Bill Ackman: SVB Collapse; Biden vs Trump; How I Lost $400M on Netflix; Bill's 10-Year Long | E991

Intro (0s)

• Bill Ackman expresses his excitement for the interview and mentions that he has heard many great things about the host.

How Bill Raised His First Fund (40s)

• Raising the first fund was challenging, with over 100 meetings and only six people ultimately investing a total of $3.1 million.
• Bill and his partner contributed their own money to the fund.
• The strategy of approaching wealthy individuals who were entrepreneurs proved successful, as they connected with the idea of backing young entrepreneurs.
• Bill emphasizes their lack of experience but highlights their track record of life success, moxie, and the fact that they were not using leverage, which reduced the risk of losing all the money.
• One of the investors initially declined but later invested after seeing the success of the investment ideas Bill and his partner had shared.
• Bill learned a lot from his first partnership with David.

Bill’s Relationship with David Berkowitz (4m13s)

• Bill and David Berkowitz were great partners and remain close friends.
• They shared an apartment at the beginning of their careers to save costs.
• The building didn't allow single people to share apartments, but they made an exception because Bill had worked for the landlord.
• People thought Bill and David were a couple because of this living arrangement.

How Bill Decides Who to Trust (6m40s)

• Bill forms a view of a person's character quickly and has rarely been disappointed.
• He listens to his gut instinct when making decisions about who to trust.
• The level of trust required depends on the situation, such as taking care of a child or investing money.
• Bill had a good understanding of David's character before they went into business together.
• Bill's father broke his trust and shaped his desire to be different from him.

What is Bill running from/towards? (8m27s)

• Bill Ackman states that he is not running from anything, but rather running towards greater happiness, self-actualization, great relationships, and friendships.
• He acknowledges that he wants to minimize the risk of negative events and maximize happiness, fulfillment, relationships, self-actualization, and achievements.
• Bill reflects on his past and acknowledges that he has experienced volatility in his career and marriage, but emphasizes that he has been consistently happy throughout his life.
• Despite experiencing challenging times, sadness, and loss, Bill maintains an optimistic and happy outlook on life.

Losing $400M on Netflix (10m26s)

• Bill Ackman faced challenges, including a fall from grace with Gotham Partners and a difficult period from 2015 to 2017 during a challenging divorce.
• To overcome these challenges, Ackman emphasizes daily progress, physical and mental health, supportive people, and learning from failures.
• When facing setbacks, Ackman advises not dwelling on the past and starting with a blank slate.
• After Gotham Partners, Ackman learned about liquidity and asset-liability mismatches, leading him to structure Pershing Square to invest only in liquid assets.
• Ackman stresses learning from mistakes, both successful and unsuccessful investments, and missed opportunities.
• A recent mistake at Pershing Square was losing $400 million on Netflix after initially investing $1 billion due to new information that emerged within a few months, causing them to question their thesis and exit the position.
• Successful investments include hedging against COVID-19's economic implications and interest rate risk, where they made a significant profit of $2.8 billion but regret not making it a larger bet and potentially earning $10 billion.
• Bill Ackman uses Twitter as a platform to influence big companies and effectuate change.
• He believes in free speech and takes advantage of his financial independence to speak freely.
• Twitter allows him to reach people who matter in finance, media, and central banking.
• He shares his views on important policy matters and engages in debates.

The SVB Banking Crisis (26m58s)

• Bill Ackman expressed concerns about a potential run on regional banks following the collapse of Silicon Valley Bank (SVB) and advised the government to guarantee all deposits, not just those under $250,000, to prevent a systemic crisis.
• Ackman clarified that he has no short positions in regional banks and his concerns are based on the broader financial stability of the US banking system.
• He highlighted the unique risk profile of SVB due to its disproportionate exposure to long-duration fixed-income assets compared to other banks.
• Ackman emphasized the need to calm depositors and restore confidence by providing temporary deposit guarantees until the FDIC insurance program is updated to offer higher coverage limits.
• The recent banking crisis has highlighted the importance of smaller banks in providing construction lending, real estate lending, and small business lending, which larger banks often lack the expertise for.
• To mitigate the risk of bank failures, it is advisable to avoid keeping large sums of money in bank accounts and instead opt for US Treasury money market accounts or US Treasury bills.
• Ackman suggests a temporary government guarantee for all deposits to stabilize the banking system, especially for small businesses, and criticizes the FDIC for not having selective deposit guarantees.
• He believes the Federal Reserve should pause interest rate hikes until the regional bank problem is resolved and proposes increasing immigration as a solution to temper rising wages and inflation instead of relying solely on interest rate hikes.
• Ackman predicts that Trump would win if he runs against Biden in the next election.

Bill’s Relationship to Money (42m31s)

• Bill Ackman used to equate money with self-worth and power.
• He realized that philanthropy is often not the solution to many problems and that for-profit business models are more effective.
• He believes that happiness comes from helping other people and that money has given him the ability to have a global impact on problems.
• He thinks about how to reallocate his funds through investments, both for-profit and non-profit, to solve important problems.
• He feels fortunate to have independence and believes that financial resources give independence and a voice to those with interesting ideas.

Tips for a Happy Marriage (45m58s)

• Finding the right person is crucial for a successful marriage.
• Commonalities in drive, ambition, values, thoughts, and physical attraction are important.
• Making time for each other despite busy schedules is essential.
• Date nights and regular walks can help strengthen the relationship.
• Managing time effectively is a challenge when balancing work, social life, and family.

Tips for Raising Kids as a Rich Person (49m26s)

• The key to raising children in a world of financial privilege is to teach them the same drive, hunger, and ambition that any child should have.
• Access to a good education, food on the table, and financial security are more important than the size of the house or the type of car the parents drive.
• Parents should teach their children about money and the value of hard work.
• Spoiled and wasteful parents will likely raise spoiled and wasteful children.

The Trend Most Investors Are Missing (51m50s)

• The world is structurally different than it was in the past 20 years, and there will be persistent levels of inflation in the foreseeable future.
• The pricing of long-term bonds does not reflect the current inflation rate, making them a poor investment.

Who Bill Most Admires (52m48s)

• Bill Ackman admires Warren Buffett, Joe Steinberg, his parents, and his mother in particular for her activism.

Bill’s Favorite 10-Year Long & Short (53m50s)

• Bill Ackman's favorite 10-year long investment is Universal Music Group due to the certainty of people streaming music in the future.
• His favorite 10-year short is a company that is likely to be disrupted by blockchain technology, especially monopolies that can be disrupted by blockchain.

Why Bill’s SPAC Failed (55m8s)

• Bill Ackman's SPAC transaction with Universal Music failed due to highly technical reasons by the SEC, despite it being beneficial for shareholders and having the same alignment as other SPACs.
• The failure highlights the issue of government regulators focusing on technical details rather than high-level principles.
• The collapse of Silicon Valley Bank is an example of regulators ignoring basic rules and focusing on technicalities, leading to a major financial crisis.
• Principle-based regulation focused on the big picture would be more efficient and prevent such accidents.

Bill’s Idea to Fix Income Inequality (57m26s)

• Bill Ackman expresses concerns about wealth inequality and the potential for violent consequences.
• He suggests promoting homeownership and asset compounding as solutions to address wealth inequality.
• Ackman proposes giving every baby born in America a $7,000 investment account that compounds tax-free until they turn 65, resulting in a $1 million nest egg.
• This initiative would cost approximately $20 billion per year and aims to provide everyone with a stake in the country's success.
• Ackman emphasizes the importance of starting savings early to take advantage of compounding returns.
• He also advocates for smart tax policies to address wealth inequality.

Problems with the Tax Code Today (1h0m42s)

• The current tax code has several issues, including:
  • Like-kind exchanges allow real estate investors to avoid paying taxes on profits from selling assets.
  • Real estate depreciation can be used to offset other income, which has allowed individuals like Donald Trump to avoid paying taxes.
  • Borrowing against appreciated assets, such as Elon Musk's Tesla stock, should be considered a taxable event.
  • Refinancing a property and taking out proceeds should be treated as a taxable event.
  • The proposed Biden wealth tax of 25% on appreciated assets would be destructive to startups and the economy.
  • Carried interest, a disproportionate share of gains given to certain individuals, should be reconsidered, especially for those in the asset management industry.

What scares Bill Ackman about the economy? (1h3m35s)

• Concerned about various geopolitical tensions, including North Korea, Ukraine-Russia conflict, China's involvement in the Middle East, and China's focus on Taiwan.
• Worried about the depletion of the US strategic petroleum reserve and weapon resources due to support for Ukraine.
• Concerned about inflation and financial instability in the US.
• Believes social media companies contribute to political division by driving people to extremes.