Bill Ackman - Evolving Investment Playbook, From MBIA to Moats

**Michael Mauboussin** (0:01)
Welcome to a new edition of the Value Investing with Legends podcast. My name is Michael Mauboussin, and I'm an adjunct professor at Columbia Business School and a faculty member at the Heilbrunn Center for Gram and Dodd Investing. I'm here with my co-host, Tano Santos, the Robert Heilbrunn Professor of Asset Management and Finance at Columbia Business School and the Faculty Director at the Heilbrunn Center. Hi Tano, how's it going today?

**Tano Santos** (0:23)
Going good Michael, everything good. I'm not teaching just yet, so plenty of time for podcasting, for reading, for thinking until the spring semester.

**Michael Mauboussin** (0:32)
That is fabulous. Well, Value Investing is hard. You have to be able to do quality analysis to identify gaps between price and value. You may need to agitate executives to better manage the business, and contrary views can often lead to controversy. Our guest today runs a concentrated fund of stocks of high quality companies. He is known too for activism and even for opportunistic bets on macroeconomic outcomes.
The fund has delivered excellent returns over time, comfortably exceeding those of the overall market. We're delighted to welcome Bill Ackman, founder and CEO of Pershing Square Capital Management, a firm he founded in 2004 Pershing Square has approximately $20 billion of assets under management. Prior to Pershing Square, Bill founded Gotham Partners with a Harvard Business School classmate, David Berkowitz. Bill graduated magna cum laude from Harvard with a BA in social studies and has his MBA from Harvard Business School. Since 2008, Bill has generously sponsored the Pershing Square Value Investing and Philanthropy Challenge, a competition that caps our Applied Security Analysis course at Columbia Business School with real-world stock pitches, a finals event he hosts, and prizes funded by Pershing Square. More than a thousand students have taken this course, and each year the finals have the opportunity to pitch a stock to Bill and a group of judges. We know that that experience has been really valuable for those students. So welcome, Bill. Thank you for joining us today. There are lots of topics we're keen to discuss.

**Bill Ackman** (2:03)
Well, thank you for having me.

**Michael Mauboussin** (2:04)
So let's start with some background. You grew up in Westchester County and went to Harvard University. Were there early experiences that shaped your temperament as an investor, curiosity, persistence, and maybe even a little healthy taste for controversy?

**Bill Ackman** (2:19)
One of my more significant childhood experiences was I was about 16 years old. My father's car, one of the tires was deflated. Dad's like, great opportunity for you to learn how to change a tire. I said, terrific, I'm going to go do that. So I actually went to the glove box, took out the manual, read what I was supposed to do, and it said, put the car on a level surface, jack it up, and change the tire. I said, Dad, I need to move the car because our driveway has a bit of a gray to it.
And Dad said, it's pretty flat. I said, Dad, but it does really actually have a grayed and says here that I'm supposed to put it on a level surface. He said, no, no, no, it's fine. I said, okay. I jacked the car up, I take the bolts off, and then I sort of trying to get the tire off, it's stuck. So I had my legs under the car, I'm sort of pulling on the tire, and the car starts to tip off the jack. And I get my legs out from under the car before it collapses off the jack, it would have been bad. And it was this very significant moment for me because my father is someone I had enormous respect for, and my parents always told me to listen to them. But my takeaway from the whole experience was, I'm always going to listen, but I'm going to make my own decisions, because it's my life that I have on the line. And I've always lived that way. My parents would always tell me I never listen, I still hear it from my mother today. I said, no mom, I listen really carefully, but I make my own decisions. I would say that was one of the more important moments in my life.

**Tano Santos** (3:36)
What do you get out of that academic experience in Harvard? I know that it's very important for you, your connection to Harvard, you speak about it often. Can you tell us a little bit about those years? What is it that you learned? What kind of things were you thinking about at the time?

**Bill Ackman** (3:50)
I learned how to write at Harvard, even though it was something that was not taught to me. I actually grew up in Chapman, New York, went to Harris Greeley High School, was considered a top 10 public school at the time I went there, in the country, believe it or not. I left not being a good writer. Big believer that being able to write is a very important skill, and even from an investor's perspective, being able to articulate your thoughts, one of the best tests as to whether you really understand something is put it down on a piece of paper. It can make sense in your mind, and then if you put it down on a piece of paper and there's no clarity to it, then there are gaps in your understanding. So I would say learning how to write, maybe debate, take on different points of view, be challenged. Those are some of the great things that I experienced as an undergrad, and also I built amazing relationships. One of the more meaningful parts of my Harvard experience, actually there were a couple that were really outside the classroom. One was rowing. I went out for the rowing team. That was a time where you didn't have to be recruited. You can row onto the team, so to speak. I was on a Harvard varsity third boat, stroked the third boat for four years and that was very significant. Rowing really teaches you that the limits of your physical mental limits are much greater than you believe. Business, investing, it's a bit of a context board. You need to be in good shape and you also have to have a fair amount of persistence to go deal with failure well. The other really significant experience I had was I worked for Harvard Student Agencies, which was a for-profit student organization that among other things published these travel guides called the Harvard Student Travel Guides and I sold advertising. I sold advertising all over the world to hotels and rental car companies and credit card companies and it was my first real business experience and I learned sales, which is a very important skill and was very healthy to me when I eventually went and raised a fund coming out of business school. So I had great experience in the classroom and I also had great experience outside the classroom and I met friends that I still keep in touch with today.