly known as Twitter,

03:08:54.140 | is a kind of neutralizing force to that,

03:08:56.660 | to the power of centralized journalistic institutions?

03:09:00.020 | - 100%, and I think it's a really important one.

03:09:02.540 | And it's really been eye-opening for me

03:09:05.140 | to see how stories get covered in mainstream media.

03:09:08.660 | And then you actually, you know, what I do on X

03:09:10.940 | is I follow people on multiple sides of an issue.

03:09:14.300 | And you can, or I post on a topic

03:09:17.380 | and I get to hear the other side.

03:09:18.900 | You know, I read the replies.

03:09:21.180 | And, you know, the truth is something

03:09:23.380 | that people have had a lot of question about,

03:09:25.700 | particularly in the last, I would say, five years,

03:09:29.540 | you know, beginning with, you know,

03:09:31.620 | Trump's talking about fake news.

03:09:34.140 | And a lot of what Trump said about fake news is true.

03:09:36.940 | You know, the world, a big part of the world hated Trump

03:09:39.860 | and did everything they could to discredit him, destroy him.

03:09:43.740 | And, you know, he did a lot of things, perhaps deserving

03:09:48.500 | of being discredited, used by a very imperfect,

03:09:52.420 | in some cases, harmful leader.

03:09:55.900 | But, you know, everything from pre-election,

03:09:58.460 | you know, the Hunter Biden laptop story in the New York Post

03:10:03.620 | that, you know, then Twitter, you know,

03:10:08.620 | made it difficult for people to share and to read,

03:10:12.940 | you know, COVID, you know,

03:10:17.740 | the Jay Bhattacharyas of the world

03:10:20.500 | questioning the government's response,

03:10:23.340 | questioning, you know, long-term lockdowns,

03:10:27.700 | questioning keeping kids out of school,

03:10:29.820 | questions about masks, about vaccines,

03:10:33.180 | which are still not definitively answered,

03:10:35.300 | no counterbalance to the power of the government

03:10:39.860 | when the government can shut down avenues for free speech.

03:10:42.860 | And where the mainstream media has kind of towed the line

03:10:47.140 | in many extents to the government's actions.

03:10:49.580 | So having a independently owned powerful platform

03:10:53.300 | is very important for truth, for free speech,

03:10:58.220 | for hearing the other side of the story,

03:10:59.580 | for counterbalancing the power of the government.

03:11:02.100 | Elon is getting, you know, a lot of pushback.

03:11:06.900 | You know, the SpaceXs and Teslas of the world

03:11:09.780 | are experiencing a lot of government, you know,

03:11:14.740 | questions and investigations.

03:11:16.820 | And, you know, even the president of the United States

03:11:18.420 | came out and said, look, he needs to be investigated.

03:11:21.140 | You know, I'm getting my own version of that

03:11:23.580 | in terms of some negative media articles.

03:11:26.100 | I don't know what's next.

03:11:27.940 | But yeah, if you stick your neck out in today's world

03:11:30.460 | and you go against the establishment,

03:11:33.260 | or at least the existing administration,

03:11:37.900 | you can find yourself in a very challenged place.

03:11:40.780 | And that discourages people from sharing stuff.

03:11:42.940 | And that's why anonymous speech is important.

03:11:45.300 | Some of which you find on Twitter.

03:11:46.900 | - You mentioned Trump.

03:11:48.020 | I have to talk to you about politics.

03:11:50.260 | - Sure.

03:11:51.100 | - Amongst all the other battles,

03:11:52.580 | you've also been a part of that one.

03:11:54.860 | Maybe you can correct me on this,

03:11:55.900 | but you've been a big supporter

03:11:56.860 | of various democratic candidates over the years.

03:12:00.140 | (sighs)

03:12:02.380 | - But you did say a lot of nice things

03:12:05.700 | about Donald Trump in 2016, I believe.

03:12:10.060 | - So I was interviewed by Andrew Sorkin

03:12:11.460 | a week after Trump won the election.

03:12:13.300 | - Yes.

03:12:14.140 | - And I made my case for why I thought

03:12:15.460 | he could be a good president.

03:12:16.420 | - Yes.

03:12:17.540 | So what was the case back then?

03:12:19.940 | To which degree did that turn out to be true?

03:12:22.180 | And to which degree did it not?

03:12:24.700 | To which degree was he a good president?

03:12:26.140 | To which degree was he not a good president?

03:12:27.980 | - Look, I think what I said at the time

03:12:29.900 | was the United States is actually a huge business.

03:12:34.540 | And it reminds me a bit of the type

03:12:36.380 | of activist investments we've taken on over time,

03:12:38.220 | where this really, really great business

03:12:39.540 | has kind of lost its way.

03:12:41.140 | And with the right leadership, we can fix it.

03:12:43.540 | And if you think about the business of the United States

03:12:46.260 | today, right, you've got $32 trillion worth of debt,

03:12:48.660 | so it's over-leveraged, or it's highly leveraged,

03:12:52.740 | and the leverage is only increasing.

03:12:54.860 | We're losing money, i.e. revenues aren't covering expenses.

03:12:59.700 | The cost of our debt is going up

03:13:00.980 | as interest rates have gone up,

03:13:01.820 | and the debt has to be rolled over.

03:13:03.980 | We have enormous administrative bloat in the country.

03:13:08.260 | The regulatory regime is incredibly complicated

03:13:12.540 | and burdensome and impeding growth.

03:13:14.780 | Our relations with our competitor nations

03:13:19.980 | and our friendly nations are far from ideal.

03:13:23.580 | And those conditions were present in 2020 as well.

03:13:25.820 | They're just, I would say, worse now.

03:13:27.980 | And I said, look, it's a great thing

03:13:30.060 | that we have a businessman as president.

03:13:33.260 | And in my lifetime, it's really the first businessman,

03:13:36.100 | as opposed to, I mean, maybe Bush to some degree

03:13:38.420 | was a business person, but I thought, okay.

03:13:42.300 | I always wanted the CEO to be CEO of America,

03:13:45.060 | and now we have Trump.

03:13:46.460 | I said, look, he's got some personal qualities

03:13:48.380 | that seem less ideal,

03:13:50.980 | but he's gonna be president of the United States.

03:13:52.500 | He's gonna rise to the occasion.

03:13:53.780 | This is gonna be his legacy.

03:13:55.620 | And he knows how to make deals.

03:13:58.420 | And he's gonna recruit some great people

03:14:01.060 | into his administration, I hoped.

03:14:02.700 | And growth can solve a lot of our problems.

03:14:06.740 | So if we can get rid of a bunch of regulations

03:14:09.340 | that are holding back the country,

03:14:10.940 | we can have a president.

03:14:11.940 | Obama was a, I would say, not a pro-business president.

03:14:16.940 | He did not love the business community.

03:14:18.900 | He did not love successful people.

03:14:21.620 | And having a president who just changed the tone

03:14:25.420 | on being a pro-business president,

03:14:27.980 | I thought would be good for the country.

03:14:29.220 | And that's basically what I said.

03:14:30.940 | And I would say Trump did a lot of good things.

03:14:33.860 | And a lot of people,

03:14:35.740 | you can get criticized for acknowledging that.

03:14:38.340 | But I think the country's economy accelerated dramatically.

03:14:43.100 | And that, by the way, the capitalist system

03:14:45.940 | helps the people at the bottom best

03:14:48.660 | when the system does well and when the economy does well.

03:14:51.140 | The black unemployment rate was the lowest in history

03:14:54.260 | when Trump was president.

03:14:55.260 | And that's true for other minority groups.

03:14:58.300 | So he was good for the economy.

03:14:59.860 | And he recognized some of the challenges

03:15:05.220 | and issues and threats of China early.

03:15:07.220 | He kind of woke up NATO.

03:15:10.500 | Now, again, the way he did all of this stuff,

03:15:12.340 | you can object to.

03:15:13.300 | But NATO actually started spending more money on defense

03:15:18.300 | in the early part of Trump's presidency

03:15:20.180 | because of his threats,

03:15:21.900 | which turned out to be a good thing

03:15:23.140 | in light of ultimately the Russia-Ukraine war.

03:15:28.140 | And I think if you analyze Trump objectively

03:15:30.380 | based on policies, he did a lot of good for the country.

03:15:33.220 | I think what's bad is he did some harm as well.

03:15:38.220 | I do think civility disappeared in America

03:15:44.740 | with Trump as president.

03:15:45.940 | A lot of that's his personal style.

03:15:48.220 | And how important is civility?

03:15:49.620 | I do think it's important.

03:15:50.540 | I do think he was attacked very aggressively by the left,

03:15:55.540 | by the media that made him paranoid.

03:15:58.460 | It probably interfered with his ability to be successful.

03:16:01.460 | He had the Russian collusion investigation overhang.

03:16:05.340 | And when someone's attacked,

03:16:07.860 | they're not gonna be at their best,

03:16:09.060 | particularly if they're paranoid.

03:16:10.300 | I think there's some degree of that.

03:16:12.260 | But I'm giving kind of the best of defense of Trump.

03:16:16.860 | Just you look at how he managed his team, right?

03:16:21.860 | Very few people made it through the Trump administration

03:16:25.140 | without getting fired or quitting.

03:16:27.380 | And who say they're the greatest person in the world

03:16:29.380 | when he hired them,

03:16:30.220 | and they're a total disaster when he fired them.

03:16:33.500 | It's not an inspiring way to be a leader

03:16:36.060 | and to attract really talented people.

03:16:38.860 | I think the events surrounding the election,

03:16:42.220 | I think January 6th,

03:16:44.780 | he could have done a lot more to stop a riot.

03:16:47.820 | I don't consider it an insurrection,

03:16:50.500 | but a riot that takes place in our Capitol

03:16:52.980 | and where police officers are killed or die,

03:16:56.540 | commit suicide for failure as they sought to do their job.

03:17:01.220 | He stepped in way too late to stop that.

03:17:02.940 | He could have stopped it early.

03:17:04.300 | Many of his words, I think, inspired people,

03:17:07.100 | some of whom with malintent to go in there and cause harm

03:17:10.620 | and literally to shut down the government.

03:17:12.300 | There were some evil people, unfortunately, there.

03:17:15.380 | So he's been a very imperfect president,

03:17:18.340 | and also, I think, contributed to the extreme amount

03:17:23.340 | of divisiveness in our country.

03:17:24.660 | So I was ultimately disappointed by the note of optimism.

03:17:29.660 | And again, I always support the president.

03:17:33.980 | I trust the people, ultimately, to select our next leader.

03:17:37.140 | It's a bit like who wants to be a millionaire.

03:17:39.260 | When you go to the crowd,

03:17:40.180 | and the crowd says a certain thing,

03:17:42.420 | you got to trust the crowd.

03:17:43.780 | But usually in who wants to be a millionaire,

03:17:47.460 | it's a landslide in one direction.

03:17:48.820 | So you know which letter to pick.

03:17:51.820 | Here we had an incredibly close election,

03:17:53.420 | which itself is a problem.

03:17:54.340 | So my dream, and what I've tried a little bit,

03:17:57.340 | played politics in the last little period,

03:17:59.620 | to support some alternatives to Trump

03:18:01.340 | so that we have a president.

03:18:02.500 | I use the example.

03:18:05.260 | Imagine you woke up in the morning, it's election day,

03:18:07.220 | whatever it is, it's November 4th, whatever, 2024,

03:18:11.900 | and you still haven't figured out who to vote for

03:18:13.460 | 'cause the candidates are so appealing

03:18:15.780 | that you don't know which lever to pull

03:18:18.460 | because it's a tough call.

03:18:20.420 | That's the choice we should be making as Americans.

03:18:23.140 | It shouldn't be, I'm a member of this party,

03:18:25.260 | and I'm only gonna vote this way.

03:18:26.260 | I'm a member of that party, I'm gonna vote the other way,

03:18:27.740 | and I hate the other side.

03:18:29.380 | And that's where we've been, unfortunately, for too long.

03:18:31.420 | - Or you might be torn

03:18:32.500 | because both candidates are not good.

03:18:34.400 | - Yeah.

03:18:36.940 | - I love a future where I'm torn

03:18:39.180 | because the choices are so amazing.

03:18:42.220 | - The problem is the party system is so screwed up,

03:18:44.660 | and the parties are self-interested,

03:18:46.660 | and there's another governance problem, right?

03:18:50.620 | An incentive problem.

03:18:51.900 | Michael Porter, who was one of my professors

03:18:54.940 | at Harvard Business School, wrote a brilliant piece

03:18:57.740 | on the American political system

03:18:59.740 | and all the incentives and market dynamics

03:19:01.740 | and what he called a competitive analysis,

03:19:04.620 | and it's a must-read.

03:19:05.980 | I should dig it up and send it around on X,

03:19:09.300 | but it explains how the parties and the incentives

03:19:13.100 | of these sort of self-sustaining entities

03:19:16.180 | that where the people involved are not incentivized

03:19:19.620 | to do what's best for the country.

03:19:21.020 | It's a problem.

03:19:22.260 | - You've been a supporter of Dean Phillips

03:19:24.780 | for the 2024 U.S. presidential race.

03:19:28.540 | - Yes.

03:19:29.380 | - What do you like about Dean?

03:19:31.060 | - I think he's a honest, smart, motivated,

03:19:35.060 | capable, proven guy as a business leader,

03:19:38.660 | and I think in six, almost in his three terms in Congress,

03:19:43.660 | he ran when Trump was elected.

03:19:46.580 | He said his kids cried, his daughters cried.

03:19:49.500 | Inspired him to run for office.

03:19:51.860 | Ran in a Republican district in Minnesota

03:19:54.180 | for the last 60 years.

03:19:55.820 | Was elected in a landslide.

03:19:57.220 | Has been reelected twice.

03:19:59.020 | Moved up the ranks in the Congress.

03:20:00.820 | Respected by his fellow members of Congress.

03:20:05.820 | Advanced some important legislation during COVID.

03:20:08.980 | Senior roles on various foreign policy committees.

03:20:13.860 | Centrist.

03:20:14.700 | Considered, I think, the second most

03:20:17.780 | bipartisan member of the Congress.

03:20:19.660 | I'd love to have a bipartisan president.

03:20:21.620 | That's the only way to kind of go forward,

03:20:23.780 | but we'd enormously benefit if we had a president

03:20:26.660 | that chose policies on the basis

03:20:30.060 | of what's best for the country

03:20:31.060 | as opposed to what his party wanted.

03:20:32.860 | What I like about him is he's financially independent.

03:20:36.380 | He's not a billionaire, but he doesn't need the job.

03:20:39.300 | The party hates him now 'cause he challenged the king, right?

03:20:43.180 | And so, but he's willing to give up his political career

03:20:46.220 | 'cause what he thought was best for the country.

03:20:47.620 | He tried to get other people to run who were of higher

03:20:49.300 | profile, had more name recognition.

03:20:50.780 | None would.

03:20:52.100 | No one wants to challenge Biden.

03:20:54.380 | You know, if they want to be, have a chance to stay

03:20:56.700 | in office or run in the future, but he's very principled.

03:21:01.060 | I think he would be a great president, but he needs,

03:21:04.860 | his shot is Michigan, but he needs to raise money

03:21:09.620 | in order to, he's only got a couple of weeks

03:21:12.220 | and he's gotta be on TV there.

03:21:13.380 | That's expensive.

03:21:14.980 | So we'll see.

03:21:16.660 | - So he has to increase name recognition

03:21:18.100 | and all that kind of stuff.

03:21:18.940 | Also, as you mentioned, he's young.

03:21:20.900 | - Yeah, he's 55, but he's a young 55.

03:21:23.020 | You see him play hockey.

03:21:24.140 | - Yeah, I mean, I guess 55, no matter what,

03:21:26.020 | is a pretty young age.

03:21:27.500 | - I'm 57.

03:21:28.540 | I feel young.

03:21:29.780 | I can do more pull-ups today than I could as a kid.

03:21:32.540 | So that's a standard.

03:21:34.540 | - You're at the top of your tennis game.

03:21:36.460 | - I'm at the top of my tennis game, for sure.

03:21:38.260 | - Maybe there's someone that would disagree with that.

03:21:40.180 | - And by the way, the other thing to point out here is,

03:21:42.500 | and I have been pointing this out as of others,

03:21:45.220 | Biden is, I think he's done.

03:21:47.140 | I mean, it's embarrassing.

03:21:48.380 | It's embarrassing for the country,

03:21:49.740 | having him as a presidential candidate,

03:21:52.620 | let alone the president of the country.

03:21:54.540 | It's crazy.

03:21:56.180 | And it's just gonna get worse and worse.

03:21:59.500 | And he should, you know,

03:22:01.340 | the worst of his legacy is his ego

03:22:05.180 | that prevents him from stepping aside.

03:22:06.860 | And that's it.

03:22:07.700 | It's his ego.

03:22:09.060 | And it is so wrong and so bad and so embarrassing.

03:22:12.620 | You know, when you talk to people,

03:22:15.380 | I was in Europe, I was in London a few days ago,

03:22:19.140 | and people were like, "Bill,

03:22:21.180 | "how can this guy be a president?"

03:22:22.900 | And it's a bit like, again,

03:22:24.700 | I go back to my business analogy.

03:22:25.900 | Being a CEO is like a full contact sport.

03:22:28.540 | Being president of the United States

03:22:29.780 | is like some combination of wrestling, marathon running,

03:22:34.340 | you know, being a triathlete.

03:22:36.500 | I mean, you gotta be at the serious physical shape

03:22:39.900 | and at the top of your game to represent this country.

03:22:42.500 | And he is a far cry from that.

03:22:44.500 | And it's just getting worse.

03:22:45.660 | And it's embarrassing.

03:22:47.340 | And he's got, he cannot be,

03:22:49.700 | and by the way, every day he waits,

03:22:51.700 | he's handing the election to Trump

03:22:54.460 | because it's harder and harder

03:22:56.100 | for an alternative candidate to surface.

03:22:58.020 | Now, Dean is the only candidate left

03:23:00.620 | on the Democratic side that can still win delegates.

03:23:03.180 | He's on the ballot in 42 states.

03:23:05.060 | And the best way for Biden to step aside

03:23:08.780 | is for Dean to show well in Michigan.

03:23:11.100 | - And so you think there is a path with the delegates

03:23:13.420 | and all that kind of stuff?

03:23:14.420 | - 100%.

03:23:15.260 | So what has to happen is,

03:23:18.100 | New Hampshire, he went from zero to 20% of the vote

03:23:23.100 | in 10 weeks with no name recognition.

03:23:25.700 | You know, I helped a little bit.

03:23:26.540 | Elon helped, we did spaces for him.

03:23:29.020 | We had 350,000 people on the spaces.

03:23:31.260 | Some originally, 40,000 live or something,

03:23:34.020 | and then the rest after.

03:23:35.580 | And then he was on the ground in New Hampshire.

03:23:38.620 | And New Hampshire is one of the states

03:23:39.900 | where you don't need to be registered to a party

03:23:42.140 | to vote for that candidate.

03:23:43.580 | So it's like jump ball.

03:23:45.140 | And he got 20%.

03:23:46.100 | And that's with a lot of independents

03:23:48.540 | and Democrats voting for Haley.

03:23:50.140 | Haley, who I like and who I've supported,

03:23:55.060 | does not look like she's gonna make it.

03:23:58.420 | You know, Trump is really kind of running the table.

03:24:01.060 | And so vote for Haley as an independent in Michigan,

03:24:04.900 | maybe throw away your vote.

03:24:06.540 | I think it increases the likelihood

03:24:08.220 | that Dean can get those independent votes.

03:24:10.980 | If he could theoretically, again, he needs money.

03:24:14.700 | He could beat Biden in Michigan.

03:24:16.020 | Biden's doing very poorly in Michigan.

03:24:17.620 | His polls are terrible.

03:24:18.860 | The Muslim community is not happy with him.

03:24:21.620 | And he really has spent no time there.

03:24:25.580 | And so if he's embarrassed in Michigan,

03:24:27.980 | it could be a catalyst for him withdrawing,

03:24:29.540 | then Dean will get funding.

03:24:30.820 | If he wins Michigan or shows well in Michigan,

03:24:34.220 | and people say he's viable, he's the only choice we have,

03:24:37.860 | he'll attract from the center,

03:24:39.780 | he'll attract from people,

03:24:41.060 | Republicans who won't vote for Trump,

03:24:42.460 | of which they're a big percentage, could be 60% or more.

03:24:45.340 | It could be 70% won't vote for Trump.

03:24:47.940 | And also from the Democrats.

03:24:49.940 | So I think he's a really interesting candidate,

03:24:52.300 | but we gotta get the word out.

03:24:53.380 | - Yeah, I got a chance to chat with Dean.

03:24:54.980 | I really like him.

03:24:55.820 | I really like him.

03:24:56.660 | And I think the next president of the United States

03:25:00.340 | is gonna have to meet and speak regularly

03:25:04.860 | with Zelensky, Putin, and Yahoo, with world leaders,

03:25:08.620 | and have some of the most historic conversations,

03:25:12.580 | agreements, negotiations.

03:25:14.820 | And I just don't see Biden doing that.

03:25:17.540 | - No.

03:25:18.360 | - And not for any reason, but sadly, age.

03:25:23.360 | - Think about it this way.

03:25:25.620 | When Biden's present now,

03:25:27.700 | you saw his recent impromptu press conference,

03:25:30.720 | which he did after the special prosecutor report,

03:25:34.500 | basically saying the guy was way past his prime.

03:25:37.580 | And then he confused the president of Mexico

03:25:40.060 | and the president of Egypt.

03:25:42.060 | So they're very careful when they roll him out.

03:25:44.740 | And he's scripted,

03:25:45.700 | and he's always reading from a lectern.

03:25:47.740 | Imagine the care they have in exposing him.

03:25:50.860 | And when they expose him, it's terrible.

03:25:52.980 | Okay, imagine how bad it is for real.

03:25:54.780 | - It's not good.

03:25:56.740 | - No, really bad for America.

03:25:58.820 | And I'm upset with him and upset with his family.

03:26:01.480 | I'm upset with his wife.

03:26:03.180 | This is the time where the people closest to you

03:26:05.920 | have to put their arms around you and say,

03:26:08.160 | dad, honey, you've done your thing.

03:26:13.160 | This is gonna be your legacy,

03:26:15.040 | and it's not gonna be a good one.

03:26:16.600 | - Great leaders should also know when to step down.

03:26:19.080 | - Yeah, and one of the best tests of a leader

03:26:21.280 | is succession planning.

03:26:23.440 | This is a massive failure of succession planning.

03:26:26.280 | - Outside of politics, let me look to the future.

03:26:31.180 | First, in terms of the financial world.

03:26:36.000 | What are you looking forward to

03:26:38.160 | in the next couple of years?

03:26:40.000 | You have a new fund.

03:26:41.480 | Like, what are you thinking about

03:26:43.480 | in terms of investment, your own,

03:26:47.400 | and the entire economy,

03:26:49.640 | and maybe even the economy of the world?

03:26:52.820 | - Sure, so the SEC doesn't allow,

03:26:54.960 | doesn't like us to talk about new funds

03:26:58.600 | that we're launching that we filed with the SEC.

03:27:00.800 | - Sure.

03:27:01.960 | - But I would say I do,

03:27:04.220 | and by the way, if anyone's ever interested in a fund,

03:27:06.400 | they should always read the prospectus carefully,

03:27:07.960 | including the risk factors.

03:27:08.940 | That's very, very important.

03:27:10.660 | But I like the idea of democratizing

03:27:13.720 | access to good investors,

03:27:16.220 | and I think that's an interesting trend,

03:27:19.760 | so we wanna be part of that trend.

03:27:21.600 | In terms of financial markets, generally, the economy,

03:27:25.840 | you know, a lot of it is gonna depend

03:27:27.400 | upon the next leader of the country,

03:27:28.600 | so we're kinda right back there.

03:27:30.780 | You know, the leadership of the United States

03:27:32.240 | is important for the U.S. economy,

03:27:33.280 | it's important for the global economy,

03:27:34.520 | it's important for global peace,

03:27:36.120 | and we've gone through a really difficult period,

03:27:40.400 | and it's time, we need a break.

03:27:42.800 | But, you know, look, I think the United States

03:27:44.440 | is an incredibly resilient country.

03:27:45.920 | We have some incredible moats.

03:27:47.900 | Among them, we have the Atlantic and the Pacific,

03:27:49.840 | and we have, you know, peaceful neighbors

03:27:51.520 | to the North and the South.

03:27:53.480 | We're an enormously rich country.

03:27:55.680 | Capitalism still works effectively here.

03:27:58.080 | I get optimistic about the world

03:28:00.000 | when I talk to my friends who are either venture capitalists

03:28:02.280 | or my hobby of backing these young entrepreneurs.

03:28:05.440 | I talk to a founder of a startup

03:28:07.620 | if you wanna get optimistic about the world,

03:28:08.920 | so I think technology is gonna save us.

03:28:12.120 | I think AI, of course,

03:28:13.200 | has its frightening Terminator-like scenarios,

03:28:17.440 | but I'm gonna take the opposite view,

03:28:20.320 | that this is gonna be a huge enabler of productivity,

03:28:25.000 | scientific discovery, drug discovery,

03:28:27.160 | and it's gonna make us healthier, happier, and better.

03:28:30.960 | So I do think, you know, the internet revolution was,

03:28:34.760 | you know, had a lot of good, obviously some bad.

03:28:36.960 | I think the AI revolution's gonna be similar,

03:28:38.820 | but we're at this other really interesting juncture

03:28:42.120 | in the world, you know, with technology,

03:28:45.400 | and we're gonna have to use it for our good.

03:28:48.160 | On the media front, I'm happy about X,

03:28:50.120 | and I think Elon's gonna be successful here.

03:28:53.300 | I think advertisers will realize

03:28:54.840 | it's a really good platform.

03:28:56.000 | The best way to reach me,

03:28:58.560 | if you wanna sell something to me,

03:29:01.000 | I've actually bought stuff on some ads in X.

03:29:04.120 | I don't remember the last time

03:29:04.960 | I responded to direct-response advertising.

03:29:07.600 | You know, in terms of my business,

03:29:10.320 | I have an incredible team.

03:29:11.320 | It's tiny, and we're one of the smallest firms

03:29:13.920 | relative to the assets we manage.

03:29:15.960 | It's a bit like, you know, the Navy SEALs,

03:29:20.480 | you know, not the U.S. Army.

03:29:22.640 | We have only 40 people at Pershing Square,

03:29:24.860 | so it's a tight team.

03:29:26.520 | I think we'll do great things.

03:29:28.080 | I think we're early on.

03:29:29.520 | You know, my ambitions, investment-wise,

03:29:31.560 | I've always wanted to, I've always said

03:29:34.160 | I'd like to have a record as good as Warren Buffett's.

03:29:36.600 | The problem is, each year he adds on another year.

03:29:38.600 | He's now in his 93rd year,

03:29:40.160 | so I've got 36 more years to just get where he is,

03:29:44.120 | and I think he's gonna add a lot more years.

03:29:46.480 | I'm excited about seeing what Nary's gonna produce.

03:29:49.720 | You know, she's building an incredible company.

03:29:51.720 | They're trying to solve a lot of problems

03:29:53.600 | with respect to products and buildings

03:29:57.280 | and their impact on the environment.

03:29:58.840 | Her vision is, how do we design products

03:30:01.480 | that by virtue of the product's existence,

03:30:03.920 | the world is a better place?

03:30:05.040 | You know, today, you make, you know,

03:30:08.120 | her world is a world where the existence of the new car

03:30:12.360 | actually is better for the environment

03:30:13.920 | than if the new car hadn't existed,

03:30:15.480 | and think about that in every product scale.

03:30:17.840 | That's what she's working on.

03:30:18.800 | I don't wanna give away too much,

03:30:20.340 | but you're gonna see some early examples

03:30:22.760 | of what she's working on.

03:30:24.200 | So again, I get excited about the future.

03:30:27.460 | And crises are sort of a terrible thing to waste,

03:30:31.380 | and we've had a number of these here.

03:30:32.740 | I think this disaster in the Middle East,

03:30:35.020 | my prediction is the next few months,

03:30:37.880 | this war will largely be over

03:30:40.720 | in terms of getting rid of Hamas.

03:30:42.780 | I think I can envision a world in which Saudi Arabia,

03:30:47.780 | some of the other Gulf states come together,

03:30:49.900 | take over the governance and reconstruction of Gaza,

03:30:54.540 | security guarantees are put in place,

03:30:56.700 | the Abraham Accords continue to grow,

03:30:59.500 | a deal is made, terrorists are ostracized.

03:31:02.640 | That this October 7th experience on the Harvard,

03:31:08.340 | Penn, MIT, Columbia, unfortunately, other campuses

03:31:12.460 | is a wake-up call for universities generally.

03:31:15.660 | You know, people see the problems with DEI,

03:31:19.820 | but understand the importance of diversity and inclusion,

03:31:22.880 | but not as a political movement,

03:31:24.300 | but as a way that we return to a meritocratic world

03:31:28.700 | where someone's background is relevant

03:31:30.180 | in understanding their contribution.

03:31:33.620 | But it's not, we don't have race quotas

03:31:36.100 | and things that were made illegal years ago

03:31:38.860 | actually being implemented in organizations on campus.

03:31:42.300 | So I think there's, if we can go through a corrective phase,

03:31:45.020 | and I'm an optimist, and I hope we get there.

03:31:47.620 | - So you have hope for the entirety of it, even for Harvard.

03:31:51.260 | - I have hope even for Harvard.

03:31:53.900 | It's generally hard to break 400-year-old things.

03:31:56.540 | - Well, I share your hope,

03:31:58.100 | and you're a fascinating mind, a brilliant mind,

03:32:02.540 | persistent, as you like to say, and fearless.

03:32:06.500 | The fearless part is truly inspiring,

03:32:08.740 | and this was an incredible conversation.

03:32:10.980 | Thank you, thank you for talking today, Bill.

03:32:12.940 | - Thank you, Lex.

03:32:14.500 | - Thanks for listening to this conversation

03:32:15.980 | with Bill Ackman.

03:32:17.100 | To support this podcast,

03:32:18.260 | please check out our sponsors in the description.

03:32:20.940 | And now, let me leave you with some words

03:32:22.940 | from Jonathan Swift.

03:32:24.860 | A wise person should have money in their head,

03:32:29.100 | but not in their heart.

03:32:30.860 | Thank you for listening, and hope to see you next time.

03:32:35.140 | (upbeat music)

03:32:37.740 | (upbeat music)

03:32:40.340 | [BLANK_AUDIO]

Bill Ackman: Investing, Financial Battles, Harvard, DEI, X & Free Speech | Lex Fridman Podcast #413

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