#82 Bill Ackman: Getting Back Up

Episode Summary

Executive Summary: Bill Ackman reflects on resilience, independence, and compounding progress, tying his personal and investing philosophy to lessons from failure, family, and long-duration thinking. He discusses concentrated investing, information sourcing, nutrition and health, the role of index funds and activism, and his COVID-19 hedge and public advocacy for shutdowns and economic reopening.

Main Topics: Resilience, failure, and persistence: Ackman argues success is shaped less by avoiding failure than by how one responds to it. He describes setbacks in his career as formative, emphasizing small daily progress, emotional balance, and support systems as the way out of difficult periods. Family influence, independence, and philanthropy: He credits his parents with teaching persistence, hard work, and philanthropy, and says a major driver has always been financial and personal independence. He frames giving back through Rawls’ veil of ignorance and the duty to help if one is fortunate. Investment philosophy and time arbitrage: Ackman explains Pershing Square’s concentrated, long-term strategy: buy simple, predictable, cash-generative businesses at a large gap between price and value. He argues the firm’s permanent capital base creates a structural advantage over shorter-duration investors. Information intake and idea sourcing: He outlines how he consumes news through major publications and Twitter, and how investment ideas increasingly come from the team rather than solely from him. The firm’s process is deliberately deep but not exhaustive unless the opportunity is compelling. Index funds, governance, and capital markets: Ackman sees index funds as both a governance force and a source of market distortion. He argues they increasingly control votes but lack the resources to steward companies properly, while also reducing float and potentially increasing volatility. COVID-19 response, hedging, and economic outlook: A major section covers his early concern about coronavirus, the decision to hedge with CDS, the logic for unwinding the hedge, and his view that a temporary shutdown plus policy support would prevent depression-like outcomes. Short selling, activists, and market discipline: He defends short selling as a public good when it exposes fraud, but criticizes efforts to damage businesses and laments slow regulatory response. He contrasts legitimate activism with harmful or manipulative campaigns.

Key Arguments: Success is not linear; the decisive factor is how someone responds to inevitable failure and keeps making progress. Persistence, discipline, and supportive relationships are essential tools for recovering from setbacks and avoiding emotional decision-making. Philanthropy should follow the logic of the veil of ignorance: if you are fortunate, you have a duty to give back. Pershing Square’s edge comes from long-duration capital and focusing on multi-year business value rather than quarterly noise. Concentrated investing allows deep analysis, but only when the business is simple, predictable, and free-cash-flow generative. Index funds improve governance pressure in some cases but also create a stewardship gap because they are commoditized and under-resourced for proxy voting. The market is more volatile when a larger share of stock is locked up in passive vehicles, leaving marginal trades to move prices more. Short sellers are valuable when they uncover fraud, but cross a line when they intentionally try to harm a company rather than expose wrongdoing. COVID-19 was an economic as well as health crisis; shutdowns, testing, and policy support would prevent a depression-like spiral. He believes many companies, especially venture-backed ones, stay private too long and suffer from weaker transparency and governance than public companies.

Data Points: Pershing Square capital from public company: 85% - Ackman says most of Pershing Square’s capital comes from its public holding company, enabling long-duration investing. Pershing Square ownership of its public company: 22% - He says Pershing Square owns 22% of Pershing Square Holdings. Hedge notional exposure at peak: 71 billion - Ackman says the COVID hedge reached $71 billion of notional insurance exposure. Average annual premium on CDS hedge: 70 basis points - Blended average cost across investment-grade and high-yield CDS. Estimated annual premium commitment: $500 million/year - He characterizes the CDS as a large multi-year payment obligation. Total premium actually spent: $27 million - Ackman says the firm spent about $27 million on premium before unwinding the hedge. Hedge value at peak: $2.7 billion - By March 12, the hedge had appreciated dramatically as markets fell. Capital deployed into stocks between March 12 and March 18: $2.05 billion - He says Pershing aggressively bought stocks during the market selloff and after starting to unwind the hedge. Net long increase after hedging activity: $350 million more long - After selling part of the hedge and buying equities, the firm was net more long than on March 11. Total firm equity: about $7.5 billion - Used to contextualize the size of the hedge and portfolio moves. Number of pandemic-related vaccine/therapy trials: 70 - Ackman cites ongoing global biomedical efforts during the early pandemic. Small investment in SEI: not quantified - He mentions a small position in SEI tied to shareholder voting technology. Potential proxy volume: 10,000–20,000 proxies - He uses this range to explain why index funds struggle with governance scale.

Pivotal Quotes: "how successful you are is really a function of how you deal with failure" — Bill Ackman: His core thesis on success and resilience. "make a little progress every day, eventually that compounded progress will dig you out of the hole" — Bill Ackman: His approach to recovering from business and personal setbacks. "if you want to be successful, all you need to do is look around the room and think about the classmate or classmates you most admire and what qualities they have, and just decide to adopt those qualities" — Bill Ackman: His description of Buffett’s advice on building character and habits.

Implications: Listeners get a blueprint for resilient decision-making: think long term, manage stress, value transparency, and avoid leverage excess. For investors, the interview underscores the power of permanent capital, governance discipline, and staying rational in crises.