Ackman on AI & IPOs, Climate Costs, Paramount's Debt Raise

Thank you so much.

Sure. So if you followed Mr. Buffett for 60 years, 61 years, incredible career, how did he create so much value at Berkshire Hathaway over time? He did two principal things. Maybe three. First, as he wound down the textile operation, he took the capital and bought an insurance company, and you manage the assets differently from a typical insurer. He took the surplus and invested in common stocks. He did a good job managing that portfolio. You collect money upfront and you pay it out in the future. As a result, Berkshire was able to grow at a very rapid rate, compounding the insurance company's assets, earning a high return on capital without having to issue stock. Berkshire had a million shares outstanding for most of its life until the January reacquisition. The culmination of a valuable business inside a company — a combination of a valuable business inside a company and not issuing stock as you grow. We are taking a page from Mr. Buffett. We closed in June. In July we announced that the former CEO of Arch Capital Group, one of the best-performing insurance companies of the last 25 years, CEO for eight years, at Arch from inception. He recruited David Ginsberg, his protégé, the former vice chair and general counsel of AIG. We brought an enormous course of power to what was an enormous platform. We already had a good team. We immediately sold the fixed-income assets. We invested money in short-term Treasuries, 65% or so. 35% of the assets invested in a common-stock portfolio. Our goal is to build a high-ROI specialty insurance company led by a superb team, with us managing assets, and growing Howard Hughes.

I'm not really a fixed-income investor. I never found the risk-reward interesting. I like risk-free or high return.

We will run a relatively low-leverage insurer. Most companies write a premium equal to the equity capital of the insurer. We will write less than that. Most insurers invest in something like 2.5 times their equity in assets and reinvest less than that. We will take a zero risk for the bulk of the insurance company assets — short-term Treasuries. That frees us up for flexibility. Under the capital, we'll have something at 40 to 50% — approaching 40% of the assets, 45% of the assets in common stocks.

It is certainly not done. But we announced something else of significance. I tweeted about it and we talked about it today. Howard Hughes has built an expert team, has an amazing collection of assets in markets where people want to live, and the business is selling to homebuilders in these cities that we manage — the commercial real estate, the land, etc. It is a business we financed entirely with our own equity the last 15 years. We are going to a model where we bring in third-party investors. Think Brookfield. Think Blackstone. The typical real-estate investor today puts very little of their own money. We will have a lot of skin in the game. Today we have 100% of the equity. We will begin a process immediately to bring in partners to reduce our equity commitment to our real estate — buy as much as 80% — and turn Howard Hughes into more of an asset-management business. When you bring in third-party capital, that will enable us to take $2 billion, $3 billion of equity over the next — some time by the end of next year — capital we can redeploy. When you get a talented team, you want to put capital behind them. It will accelerate the development of assets that, in the context of the cost of public-company capital, were difficult to achieve, difficult to justify, and now become much more attractive.

Both of those are something.

Among other things, we go on Bloomberg TV to talk about it.

We did a listing and an IPO. We had a closed-end fund, a very different closed-end fund. A typical closed-end fund does not have a good track record. It is a financial product that is sold to financial advisors, and the client is not particularly involved. The majority of the investors — they made an investment to invest with Pershing Square. Historically, to invest with Pershing Square as a U.S. citizen, you went to invest with us privately in a fund with a 20% incentive fee, and you had to lock up your money over a longer period of time. This is a liquid public vehicle that does not charge an incentive fee. Largest hedge fund in the world. 19% compounded, nearly 23-year track record. Track record of the lower fee structure of the entity. Truly liquid alternative at the lowest fees. We focused since the IPO on deploying the capital. Our first priority was putting the money to work, and we are fully invested at Pershing Square USA. What we haven't done, what we are beginning, is —

It is a marketing issue. If you want to invest with Pershing Square — I know people all the time say, "Bill, I would love to invest with you, but I can't." Now you can. Spent $39 —

OK.

I think it's down about 3% from the IPO. 240 basis points of that is the cost of the IPO. We are basically flat. We deployed $5 billion of capital in stocks we like that are compelling at current values. I wouldn't want someone to judge us — the market was helpful to us as we were deploying capital. Stocks, we were going down. We were buying Meta as it was going down. We own a portfolio of some of the best, what we call, super-durable growth companies in the world. Businesses like an S&P Global that you couldn't touch at 21 times earnings. A business like the Intercontinental Exchange, amazing business with an incredible track record. You couldn't own it at 24 times earnings today. It is a market that is a very narrow market. I'm sure you know where the market's attention is focused. In the kind of businesses we would like to own, we own businesses based on how we expect the returns over the next five years. Not five minutes, not the next 90 days.

Although it seems like they're falling off a cliff.

I don't understand the Oura delay based on the public reports. Apparently they had oversubscribed offerings. I'm assuming that's true.

The market is very narrowly focused on SpaceX, Anthropic, and the picks and shovels that support —

Anthropic is perhaps the greatest business story I've ever seen in terms of from de novo to $2 trillion, a significant need, the revenue ramp of the company, the quality of the product. We use Claude internally. It is clearly an amazing company. Query whether the frontier companies maintain the market presence in light of the power of open-source and open-weight models.

We like to buy the businesses that we think will look like that for a long time — boring things like Microsoft, Visa, Mastercard. We are less likely to be an investor in a fast-growing business that is consuming a huge amount of capital and betting on the lines crossing in the future.

Pershing Square has been filed —

I think Jensen has made this point well — if you are a $2 trillion company and you have a service that can cause enormous harm, you are going to be careful about releasing a product to the market. I feel like you don't need, at least for the Anthropics of the world, legislation or the government to protect them from doing something stupid. You would hope you wouldn't. It is a bit like a pharma company. You don't release a drug to the world — maybe in the case of a drug you have government oversight. There is a huge disincentive to put out a product that will destroy the world.

I'm less concerned about Anthropic and OpenAI. I'm more concerned about a bad actor, a rogue actor, who does not have the same considerations, using the resources of an open-source model to cause enormous harm. I think that is a very significant risk. I would rather that the best frontier labs are incredibly powerful so they can protect us, apart from the rogue operator using a less powerful AI.

She is doing really, really well. It's a journey. From where she started, she is the symbol Lucy. She has the same friends, the same sense of humor. She is learning to walk, learning vowels again, learning consonants again. She's very good at saying no. Vision — even with this mitochondrial therapy, first human patient, she had zero ability to see light. 20/2000 in one of her eyes, which is not great, and we don't know if it was the mitochondrial therapy, but we suspect it might have been helping her. We use her as patient one — what can be achieved if you put every resource, every technology, any credible therapy and care, nutrition — an incredible therapy and care, nutrition. One of the fortunate things about our economic circumstances is we can provide the care for her, but we think it should be available for everyone. Contemporaneous with Lucy's recovery, we are building an institute that is going to be not just another brain research institute that studies the brain, but is focused on delivering care to patients.

It was a good distraction. But as I've mentioned, I very fortunately was able to rent the hospital room next to her. They removed the bed. IPOs are done by Zoom today, really. Very few in-person meetings. That kept me busy. She was right there, and you really can't be with someone 24/7, so it was my inspiration for getting the IPO done.

I always had this view that a significant life is having one in which you have the largest impact on the largest number of people — largest good impact. In a way this fits into that mandate. I think this initiative can have a hugely favorable impact on a very large number of people. I also don't know anyone who hasn't had a parent or grandparent or a son or daughter or a friend who hasn't had a major brain-related issue — whether it is Alzheimer's, or they were in the military and they got hit with a ballistic, or they are riding a bicycle and they crash in Central Park, or psychiatric issues. The brain is something — and we studied the brain, we don't understand it. And what makes this moment unique in history are the Anthropics of the world are making it possible. The brain generates an enormous amount of data. There are lots of different approaches to getting basically data from the brain and seeing examples of the data being converted into, here is what he is actually trying to say. Here is how you can see again — maybe a pair of glasses with a camera that transmits data directly to the visual cortex. We are going to learn a ton about the brain in the next three years, five years. And having a place which aggregates everyone interested in the topic with the appropriate vendor of resources.