Warren Buffett, the greatest investor of all time, he was not able to perceive the risks of disruption created by the internet. Well, now we have AI. We're at the beginning of an industrial revolution.
It's a much more complicated problem. If you had to guess, how do you think it plays out over the next 18 months?
The pace of improvement is by far the fastest of anything we've ever seen. There will come a time there'll be some form of a blow up where people lose a whole bunch of money.
What's your investment process like? How do you go from I'm interested in this company to now we're writing a check for a billion dollars.
Over time, you develop a spidey sense on people. If you look at our most successful investments, they've usually been cases where we've done something that someone hasn't done before.
What advice do you have for the ordinary person who's making a paycheck and wants to invest? So, if you want to be an investor,
you've had a challenging year this year with Lucy. What happened?
You know, otherwise healthy child. What happened was she had unbeknownst to us what's called an arterial venous malformation, which is a kind of structure in the brain where the way the doctors describe it is the arteries, you know, typically blood flows into the arteries and then to the capillaries and then to the veins. And when you go from arteries where there's a huge amount of blood flow to capillaries, the blood flow slows down and then to the veins. So in her case, she had what they like a bridge that went from the artery directly to the vein. So over time there was too much pressure going into these veins in her brain and one of those veins burst and then a large amount of blood filled her brain which is a confined volume. And so it's a bit like a balloon blowing up inside your brain and that put pressure on the surrounding brain and the skull. And obviously the skull doesn't move. So the pressure goes downward. It puts pressure on the midbrain. The midbrain is, you know, what keeps you breathing, keeps your heart beating. And the really unfortunate thing, we believe this happened around 9:00 in the morning based on her Oura ring. She lived, you know, young woman lives alone in Williamsburg. And I texted her at 4:00 that day. I had called her another time that day. Other family members had done the same, but only when she hadn't picked up her luggage. She was, you know, she was leaving for Abu Dhabi for a wedding. A friend of hers was getting married the following day and she was picking up her luggage from her mom's house and she didn't show up. When she was 2 hours late and no one could reach her that week. I was sleeping at the time, but my oldest daughter went to find her and they found her lying on the floor of her apartment barely breathing, face down on her right side. So and she thought she was dead. Called 911. She could hear her breathing in a very labored way. And then I don't sleep next to my cell phone. My daughter doesn't know the landline number for my house. So she was able to call someone in the building. Guy in the building knocked on the door, pounded on the door and handed me the phone with my daughter on it and then hopped in a cab. The EMT didn't know which hospital to take her because they didn't know what had happened to her. One of the big problems sometimes, you know, the EMT thinks someone's just drunk and that's why they fell and the way you treat a drunk person is you just let time go by, right? Time going by for a person where the brain hemorrhage is very, you know, the more time the brain is under pressure the more damage that can take place. To the hospital at 12:05 and she was just sitting on a gurney there while they were trying to figure out what she had. Eventually they gave her a CT, they figured out she had a hemorrhage, they called the surgeon. And what you need to do is you need to release the pressure on the brain as quickly as possible. And the way you do that is you remove about 40% of the skull to allow the brain to expand beyond the skull. And we moved her from Elmhurst Hospital, by the way, very pleased with how they cared for her there, city hospital in Queens. We moved to Mount Sinai where Neri and I spent some time helping Mount Sinai. We knew the team there and they also have very good neurosurgeons and a neuroscience brain practice. And she was on a breathing tube. She had a bandage of course on her head and it said no bone right to make sure the nurses knew to be careful. And that's how we started. And so I basically gave the doctors what I call the dare to be great speech. I said let's see what can be achieved by whatever you need from us, unlimited resources, let's look at latest and greatest technologies. I mean they basically told us, look Bill, we don't know what kind of deficit she's going to have, 19 hours of pressure on the brain. I didn't learn actually until weeks later they don't normally do the surgery to save someone when it's been more than 5 hours because the assumption is brain death basically. So 19 hours, she's as close to death, hours, minutes, I don't know exactly. And so we didn't know what would become of her, but I'm a very optimistic person. And she's regained over time her cognition. She's the same Lucy we knew. She's got the same sense of humor. She's really kind of remarkable. She woke up not being able to walk, to speak, and unfortunately to see. Her walking is coming back. I think she's going to regain her ability to walk. Her speech very slowly is coming back. There's something like 17 vowels beyond the vowels that we were taught. And she can do about 15 of the 17 now. Each day she's almost learning a new consonant. She can say a few words. Certainly no. She's quite good at. And then vision. She's even shown some progress there. But I spent a lot of time working with the doctors and my pitch to them was let's see what we can do for her and everything we learn for her we can help others. And Neri and I are going to make this available to everyone. And 3 months after, I guess I was coming back from my birthday party and I got a call from a friend. We were talking about Sinai actually about doing a redevelopment of their Fifth Avenue campus to build a brain institute, some kind of brain center. And we had very aligned with our idea. Problem with that is probably a 10-year project and super complicated. Obviously, taking down the existing hospital, moving people, bringing people back. And a vacant biotechnology building became available on 65th and 11th Avenue, 10 blocks from the office. And 60 days later, we closed the building. We signed a contract to buy the rest of the site. It's a 3.4-acre site and our goal is to build the world's greatest brain institute. Everything from a focus on the patient. How do we get treatments to patients? And there's a ton of interesting things going on in technology. Obviously, everyone knows Neuralink, but there are probably a dozen other companies working on brain-computer interfaces and other ways to get data from the brain, right? You think and of course, AI. So, not only are we able to get more and more data from the brain, we're able to interpret that data better than ever before. So, I'm hoping Lucy can speak normally and I'm on her own just working at it. I'm hoping her vision returns. But if she has deficits in those areas, there will be solutions in the relative short to intermediate term. Envision a world where you wear a pair of glasses that basically have a camera and the camera takes in the vision and kind of ports it to your visual cortex and that's how you see. I mean, that will be how Elon says he's going to have a rudimentary way for people to see within a relatively short amount of time and within 5 years I actually I've reached out to pretty much everyone for help on this and he told me he said 5 years we people have better vision than we'll have bionic vision in effect. The way my Dr. Kellner describes it to me is that it's been Lucy's lead on this whole thing. A lot of neurologists and even neurosurgeons are nihilists. They don't believe that the patients can make really material recoveries and they can. And we've heard a lot of interesting stories of recovery which are great to share with Lucy. But we're going to be able to do a lot more. And New York's actually probably one of the best places to do this. And there isn't anything like it. So we're excited about it.
What you guys have done in response is just incredible.
Yeah. So what's interesting is that all of the skills, experiences, relationships, resources that I've developed over my career work set me up to be incredibly well positioned to help my daughter and to help other people that have this problem. Right? I'm like a real estate investor, right? So I was able to buy the building at a fraction of what it cost. Architecture, design, also married to a very talented architect who's going to play a pretty important role here. So I think we're going to do something really interesting and we've had an incredible outpouring of people who want to be part of this who in many cases we love people who write to us who've dealt with this on a very personal level have a brother a sister a mother a parent who've suffered and they've seen kind of the nature of the treatment that's available today and they want to change that. It's interesting and actually people say Bill how do you deal with something like this? Well, the first thing I had to do is figure out how to help my child. And as I made progress with that, this other thing is an amazing, makes me feel like something good is coming out of, I have this view that every bad thing, something good comes from it. This is among the good that's coming from what she's going through and that makes me feel good.
Did you always have that view or was that learned?
I figured that out over time.
When was there a moment when that?
Well, you know, I've had a few near death experiences in business and in each one of those cases, I was materially better off after that. So, those are kind of good lessons. The what does not kill you makes me stronger thing is definitively true. And by the way, for my child, for Lucy, I think this is going to be good for her.
Look, she's a wonderful, amazing person, but if you can recover from something as devastating as this, it's going to make her into like a superhuman person. And she was, she is a wonderful human being. I mean, one of the things that's helping her recover is, one, her mom has been there every day. I moved my office into the hospital. Within a day of her moving into the hospital, I did two IPOs, the two Pershing IPOs I did from room 1107, room 107 on the 11th floor of 11 West at Mount Sinai Hospital. The power of Zoom. So I would do a Zoom meeting for 45 minutes and then I would go spend 15 minutes with my daughter and then I'd do the next meeting. And so I had my daughter as the inspiration for these two IPOs that we were working on. And we only moved her out of the hospital August 8th. And she's been rehabilitating in Bridgehampton. Then she's coming back into the city for a little procedure and then she's moving into her own apartment that we've been, we bought an apartment in our building within a few weeks of the incident and we've been designing it to be the best rehab recovery place for her to live. And socialization, social interaction is absolutely critical for someone recovering from something like this. The emotional support that you get and everything. And her friends have been amazing. Her friends have been with her every day. Every day one or more of her friends shows up and talks to her, eats with her and engages with her. And she's like this super giving person, ton of friends. Everyone loves Lucy and so she's getting an amazing return on that. Because her friends are showing up to save her. All of this makes me feel that humans can be so amazing.
Yeah. I mean, you know, you can recover from almost anything.
Yeah. And by the way, there's a lot more hope for people who've had strokes, brain injuries, military TBI type stuff. And there are a number of people in the field that have been really frustrated with how far we've not gone who want to be the ones that fix this.
What's been preventing us from going further? Like why haven't we pushed the limits on this stuff?
The answer is some combination of the insurance industry and just economics and hospitals that how they work. I mean a neurosurgeon wants to do their surgery and they move on to the next one. Neurosurgeons are highly compensated but they get paid for doing surgeries. They don't get paid for the recovery of the patient over time. Rehabilitation every hospital has some kind of rehabilitation program but in many cases it's embarrassingly inadequate. And the insurance company might pay for only 6 weeks of care. And then they get sent home and their home is not the ideal place and you need, it takes a village. What if they're the principal breadwinner and they're devastated by this? Maybe the other family member has to go out and work as opposed to care for them. One of the most depressing things I was told by the head of rehab at actually at Mass General we've been talking to and they said, Bill, what Lucy's achieved is remarkable. She's had incredible care. The typical person, one, they wouldn't do the surgery. Two, if they do the surgery, the typical patient ends up in a nursing home when they check out of the hospital because the family can't take care of them and they die a few months later from pneumonia because just the care that can be achieved in a nursing home. It's like super depressing. And so, this is one of the cases where I'm financially unconstrained in my ability to help her and so we can maximize the care. Now what we're going to try to figure out in the institute is how we do this in a way that everyone can have the benefit of the care and technology is going to help a lot. A great speech therapist could be $500 an hour that insurance will pay for whatever percentage of that but only for some period of time but people can keep recovering years and years later but of course AI could be an amazing speech therapist. So there are lots of ways that technology are going to enable us to help people recover from these injuries. And by the way, this all, we're calling it, the focus is brain rehab, recovery, and longevity, right? What does a brain rehab recovery institute do? It focuses on brain recovery and your physical recovery. The brain plus your physical recovery, it's fundamentally longevity. And the other thing that hospitals aren't very good at is nutrition, right? The food in hospitals is frightening, right? They have someone who has a heart attack and the next morning they're having like pancakes with syrup with orange juice. In Lucy's case, we made food for every meal. The institute's going to have amazing food because nutrition is critical. So, there are a lot of things we can do taking advantage of this financial circumstance. I'm going to use it in a way that will enable us to build something optimal and I think ultimately self-sustaining.
You're an incredible father. Like, what an amazing response to terrible circumstances.
You know, I would feel if I couldn't do it, I would be one of the most frustrated people in the world. I literally feel like I was designed to help her. Like everything I know how to do.
You mentioned the Oura ring, the data on the Oura ring. What was the data that indicated something was?
So, I've been in touch with the CEO of Oura. He actually reached out on Twitter and I think you can certainly with an Apple Watch and hopefully with an Oura ring. So, what happened was if you look at her spike, I actually put it on Twitter at like 9:00 or so, there was a very quick spike in her pulse and then kind of a drop off that looked kind of unusual. And if you combine that spike and a drop off with someone falling, like the Apple Watch has an alert when someone falls, right? Well, if that happens and it happens when there's a huge spike in their, you can reasonably assume, you can say did they have a heart attack did they have a whatever, these are things you can look at and I think Oura ring should have the same capability and they're I think they're working on it.
How do you keep your mind in a healthy place? Like what do you do to keep your head right?
I play tennis almost every morning or do some form of exercise. I think that's probably the most important thing I do because it's the one thing I do over the course of the day where I'm completely focused on the ball that's coming at me as opposed to whatever else is going on. So, I think that is a really important form of meditation for me. That's one. I got a good night's sleep. I spent time with my family. Things like that.
I haven't in a while. I did for this challenging year and I, you know, I was middle of divorce. I was not kind of on my own and it really helped and I probably should find 20 minutes a day to meditate.
How do you manage it all? I mean, you have four effective public entities. You have this with your daughter. You have a seven-year-old. You want to be a great husband. How do you harmonize all of these things?
So, Pershing Square has come a long way from when I started it. When I started it, I was sort of the chief bottle washer guy. And I would come up with all the ideas and I have an analyst that would help me prosecute them. And that's how we and there was activism. I was the guy, etc. Over 22 years, we built an amazing team. We're in an industry where the half-life of someone who works for a firm, people are paying the top people can move from one place to another and get huge, $100 million bonuses for showing up, things like this. And the result is a lot of turnover in the industry. We have no turnover at Pershing Square.
Well, if there's someone that we've, we've had no turnover. We obviously we've made some mistakes and we replaced some people over time, but if you look at the investment team, the investment team has been the same team for now 9 years with a couple of new additions. And that's actually a really good thing. If you have a constant revolving door of new people, you don't really know that you can trust people over time. Are they really telling you the truth? Are they really telling you all the risks and rewards of a particular situation? When you've built a relationship with people and you work with them for 9 years and you have this culture of transparency and candidness, I don't for a second ever question anything that's being told to me by a member of the investment team. They're telling me the flat, candid truth. That's a very comfortable place. So the answer to your question is the Pershing investment process is incredibly well-run by a very experienced team that I play an important role in at the ultimate say but I am no longer the guy that generates the bulk of the ideas. I'm someone that generates a minority of the ideas in the portfolio. So that's helpful. And then the business itself, the way it's structured is Ben is responsible for running a lot of the business elements of Pershing Square. So that frees me up to think. It frees me up to work on more strategic stuff and it frees me up to come up with the occasional idea. So Pershing kind of takes care of itself. Well, we have a number of public entities. We have an amazing accounting team. And those public companies all sort of do the same thing. They're really just, there's the management company that earns fees from the entities we're on. That's Pershing Square Inc. PS ticker. There are two funds that are publicly traded that own effectively the same portfolio. There's certain governance responsibilities we have for those entities but they're really actually each of them have independent boards of directors. So our role there is as the external investment manager. We have excellent boards at both of those. The typical closed-end fund board is a bit of an embarrassment. I don't know how closely you follow the space, but you've seen Boaz Weinstein going into proxy contests. The typical closed-end fund board is a group of people who, not to, I don't want to pick any, let's say BlackRock for the moment. I think I read somewhere that they sit on 86, the same six directors sit on 86 closed-end fund boards. It's hard to do real governance when you sit on 86 boards of directors, right? The typical limitation is four, from by ISS. We hired actually real directors. We pay them like real directors. They're not serving on multiple, 50 other, so we have really good boards and what we do is fundamentally simple. So Pershing kind of runs itself to some degree just because of delegation, incentives, alignment. The we have the best alignment because no one's paid on individual stocks. They're based on performance. At the end of the day, performance is going to be the biggest driver of our management company because the compounding of the underlying assets is what grows our fee stream. So it's just a very aligned entity. I own about 45% of the company. The team owns another I think 35% of the company and then we have a minority interest held by the public and some strategic investors that invested with us. So it's, if you get the alignment right, you get the people right, and you've got some principles written on a stone tablet and you've been doing it for a while,
but you're super competitive.
I know you want to be the best investor in the world.
Sure. And so you're this is like one path and then there's another path. It's like dad and husband and
I would say the one thing I would say in the last, the setup of this AOI thing has consumed some mind share of mine as you would expect over the last 60 or 90 days because I'm assembling the team just like with, there's a moment it's a bit like we ran a proxy contest we took control of a board of directors now we got to bring in a new CEO once we bring in the CEO and the teams in place and announced and everything else I don't get involved in the day-to-day operations and the same think it's going to be true for the AOI. It's going to be like another portfolio company in some sense. Although I'll, we're all going to sit on the board, I'm going to chair the board but there is a bit it is similar to I don't think I could be doing setting up the AOI and we had a proxy contest underway at the same time.
AOI is the Ackman Oxman Institute just for everybody listening.
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When do you do your best thinking?
Often when I'm on vacation, actually some of my best ideas are ones where I'm literally totally relaxed or I'm in the shower.
You've done a lot of research about bubbles. I'm curious like how would you explain what a bubble is?
A bubble is when human nature, when a lot of money is being made and people have a lot of FOMO and they want to participate in having money being made and it leads more and more money going into the same trade if you will until overvaluation takes place and then a bullance and then eventually the bubble bursts. They seem to happen around these technological changes like railroads, automobiles, transistors, the internet.
Well, we're in certainly in a transition. You could say AI is absolutely transformational and it's the most transformational technology I think of all of our respective lifetimes. There are bubble-like elements. There's a lot of crazy stuff going on in the private world of venture. I think we're starting to invest in some, you talk about a bubble where Pershing is now investing in some venture stage businesses, met with a company, let's say two weeks ago and they weren't raising money. 2 days later they close a round, they were preempted by some investor who put 50 million in at a $400 million valuation and then two weeks later they raised another $50 million at a billion dollar valuation. So there's a lot of people fearing missing out on the future and so a lot of capital going into venture a lot of competition and a lot of preempting and leading to very high valuations. I saw a company, series A round at a 5 billion pre-money.
How do you avoid that FOMO?
It depends on what you where you are in life. Warren Buffett was remarkable for his discipline over a 60-year career. And actually, interestingly, in the last real bubble, the internet bubble, that's when Berkshire stock hit like an all-time low, because people said he's kind of lost it. While all these other people were making money, he just didn't participate, but he just shouldered on. I think it's a question of short-term versus long-term perspective.
What advice would you give founders right now who might be trying to raise?
It's a great time to raise capital and assuming you raise the capital, don't spend it so quickly expecting money will be there forever. What this is reminiscent of is in the internet bubble, there was effectively unlimited amount of capital available for kind of suspect business plans and then there was a piece in Barron's one weekend and it listed all of the internet companies in the public markets and how much cash they had left based on their burn rate and how many months to go before they went to zero. That was probably the week before the market blew up. What happens to a private company that has no capital? There's a certain discipline associated with bootstrapping yourself and then you take in 50 million or 100 million and you completely change the way you deploy capital betting that there will anytime you need money you could just tap the markets. There will come a time there'll be some form of a blowup a pretty high-profile one where people lose a whole bunch of money and that will cause a reset. And I think the companies that are disciplined in how they spend the capital so they have years of runway will be the survivors and the ones that have to raise money in 3 months will be gone. My advice to founders is treat every dollar as if it's your own money and spend it really carefully and don't expect the kind of a bulliant freely available capital thing to exist forever.
So raise money now but keep it in the bank. Don't spend it.
How do you see the difference between investing which is what you've typically done in the public markets versus private markets in terms of ventures?
Sure. So public markets we're investing in what we call super durable growth companies. Businesses that are the most dominant companies their respective spaces. They're highly profitable. They have strong balance sheets. And the key sort of success factor is predicting their ability to continue to either gain or maintain market share and grow their business and have pricing power in the public markets. Yes, the CEO matters, but we've always had the view, well, if we don't like the CEO, we can find a better one. In venture, you're really betting on the person and more than the business plan. And you're investing in a company that is maybe pre-revenue or it's losing money. You're betting on their ability to grow at a fast enough rate that ultimately they go from being a capital consumer to one that's going to generate cash over time. So it has some similar elements but it's much more founder dependent CEO dependent than the public markets. The best public market companies something happens to the CEO you can find another great person to run it. The best private companies without the CEO it's you probably write it off.
How much are you weighting sort of the idea versus the person?
I weight the person more than the idea because often the original idea is not the idea that turns out to be the success and the founder is going to hit a roadblock. Original idea doesn't work. My most successful venture investment. I didn't like the idea. This was Coupang which was Bom Kim and his business plan was to create the Groupon of South Korea and even at that time which was 2009. I thought Groupon was a really bad business model but he made a very powerful case for why South Korea was a great place to launch an internet business. And I liked him. And ultimately he built the Amazon of South Korea. Really nothing to do with the original business model. So the most successful you're really betting on their ability to manage through the challenges that emerge and figure out a business model over time.
How is AI changing the investment profession?
The most important thing an investor has to do is assess the risk. I mean, the value of a business is the present value the cash generates over its life. And its life, the early years of the life matter more than the later years. But you need to predict with a pretty high degree of confidence what a business is going to look like 10 years out, 20 years out, 30 years out if you want to make an illiquid long-term investment in the business. And we look at even liquid investments that way. You want to invest in something that you know if the stock market were to shut for 10 years, you're happy to own it. It's good discipline. So the thing that you need to think through is the risk of disruption. What AI has done is massively increase the risk of disruption. So you got to be very very thoughtful about the businesses you in, businesses, go back to Warren Buffett. If you go back and read Warren Buffett the greatest investor of all time he was not able to perceive the risks of disruption created by the internet for example Wikipedia disrupting World Book. Well now we have AI. It's a much more complicated problem. All of us are guaranteed to look foolish with one business or another that we didn't anticipate the risk of disruption because of AI.
What businesses do you think become more valuable as a result of AI?
I actually met with one of the founders of Cognition yesterday. Very interesting company and their software or their AI in effect enables banks, big financial institutions for example that spend a ton of money on dealing with legacy systems because of an accumulation of acquisitions they did over time they can kind of rewrite the COBOL into modern code and do it in a matter of days as opposed to many months. And I think the cost to run big financial institutions is going to come down meaningfully because of AI. Big spenders if you will on tech are going to be able to bring some of that, they're going to become a lot more efficient. Now the question is are they going to be able to keep the profit right if everyone's going to be forced to use the best software to run their business more efficiently become more AI native and the question is whether they get to keep that profit or whether the profit or the margin gets passed on to the customer and that's a function of the nature of the business and pricing power. The problem with money generally is it's a commodity and banks are in the business of providing money. So it's a complicated question depends on the business. I think AI will enable the creation of many businesses that heretofore cannot be created before and AI will enable entrepreneurs, people to become entrepreneurs who never been entrepreneurs before. Just even the most recent like overnight release of Meta, I haven't had a chance to play around with it but guys in the office were talking about how easy it is to use, I think it's Muse whatever.
Yeah. How easy it is for people to now create their own agents to do stuff for them. The pace of improvement is by far the fastest of anything I've ever seen. If you think about Microsoft in the old days, 1.0 versus 2.0, it might be a couple years or more between updates of consequence. Here you get an update of consequence in days. It's a bit like driving a Tesla and they're overnight they're updating the software.
