Look, I think the AI conversation is probably the most important conversation to be having. Our focus is identifying the great businesses of the world. The less you know about investing and what you're investing in, the more diversified you want to be. I said, look, I'm gonna quote unquote try to allocate as much of the world's resources to me as possible and then reallocate them in the way that I think makes the much sense.
SPEAKER_00I'm Carl Hazley, and you just heard from Bid Ackman. He is the founder and CEO of Pershing Square Holdings, which runs about $33 billion. This is a must-listen episode. So sit back, relax, and hear from one of the greatest investors of all time, Bill Ackman. Bill, thank you so much for joining me today. Thanks for having me. The biggest conversation right now is about AI, whether it needs regulating, whether we've gone too fast, what the risks are. You've obviously got positions in some of the big hyperscalers, but also in companies that are set to be disrupted by AI. Where are we with AI? How are you thinking about things?
SPEAKER_01One, I hope we don't have companies that are going to be disrupted by AI. So if you think we do, I'm happy to have that conversation. Um but we do own some stocks where there's a perception of risk of disruption uh due to technology, and that's you know, created an opportunity for them at more attractive prices. Look, I think the AI conversation is probably the most important conversation to be having. Um, it's a bit like you know, we're developing a nuclear weapon uh and we're competing around around the world to develop that nuclear weapon, and we think that technology is going to have lots of benefits for mankind, but it also has the potential to destroy mankind. It's you know, fairly analogous. Um but I I think before we tested a nuclear weapon, we didn't know exactly precisely what would happen, but at least we were relying on our understanding of physics. Here, number one, we don't have an incredible understanding of the human brain. That's actually something I've learned about more recently. Um AI and uh you know, some of the recursive learning and and uh reinforcement learning that is done by a lot of that is modeled off of you know how human beings learn. So you have these models that are developing, approaching superhuman intelligence, and we we don't know what the implications are going to be. And we've certainly seen some pretty frightening recent episodes, this hugging face, uh, you know, the the swarm of AI kind of working together to achieve an objective, you know, committing a felony to break into another website. And this is pretty frightening stuff. And uh, of course, the noisy uh exits of various people from anthropic and and open AI, and even Elon saying, yes, we have to be, you know, Elon has been saying for a while, you know, in fact, he was early in in in the creation of OpenAI. The theory was, you know, we need to get out ahead of this and and we need to have benign force. I think the complexity is I don't know how we slow AI development. There's such an incentive for China, Russia, whatever to get there before us. Uh I'd rather be the AI leader and uh and then you know have have as much, you know, I would say as much oversight as possible without restricting the ability of us to be the competitive leader. I think that's that to me is uh is a critical. As much as I worry about AI, I worry about it more if one of the uh one one of the enemies of the United States uh guess it before we do.
SPEAKER_00How do you even start to scenario plan around all of these potential outcomes? And maybe just in the US for the time being, is it a case of worrying about the speed of uh you know improvements? Uh is it degrees of success? How do you start to put that together in a in a model that makes sense?
SPEAKER_01So look, the world is an uncertain place for my lifetime. That's that's always been true.
unknownYeah.
SPEAKER_01It almost always seems more uncertain now than ever before. And that that seems to be our kind of lived experience, right? Whether it was the pandemic, um, again, I I think inflation wasn't so dramatic versus the pandemic, but now AI is, you know, there there have been a series of very dramatic events, financial crisis. It seems like every whatever, five or seven years, we have some development, either in the financial markets, technologically, uh geopolitically, or otherwise, uh, that create risks. We are not trying to uh maneuver around kind of short-term movements in markets. You know, what we think is the best long-term strategy is to find kind of the business that can withstand the test of time, the business that you can own if the stock market closes for a decade, and who knows what's going to happen. But you can have a high degree of confidence that coming out of that, that the business will not just exist, but continue to thrive. And I think if you look at the businesses we own, you know, in each case, we spent a lot of time thinking about, you know, their durability, their potential for long-term growth. Um, and, you know, Buffett always used to talk about, you know, if you look at the last whatever period of time, you know, last hundred years, we've had a couple of world wars. Uh, we've had the development of a nuclear weapon, we had the detonation of a nuclear weapon, we've had again more recently a pandemic, a financial crisis. You know, the internet, the world will always have disruptive events. But during these periods, if you own, you know, kind of these high-quality, durable businesses with strong balance sheets that have long-term, you know, opportunities for growth, that's been a pretty good thing to do. So our our job is to find those companies and generally not part with them unless they get kind of stupidly overvalued. And that's and that's worked well for us for it's worked well for us for 20 almost 23 years, um, but it's worked well for investing for for you know I would say hundreds of years, or certainly a couple hundred years.
SPEAKER_00Can I maybe put a cynics question to you on the back of that? Please. Right. Companies with a strong balance sheet that will endure, stand the test of time. If I look across the hyperscalers in big tech, a cynical person might say that these companies with tons of cash with strong balance sheets are making their balance sheets weaker in order to pursue the AI opportunity. You know, if I look at China spending one dollar for every eight that the US is spending, and the implicit uh high hurdle rate that these companies potentially need to earn an attractive return on their investments. Yeah, the cynical view is that yes, these are strong companies, but they are becoming weaker, and that's maybe a direction of travel you don't necessarily want to be a part of.
SPEAKER_01So I don't agree with the proposition. Uh so we we own uh in the hyperscaler space, we own Microsoft and Amazon, which are not pure hyperscalers. Obviously, they have other, obviously important core businesses. Um but what I can say is um what is absolutely clear and maybe clear from the fear of AI is that AI is incredibly powerful uh and AI and that the demand for compute is going to continue to uh you know be enormous and scale for for you know probably you know decades to come, right? How much value can be created per dollar of compute is only improving as AI gets gets more and more powerful. A company's balance sheet is only getting worse if the investments that it's making. What's what's happened in the last you know couple of years is that you know, let's say Microsoft, Amazon, Google, et cetera, are accelerating their capex spend and anticipation of demand that they're actually seeing, right? They're trying to keep up with the demand for their service, right? Normally, and and that's actually created an opportunity to buy uh Microsoft stock, Meta stock. You know, the the market, these were pretty uh, well, certainly Microsoft was a you know a very capex light kind of business model. Well, I guess the you know ultimately data centers were, but it was still relatively capex light relative to their cash flows and you know AAA balance sheet, et cetera. Uh now what they're doing is they're just front loading that capex spend because the demand is so great and and they want to be in a position to meet it. And that demand will, you know, I you know, I think the evidence suggests that they'll be able to price that uh demand appropriately to earn you know a very attractive return on capital. So you have a very high quality business that has an opportunity to invest even more capital in a high return business, to me, that's a ultimately a better company that will have an even stronger market position over time. So I'm I'm not skeptical at all about that. I think that's a good thing. Now, if, on the other hand, you know, if you have a business where you're forced to make an investment in capital, um, and you're not and the incremental investment does not come with a substantial incremental return, then yes, I would be quite concerned about that. But I I don't think that's the case here. So I think this is indeed growth capex, uh, where um they've just a big, massive, significant, sustained spike in demand in order to meet that demand, uh, they've they've had to make investments on which they expect your hybrid subturn.
SPEAKER_00Gotcha. Okay. So I want to zoom out a little bit to your investment process and you know how you think and how you identify opportunities. So can you share a little bit about how you and the team do that? What is the what is the process?
SPEAKER_01I would say our focus is identifying the great businesses of the world. And every day we're trying to learn about these great companies. Um and over time we've built a library of great businesses that someday we'd love to own. And the great durable, high-growth, well-capitalized, well-managed company generally uh trades at a price that offers a relatively modest return because people like all those factors. Yes. Every once in a while, a company that meets all those criteria trades at a price that offers, you know, twice that return or more. Yeah. Uh, you know, this happens to be one of those moments where a business like Microsoft, a business like Amazon, um, business like Meta, Uber, you know, the some of the kind of core names in our portfolio, we believe are trading at prices that offer well north of a 20% IRR on a long-term basis kind of going forward. The hard part is you know, is this business a business that's going to be disruptive? Is this a business that has a wide mode, as Mr. Buffett would say, around it to protect it from uh competition? That's where we spend most of our time understanding the durability of the franchise. And then it's building a model of what that business looks like over time. And we try to invest in these kind of relatively highly predictable businesses. And then it's just a little bit of math to determine what the go forward return is. And then when that go forward return gets within our strike zone, uh we update the analysis and everything checks, we'll buy a stock.
SPEAKER_00Aaron Powell You talked about the opportunities in high-quality companies, you know, when there's a sell-off essentially. And are those things happening more frequently or less?
SPEAKER_01And the reason I ask is much more frequently.
SPEAKER_00Yeah. Is that is is that I mean, is that to do with the rise of retail investors or because the advantage that you have and that retail investors have is that you've got long-term capital. You can be patient for a long time. Whereas, you know, an investment manager at an institution, they can be long-term, but December 31st rolls around and if they've underperformed, you know, their job's on the line. What's what's driving that?
SPEAKER_01So I would say the the factors driving more volatility in the market are driven by two principal forces. One, the rise of indexation, bigger percentage of companies owned by index funds that in effect shrinks the effective flipped, right? Index funds are basically permanent owners, more and more capital flows into index funds, they end up owning a greater and greater percentage of the shares, which means the marginal buyer and seller will have more impact on price. Um, I would say the bigger force of force, maybe it's hard to calculate this scale, but you know, the so-called, you know, there are a lot of trading investment strategies today that are very short-term uh because of the underlying leverage of the strategy. Think uh Citadel Millennium, maybe Jane Street, uh firms that are very short-term trading oriented, they're looking for small uh advantages in markets. Um, when a company disappoints or exceeds expectations, you see huge changes in stock prices. Now, um, that has created for us the opportunity to own some truly great companies at occasionally insanely cheap uh prices. You know, retail investors are an obviously very important force. Some have permanent capital and some don't. If you're a retail investor operating with margin leverage, you we have the opposite of permanent capital. And there's a lot of speculative activity in markets. If you're trading options, it's not really long-term capital. You know, we we're fortunate in that we manage public entities. We're Pershing Square and affiliates with the larger shareholders. We have, you know, so-called permanent capital. This means we can buy something on the basis of a five-year IRR without worrying about where it's going to be on, as you say, on December 31st. Of course, we'd like December 31st to be good price because uh, you know, always good to report a good year. Um, but you know, a year that creates the opportunity for us to own great businesses at attractive prices sets up for higher returns in future years. And that's how we think about it. And this has been largely that kind of a year for us where we've been able to buy substantial stakes in businesses, a number of which we've always liked, but never got a chance to own.
SPEAKER_00You've always had a concentrated fund. And I just wonder, again, if I think about investors watching and listening to this, you know, the received wisdom is diversification, diversification, diversification. You've gone the opposite way in a sense. And I wonder, you know, how you think about that approach in the context of that received wisdom.
SPEAKER_01Sure. So diversification makes sense. The less you know about investing and what you're investing in, the more diversified you want to be. Um, I would argue the more you know about the businesses you're investing in, the more opportunity you have to be a concentrated investor. And the reason for concentration is unlike children where you're not supposed to rank order your favorites, investing, you can you can assess risk and return. And for every portfolio manager, they're likely to have uh an investment that they believe has less risk and more return than another investment in the portfolio. You know, there aren't hundreds of incredible businesses. Uh, there are smaller numbers uh in terms of uh companies of a scale that we would be able to invest in. And they don't always become, they won't always available at prices that make sense. Um so that limits us, it limits our universe if we want to achieve our return objectives. And the benefits of diversification, once you get beyond, you know, a dozen or 15 names, the incremental diversification benefit of idea 16 is not, in my view, does not meaningful versus the benefit you get by owning more of ideas one, two, and three. Right? I'd rather have a more concentrated portfolio. Um I still think diversification makes sense because you know it investing still fundamentally is a probabilistic game. You know, the unexpected can happen. You can be uh disappointed. Um but uh yeah, we think we have an adequate degree of diversification, but not too much. It's hard to beat the market if you are the market.
SPEAKER_00One of the big ways a lot of people will have gotten to know you, perhaps, and Pershing Square is your activism with companies. Uh can you maybe just uh share from your perspective, and maybe it ties into that focused, concentrated portfolio, how and why it makes sense to be an activist investor at times.
SPEAKER_01Sure. So actually, uh it's been a decade since we've taken made an activist investment. That is an investment where our business plan was to take a series of steps to make changes to the way the business was being run. You know, what's happened with the passage of time is the firm, you know, people know who we are. That was not the case 20 years ago. And so in order to get the market's attention, uh, as a relatively small investor, we had to put out our theses in a very public way. And uh, you know, we weren't, we didn't get invited immediately to join a board of directors. Uh in fact, we couldn't even get a meeting in some cases with management. But w as we sort of built our reputation, and as we had to on occasion run a proxy contest, which is maybe the most extreme version of shareholder activism, and and run these contests successfully, uh, that gave us, and then, you know, as the track record uh demonstrated over time, it gave us credibility, not just with uh investors, but with board members and management teams. And people figured out, you know what, Pershing can be a force for good. Uh rather have them on side than offside. Uh and so today we buy a stake in the business. I was, I mentioned uh uh, you know, what's interesting is uh I got a few thank you notes when we took some initial stakes in companies. Uh where CEO wrote wrote a personal letter, you know, dear Bill, thank you for uh investing in, you know, uh ICE, uh, you know, the owner of the New York Stock Exchange. Um, and and sharing that they shared our view. We put out our thesis in our letter as to why we own the stock, and they and they sort of confirmed our thesis, uh, respected our analysis. We didn't get many thank you notes in the first decade. Um, but we're we're getting more now. But it means that if we do have an idea on how to help a business be more successful, they're gonna be more receptive. And and the opportunity for you know being an influential shareholder, you have to call yourself an activist, is that sometimes, you know, when you're managing a business, you don't have the perspective of an investor that's looking at and has access to all your competitors. Right? In fact, you have certain limitations on your ability to do that. But as an outside investor, not a member of management, you know, we can talk to the competitors of each of our various companies. Uh, we can meet the management teams, we can uh get the perspective that comes from looking at you know many businesses over time that occasionally gives us an insight. Um, you know, the the most extreme version of activism is a case where you think the person running it can't fix the company, you need to replace that person. We're uh up to taking a stake in a company that offers that opportunity. Um, you know, the the market generally values stocks on the basis of what uh you know, assuming that all holders are passive, meaning that whatever mistakes the company's making are going to continue. Um, and we can, you know, the opportunity for an activist or someone who's an influential shareholder is you can buy with the confidence to believe that you can change whatever is wrong about business. You know, Chipotle was trading at half of what it was worth if it was if they could fix the problem. But none of the shareholders believed the problem could be fixed. But we bought a 10% stake with the confidence that we could, you know, make necessary changes. We had a CEO in mind who could come in and who we think would, you know, and the question in our mind was are we going to be able to convince the board and the CEO, who was the founder, that he should, you know, step upstairs to chair, that bring in a new person. And he was quite receptive. And we'd have to run a proxy contest, they invited us to join the board. And that's really been our history uh of the last sort of decade.
SPEAKER_00Aaron Powell What's the difference between those those influential shareholder positions that are successful versus not? Is it down to the management and board's receptiveness? Is it, you know, market forces, this company was maybe not going to turn around in any case?
SPEAKER_01So if we do if we do our job, uh we're gonna buy a really high-quality business. Um and in the last, I would say, nearly decade, we've been able to find businesses like that that are already being run by good people and just take advantage of the volatility in the market to buy them at a good price. That's a much easier strategy, less uh I I used to call it return on invested brain damage. I'm more cautious with that term because I'm more unfortunately familiar with the with true brain damage. But you know, much rather invest within a phenomenal team and a great business at a good price than a great business at a good price with a bad team where you have to do a lot of work. Uh and the if one of those investments you know, one of the our experience has been we generally avoid investing in controlled companies where there's a need for change. And our experience in investing in controlled companies with a need for change has not been great. Um, because a controlling shareholder is a true barrier to there you have to convince them. And and that's not something, you know, they may have an agenda that's different from yours, or they frankly may have a different view. And there's nothing you can do about that.
SPEAKER_00We talked about, you know, uh, you know, being an influential shareholder early on and that being the way to affect change, and now you probably don't necessarily need to do that. The fact that Pershing is an investor and has a view can almost help make that view a reality. Have you changed as an investor for better or worse, perhaps?
SPEAKER_01Hopefully for better. Um I would say uh the biggest change over a 30, you know, 34-year career is understanding the importance of business quality, durability, and long-term growth. Uh and in the earlier days, we'd buy, let's say, a dollar for 50 cents, where there was a catalyst to get to a dollar. But as you got closer to a dollar, it became a lot less interesting and you had to find a place to put the capital. In more recent years, we're finding places where we're buying, you know, a dollar maybe for 70 cents. Um, occasionally, you know, 60 cents, 50 cents. But where the dollar becomes $1.15, you know, and then $1.30, then $1.60. Uh, and so, you know, you and the discount narrows, but you can continue to be a long-term owner. Um, you know, the benefits of business quality are something that we I appreciate even more. And in a world with very powerful disruptive forces, most notably AI, you want to own the most durable business in the world. Um and our the vast majority of investors today, it seems, in the, you know, that are moving around the public markets are looking for an edge over a very short period of time. Yeah, sometimes a day. But you know, that to me is just gambling. But you know, oftentimes a quarter. Um, you know, buying a stock because based on the data they collect, they think the company's gonna outperform that quarter, and therefore the stock will move by X and they can capture a five or six percent move in a stock in 90 days. And that's just you know, anathema to what we do.
SPEAKER_00So I I feel like everything you've said in this conversation is leading to this point, which is there aren't that many high-quality companies in the world. You've got a view on the biggest and the ones that you can, you know, uh reasonably have a position in. You want to own them for a very long time. You're less focused on getting a dollar for 20 cents as you are getting a dollar for less than a dollar that will grow over time. Um you've mentioned Mr. Buffett's Berkshire Hathaway a couple of times, and it feels like you know, the parallels between Berkshire and Pershing are getting closer and closer. Which brings me to Howard Hughes. Is that the direction of travel? Are you, you know, becoming increasingly a permanent owner of certain businesses? Um is that the right way to think about things? Or am I, you know, spinning my own yarn here?
SPEAKER_01And I would say a lot of I think all of us can learn from Mr. Buffett. I certainly have. Um and uh we have some but not many of the constraints that Berkshire Hathaway has. Obviously, the scale there affects dramatically their ability to buy and sell things. Um we vastly prefer things we can own for many years. Yeah. Uh but we are generally a minority state buyer in public companies. So our principal investment vehicle, Purging Square Holdings, you know, talk about dollars for discounts. That's a dollar trading at 67 cents. You know, the net asset value of the liquid underlying holdings of that company uh are are available at a 33% discount uh to that. Uh that that's worth a look, I would say. And if that entity, if I'm correct, and we own a portfolio of businesses that themselves are 65, 70 cent dollars, net only dollars are growing at a good rate. Okay, but now you have a double discount. And then, oh, and by the way, we finance that business with 80% equity, but 20% debt at very low cost. That should be able to, you know, compound at a pretty nice rate over time. You get a margin of safety and that kind of double discount. Um, other than a brief advertisement for Pershing Square Holdings. So I would say those vehicles will be, you know, Pershing Square Holdings are entity we listed recently in the US, Pershing Square USA. Those will be closed-end fund type entities, a way for us, we're gonna do the work, and an investor can go along for the ride, and we're gonna own minority stakes and large cap public companies. What Howard Hughes is, Howard Hughes is really, we're taking a true page from the Buffett playbook. We have a business that's sort of gone unrecognized by the market in terms of its performance, stock price performance in the last significant period of time, where we're repurposing that business, we're using that platform to do something else. Buffett started with a textile business that was a dying business. He liquidated that business over time, he invested the assets in, bought an insurance company, bought a bank, he bought a candy company. Um, we're following a pretty similar playbook, uh, starting with insurance. So Howard Hughes is a real estate company. The real estate over time self-liquidates. We own land that we sell every quarter, we own condominiums that we sell almost every quarter, uh, and uh we have cash from income-producing assets we own. That company historically took all of its capital and reinvested in real estate. Today we're taking all the excess cash from that business and we're investing in insurance. We injected capital in Howard Hughes, we bought an insurance company uh called Vantage Holdings. Um we've recruited, we believe, the best senior team in the insurance industry, a guy named Mark Renneson from Arch Capital Group, David Gansberg, former president of Arch Capital Group. Uh, and we're building out a best in class insurance company team so that we're going to run a profitable insurer that you know makes money on writing insurance. And then we're gonna manage the assets very similar to the way Buffett has over time. The first thing we did, we closed on the company three months ago, we sold their fixed income portfolio, which was kind of a longer dated safe portfolio, and we reinvested in short-term treasuries. So we fortunately missed uh the the risk to the bond market from a rise in rates. And then we took the surplus of the insurer, we bought a common stock portfolio. We think we can the combination of profits on the liability side of the balance sheet, plus returns on the asset side of the balance sheet will generate a high return on equity insurer over time. That with the power of compounding, we can build a very profitable business. Um that's uh largely from learnings from from Mr. Buffett. And, you know, starting at a somewhat bigger scale, he was, you know, market cap of Berkshire was like $40 million or something when he bought an insurance company. Uh Howard Hughes is about a $4 billion market cap company. Um, but you know, with the past, you know, 10 years from now, we think that's gonna be a vastly more valuable business. By the way, another cheap stock. Uh we we bought a stake in that company at $100 a share uh 15, 16 months ago. Um we put the real estate we thought was worth at least $100 a share. Uh the stock at the time was 66. We were paying a premium uh to transform the company. Stock today is 62. Why? Because interest rates are up. People think, okay, real estate, mortgage rates are up, so therefore, you know, it's still being thought of by the market as a real estate company. But fairly quickly it's going to become a very different kind of business.
SPEAKER_00You've previously spoken about the goal of becoming uh a millionaire by 30, uh 100 million by 40, billion, a billion dollars by 50 and achieving those goals early. But one of the things that struck me is, you know, it's not, it's you know it's not for nothing. Uh you recently launched the Ackman Oxman Institute. Uh you shared a really personal story around that. Um, up to you how much you want to get into it. But what I'd love to spend a bit of time on is how, you know, how you think about measuring success there, um, given there's a a mission behind it, but it's ultimately, well, not ultimately, it's also a commercial venture. So is there a balance there you need to strike? And can you maybe share a bit more about it?
SPEAKER_01Yeah, of course. So uh actually the the aspirations were the aspirations of a 19 or 20-year-old telling my dad what my business plan was. But the part of the business plan, I said, look, I'm gonna quote unquote try to allocate as much of the world's resources to me as possible and then reallocate them in the way that I think makes the most sense. That was kind of my grandiose uh aspiration. To then, you know, 20 years ago, I started uh, or I think about 20 years ago, yeah. I started a foundation uh and that was and you know, to the point that diversification protects you against ignorance, that was our approach in the early days of the foundation. Uh we did a lot of different things because we didn't know what we were doing. And we wanted to make sure we felt as a fiduciary for these assets, we have to invest them for the benefit of society. Um, you know, you get a tax benefit when you donate money in the U.S. And therefore, you know, in some sense, the the public is uh your fiduciary for the public and how those assets are or uh because you're being subsidized in some sense. Um and uh more in more recent years we started to concentrate a bit. We started to concentrate on scientific research, uh, cancer research, brain-related research. And then we've had our own sort of personal tragedy. Uh in uh my 26-year-old daughter, Lucy, had a brain hemorrhage a little over seven months ago. And uh she was unfortunately alone uh in her apartment at the time. We and we did not uh get to her until late at night, and the result is her brain was under uh her brain was under enormous pressure uh from uh the the uh the blade the the bleed. Because what happens is you have a burst vessel in your brain, uh the the the bleed continued for a significant period of time, and the brain is a confined uh space, and so the the pressure uh obviously can cause uh neuronal damage. And uh she uh emerged in a coma uh after the surgery to release the pressure on her brain, and at a place where most people don't recover from that kind of and and obviously, you know, uh she's a wonderful human being, and uh uh, you know, I'm well situated to help her. And I did my best to inspire the doctors to say, look, let's see what can be achieved for her. Um obviously it'll benefit her, but what we learn from her, we can apply to others, you know, similarly situated. And I said, look, everything we learn, I'm gonna we're gonna find a way to make that available to everyone. Shortly after, uh, you know, within 90 days, we had learned about a I'm also kind of a real estate person, as you might know from some of the investments we've done over time. And we learned about a kind of biotechnology, you know, building uh that had been built for the purpose of uh, you know, biolabs, uh and uh that was unsuccessful as a real estate deal, but presented us the opportunity of a vacant Class A building uh that we could purchase from uh the lender. And uh that became the basis of what we're calling the Ackman Oxman Institute or the AOI. And we've recruited, uh we're in the process of recruiting a senior leadership team. It is a actually it's not, I would just, it's a it's funded with philanthropy initially. It's gonna have commercial instincts. We're gonna run it like a for-profit enterprise in terms of the best uh aspects of for-profit enterprises and minimizing bureaucracy. You know, the goal is to accelerate uh treatments to patients. Um there are many brain institutes, but many of them are kind of pure basic science labs. And they've and the way they measure success is by the number of papers produced. Uh and you know, some interesting findings that they can share publicly. What we want to do here is come up with solutions for people like Madar, you know, to help her speak again, to help her see again, to help her walk again. Uh and, you know, there the brain is something we still know very little about. Um and uh, you know, AI, uh, you know, the launch of this institute at a time when there are now tools available to have a better understanding of the brain. The brain creates a lot of training data, if we can talk about it that way. And we haven't trained on that data at this point uh to really have a better understanding of how the brain works. Um and uh, you know, we're among other things, you know, AI will play a big role here. But you know, the goal here is to take advantage of being I would argue the greatest or one of the greatest cities in the world, or a place where people like to do this kind of work. Uh we have some of the best uh medical institutions uh approximate. Uh we have an opportunity to recruit you know top scientists around the world. We're actually we've had a ton of inbound interest. We just put out a little piece looking for a chief scientific uh officer. Um I saw that. And uh I think we're gonna be able to move the needle in the field, and that's what we're trying to do.
SPEAKER_00Fantastic. And uh you probably didn't have this necessarily in mind when you were 20, but this is a version of you know, uh having allocated a ton of the world's capital to you, redistributing it um more effectively and more efficiently.
SPEAKER_01I think we've created a lot of value in in our investment approach. And this part of that, you know, you can create value for yourself uh in building a valuable business. And uh I'm using the capitalized value or piece of the capitalized value of that business to launch this institution. We've invested about 700 million in the real estate and in providing kind of startup capital for the institution. The goal is to build a self-sustaining enterprise uh that focuses on um, you know, delivering cures. And then as part of that, the commercial part is we're gonna, you know, we're gonna seed and create companies. And uh those companies will uh hopefully enable uh the products, services, devices, molecules to get to people to help them. And you know, capitalism rewards people who save people, and you know, owning pieces of those businesses will provide uh you know inc incremental profits. The institute that can be reinvested in learning more and doing more. That's the idea.
SPEAKER_00Aaron Powell Both on a personal level and for the good of the world, I I wish you every success in that. Before we wrap, let's dive into a quick fire lightning round just to give people a bit of a uh a fun way to close. Sure. Think back 40 years. What was your first big win that made you come away thinking, I'm pretty good at this investing thing?
SPEAKER_01So one of the first stocks I bought was a company called Alexander's Department Stores. And it filed for Chapter 11, I think, in late 1990. The company owned amazing retail real estate uh that I believe was worth $50, $60 a share. The stock went from it was a department store company that was in the process of sort of transforming some of its real estate into other uses. But on the bankruptcy, the stock went from 21 to 8 and 38 per share. And I bought 2,000 shares, 1,000 at 8 and 38, and 1,000 at 8 and 58. Um I I the fact that I remember the price payment. This is when stocks traded in eighths. Uh tells you how long ago they were.
SPEAKER_00What was the settlement time? It's been like five days? It was, I don't remember exactly.
SPEAKER_01I think three days, but uh and that those 2,000 shares were about 35, 40 percent of my net worth. I was even a more concentrated investor back then. Oh wow. And within a few weeks the stock went to 21. And I sold. Yeah.
unknownOkay.
SPEAKER_01And then over time the stocks went to like six, six or seven hundred. Um and so uh that was a good it was a good lesson in uh in in some respects. You know, had the initial investments I made gone down, I probably would be not being interviewed by you. I would be doing something else.
SPEAKER_00Or you'd have averaged down and traded your way out of it and you'd have held on even longer and uh uh I don't know.
SPEAKER_01I think if my initial investments didn't work, I might have been discouraged and tried something else.
SPEAKER_00Well, that covers off my next two, which is uh highest conviction trade and what what did you sell to early? Maybe one final one then. What sort of received wisdom or let's call it consensus is everyone getting wrong?
SPEAKER_01I don't know that there's something that everyone is getting is getting wrong. Um look, let's I'll give this more an optimist. Let's hope that AI is a very, very material net positive for the world and that the risk of a catastrophic outcome is very, very small. I'm an optimist generally, so that's the way I lean. But I I think that's where we're gonna end up. And I I I hope that the recent concerns are gonna cause us to be thoughtful of uh about monitoring and being cautious about uh what the risks are.
SPEAKER_00Bill, this has been fantastic. Uh before I let you go, can you just share with everyone where we can hear more from you and learn more about Pershing Square Holdings on X, online, wherever?
SPEAKER_01Sure, you can follow me on X. Uh I I uh tweet about a large array of topics, some investment uh directly investment related, some geopolitical related. Um Pershing Square uh has a website. There's a lot of information about us available. Um but I would start with our website.
SPEAKER_00Thank you so much, Bill. All that's left for me to do is again, thank you on behalf of everybody watching and listening for joining us here on the Modern Investor Podcast.
SPEAKER_01Great. Thanks so much.