Well, welcome. Welcome everyone. Good morning. Thank you everyone who is joining as well live streaming. Bill, we are truly, truly honored to welcome you to GBM.
I want to introduce you first to something about GBM, something about the audience that is going to be in the conversation. GBM is an investment firm that was founded more than 40 years ago only to serve high net worth individuals and institutions. But just eight years ago, Mexico had fewer than 300,000 brokerage accounts in the whole country, and that is less than 1% of the working population invested directly in the stock market. Even many wealthy families kept their savings in bank accounts earning almost nothing.
So we wanted to change that culture and help millions of Mexicans benefit from the capital markets, and not only for the very high net worths. You better than almost anyone knows what consistency and long-term investing can do for individuals and families. Bringing that opportunity to Mexico became our mission. What was needed was better access, better education, and more and better financial advising.
Today, GBM serves millions of clients and has built Mexico's largest investor community and the largest independent advisory network. We also redirected much of our marketing effort toward education, working with universities and creating GBM Media to produce deep, clear, and simple content. And this forum is part of that effort.
Here today are leaders from Mexico's largest institutions and family offices, private banking clients, entrepreneurs, financial advisors, individual investors, and some of the country's most influential financial content creators. Together, they are creating a virtuous cycle of knowledge, participation, and awareness. And this room is only a sample of the broader community joining us live. And of course, this conversation will remain available on our channels.
We are proud of that progress. But in a country of 130 million, it is not enough. That is why it is important to have you here. Our purpose is to transform people's lives through investing, because as more Mexicans build wealth, they help move the entire country as well.
Today, everyone, we will welcome one of the most extraordinary investors of our lifetime, Bill Ackman. Bill is the founder and CEO of Pershing Square, known for its deep research, conviction, and long-term investments in exceptional businesses. Its track record speaks for itself, and it just so happens that today PSUS, the company, is trading at a large discount on the stock exchange.
He graduated magna cum laude from Harvard College and earned his MBA from Harvard Business School. He's also a major philanthropist and an influential public voice willing to challenge conventional thinking and defend his convictions. He's also an excellent tennis player. I have seen the videos, Bill. I will need to see it on the court one day as well.
And leading this conversation, it is my very good friend Carlo Teran. He is a great investor himself and one of the smartest, most diligent, most eloquent people that I have ever met. So no better than him to lead this conversation. Welcome, Bill. Welcome, Carlo. This is your stage.
Same. We've been seeing each other somewhat the last couple of years, and I was trying to prepare for this podcast, but let me be honest, you've made it really damn difficult.
Because you've been on like seven podcasts the last two weeks. I was up, I think it was like 11:00 p.m. last night, and there was a new one with some Aussie guys that came on, and I'm like, damn, I have to see that one too. So, but anyways, I think I found something that you haven't started with, and I want to start with a clip because the objective of this podcast is to get to know you first, get to know the investment philosophy, and then show the average investor how you think they should be investing long term. But let's start with something about you. So, why don't we queue up the video to start? Hopefully, they cue it up.
This is me at a young age.
I was dancing and playing. My sister and I were in Central Park.
Who's that guy? Grandma Hart.
David Hart is here tonight. That's me. Now look, I have a device on me that keeps me in the stroller. I can't get out.
That was the last time you were under control, though.
So, do you remember that?
Well, the video was about 57 years ago.
No, no, no. But when did you show it? When did you show it?
I showed it. I interviewed my father at an event at the Center for Jewish History, and I think I put it up there and it was recorded. So, you've done a pretty good job finding that.
I'm surprised Lex Fridman didn't find it, but I had to do my diligence. But why don't we start with your family story? So, your great-grandfather Abraham came from the Ukraine.
And it was actually Russia at the time.
It was Russia at the time. Yeah.
Same, same problem. I'll let you — why don't you tell the story, because...
Well, you know, being Jewish in Ukraine, Russia in the 1890s was not an ideal place. One, they put Jews at the front of the Russian army, which is not a great place to be. But also there were pogroms of anti-Semitism, and so he was one of — he had, I think, 11 siblings, same mother, but he was the only one who made it to the United States. And he literally, you know, walked or rode a horse, or, you know, I think to Austria, and ultimately, you know, he found a way to a boat to America and got here in, I think, 1893.
Okay. And you guys landed in New York or New Jersey? Where was...
No, it was pre-Ellis Island. But Newark, New Jersey.
Yeah.
So, one of the things that surprised me about that video is because you've mentioned this publicly a lot, is that your father has been a big influence in your life and was a big influence in your life.
But I didn't realize that your mother was an activist.
Can you tell us a little bit about the activism, her getting those 8,000 signatures and what she did, because that was the first time I heard about that.
Sure. So I grew up in a town called Chappaqua, New York, which is a suburb about 37 miles from New York City. And my father commuted by train to New York City. And the trains were from the 1950s. They were diesel locomotives. They were in poor repair. They would break down constantly. And my father, you know, we were not allowed to have dinner until dad got home. Very often he would get home at 8:30. You know, I remember being a very, very hungry kid. But you know, dad left early in the morning and he came back kind of late, and a big part of that was the rail service. And my mom — there was a, you know, so to speak, grassroots community organization that had been started to try to, you know, get the state government to fix the rail service. And it had gone nowhere.
And my mom ended up taking control of this organization. And mom was really a mom, a housewife. I guess she really took care of us, but got deeply involved in this organization. And then ended up leading a petition drive. It was actually, I think it was something like 17,830 signatures. I remember this because I was the one who counted them.
And, you know, presented this big box of signatures, and ultimately got a $700 million grant to electrify the railroads, put in new trains, which was pretty transformational. But yes, mom was the real activist in the family.
So if mom was the real activist, then what was dad's role? And your dad was a real estate broker, investor, etc., right?
Yeah. My father was in real estate. So my grandfather and his brother actually, right in the 1920s, started what was called Ackman Brothers. And what they did is they helped real estate developers get financing from banks to build and to acquire assets. Kind of what you would call investment banking today, but really kind of a mortgage brokerage business. And my dad took over that business from his father and wanted me to join him in that business when I graduated.
But it seems like you — when you graduated, was it Harvard or undergrad?
And I did work there for about a year and a half.
But then what happened? Because you wanted to be independent. It seems like since you were a kid, you wanted to be independent.
I didn't like anyone controlling me.
And, you know, ultimately working for dad was, you know, I didn't think of it as a form of independence. I also got really — I was in the brokerage business, you interact with a lot of investors, i.e., being the client, and I preferred being a client than being the service provider. And so what's nice about investing, particularly in the stock market, it's a very accessible form of investing because you need not a huge amount of money and you can start. So I decided I was going to go to Harvard Business School to learn how to be a good investor, and I made the first mistake of an investor, which is I didn't actually do any research on Harvard Business School and what they would teach us about investing. And when I got there, there were no classes at Harvard Business School on investing, which I think there are today.
I hope you change it, because you've given a lot of money, so I hope you change that. So, what did you do then, if there wasn't really...
They had classes on finance, they had classes on accounting, they had classes on competitive strategy with Michael Porter, who was one of the most famous competitive strategists. And I opened a brokerage account. Actually, I opened an account at Fidelity. I had made about 40 — I had 40-some thousands that I had made working in the commission-based business. My parents were paying for my education. So my $48,000 was about what it cost to go to Harvard Business School with housing for a year. So I said, 'Look, worst case, it's an extra year of business school if I lose it all, but it will be my education.' And actually, a very good thing to do if you're studying in school is to actually have a brokerage account, because you're going to pay a lot more attention in accounting or finance and other classes if you have your own money at risk.
So one of the things that you mentioned a lot is that Buffett has been a big influence. So I want to ask you a two-part question on this. The first one is, when did you really get a hold of Buffett? Who tipped you off? Who was that person who told you about him? The second thing is, at Harvard Business School, Stanford, and other schools, entrepreneurship and starting something from zero is something that a lot of people want to do.
Buffett didn't do that. Buffett just compounded capital.
So the second part of the question is...
Well, actually, I disagree with that. Buffett was an entrepreneur.
But in a different way, not creating a product.
Well, he had — he created a product.
He had an investment product.
Yes, but at the end of the day, he was compounding capital on that.
Well, so hopefully most founders try to compound.
I hope — well, I hope you do. I hope you do. But who got you hold of Buffett?
So I heard about Warren Buffett for the first time in 1985 or '86 from a classmate of mine at Harvard College who was from Omaha, and she owned a share of Berkshire Hathaway, and she told me about Warren Buffett. The first time I met Warren Buffett was between college and business school. A professor named Lawrence Cunningham had written a book which basically took the Berkshire Hathaway letters and consolidated them by topic, and he wrote a book. And he gave a presentation at Fordham Law School, and we heard that Buffett and Munger would be there, and I went. And this was not a widely advertised event, so it was, you know, very few students, some faculty, and, you know, it was at the law school, and law school people aren't actually that much interested in investing. So I sat next to Susie Buffett. I didn't actually know who she was at the time, and I introduced myself. We were talking, and then she said, 'You know, Bill, I think Warren would really like you.' And there was a lunch at the event afterwards. She says, 'I'll tell you what. I'll sit here and I'll put you next to him.' And so I had lunch with Warren Buffett for the first time. This was probably 1989.
And kind of a fun story — it was a buffet, and we sat next to him, and I went to the buffet with Warren, and, you know, he piled up a plate with, you know, steak and like brownies and all this other stuff. And then when he came to the table, he took the salt shaker, and the salt came out, you know, with a lot of volume, and he basically salted the entire thing, including the brownies.
Were you a health nut back then, by the way?
I wasn't, but it just struck me as kind of interesting. It's like, okay, do I need more salt to be a good investor?
So you meet him and you get influenced, but you graduate Harvard Business School and you start Gotham Partners. I've read Confidence Game several times. Why did you start Gotham Partners? What were the lessons learned there?
So actually, the reason why I started my own firm — the reason behind this actually goes back to college. I happened to read the college application essay of the guy who lived next to me in my dorm, and it was an essay about why he liked Smurfs, which were these cartoon characters. It was like a really good essay. And then I asked my roommate if I could read his essay. It was another really good essay. And then I started collecting up the essays of people I went to school with. And I had this idea to write a book on how to write a college application essay. And there were no books on how to write a college application essay. And I had just written one to get into school, and it was kind of hard to come up with a topic and everything else. So I went around, I interviewed a bunch of admissions officers, I wrote this book, and then a bunch of adults tried to convince me it was a bad idea. It's too specific. It's too narrow a topic. I don't think there'll be demand for it. I didn't know how to publish it. And my parents had a friend that was an author of fiction books, and he said, 'Look, go to the library. There's a book called Publishers Clearing House. It lists all the publishers. Find ones that publish stuff like this.' He wrote a letter, and — you were wondering how does this have anything to do with why I started my own firm?
No, keep talking. Keep talking.
Okay. Well, the interesting answer is I got, you know, five or six rejections, one job offer — Mr. Ackman writes, 'Well, you should come work here for the summer.' And then one — this is interesting — you know, were looking at a similar book or on a similar topic, and ultimately got a rejection, and so I never published the book. The next year, two guys from Yale wrote a book called Essays That Worked, and they literally copied my idea, and it was a number one New York Times bestseller, and I suffered like severe psychological torture, you know, FOMO. This could have been me. And I said, 'Look, the next time I have an idea and a bunch of adults tell me it's a bad idea, I'm just going to do it anyway.' And my idea was to start a hedge fund without any experience. And my dad said, 'This is a really dumb idea.' I said, 'Perfect. I'm doing it.'
True story. What did he want you to do — he wanted you to do real estate, or what did he want you to do?
Just, look, if you want to be an investor, go work for Michael Steinhardt or George Soros, learn on their dime, and then go do your own thing.
So, you start Gotham Partners with David Berkus.
Classmate from business school.
Well, you had a pretty good class, right? Because Guy Spier was also in your class.
There's a couple of ones that we can talk about, but...
So when you started, you decided to do a long-short hedge fund, basically.
What did you learn about that? Recruiting clients, taking their money, lessons learned. You had a little bit of a battle there with MBIA.
So we actually did a lot of things right for a startup. And because what's interesting is the only people who gave us money were super sophisticated investors. Whereas people who were like friends of the family, they all turned me down because they thought of me like a high school kid and like, why would I give them money? But we got money from Jack Nash, who was like one of the famous hedge fund managers, the Ziff family. So sophisticated people, interestingly, were willing to back us. But the first getting started was the hardest part. Once you're in business, it sort of doesn't matter how much capital you start with. Once you're in business, you've got a sign on the wall, you have investors, you're starting to make investments. You know, the power of compounding — you know, and we said, 'Look,' my partner was more risk-averse than I. He said, 'Look, Bill, we can't raise 3 million or more.' 3 million was still, you know, decent money. And we literally were close. But finally we got over the line. But of the original six investors, four were in the Forbes 400 net worth, you know, pretty sophisticated people. And what I did is I called up the richest people I could find.
You asked them for a really small amount of money, and the strategy worked.
How long did you guys have Gotham Partners?
Decade. So Gotham Partners ends, I think that's after the financial crisis, and you start — what was it?
No, no, no. So the catalyst...
2003, although Gotham didn't really end for almost another decade.
See, I read the book, you don't believe me.
Yeah, it's true. So we were a concentrated investor, more, I would say, buying a dollar fifty at fifty cents with a catalyst, and sometimes we'd be the catalyst, as opposed to today where we want to own these kind of long-term kind of compounders, a little lower business quality, but more smaller cap obviously. And we had an incredible run for the first five years, and then the stock market starts getting more expensive, '98, '99, and we start getting interesting inflows of private investments. And we go back to the investors, we say, 'Look, we're seeing some pretty interesting things. Can we expand the mandate to include private investments?' And they all said yes, because they've had a — you know, I think we were 27% compounded or whatever up to that point in time. And we started making some private — we set up side pockets and other structures to do this. And then the stock market started getting more interesting again, and we had about a third of our assets in private assets. And we learned one of the first important lessons, which is the opportunity cost of illiquidity is much higher than you think. People underestimate this. But the catalyst for the end of Gotham was we had — there was an instrument called a credit default swap that had really just been invented at that time, and we used it to bet against the credit of a company called Farmer Mac, which was actually unrated by the rating agencies but was listed on Bloomberg as having a AAA rating. And we went short the credit, and we wrote a series of reports about the company, and the company imploded. We made a lot of money. And we looked for a similar opportunity, and we came across a company called MBIA, which was a AAA-rated guarantor of what were supposed to be safe assets, but the more we looked, the more we realized that the company was guaranteeing highly risky assets, subprime and other assets. We made a huge bet against the company, relatively speaking, and then we released this report, and then life began to change. We underestimated the political power of this company because they were the largest guarantor of every state and city in the country, and so they knew every attorney general, they knew every regulator, and they didn't like me.
And that was the beginning of the end.
It was a rough patch. Well, we found ourselves under investigation. We had a court case go against us, which we ultimately reversed on appeal, but by then we were already winding down our fund. And so it was a pretty ignominious sort of event. But the key thing we did is we treated our investors really well. We were very conservative in the marks on the private assets, and we ended up sending them back three and a half times their carrying cost. So the investors ended up actually doing well, and they all returned to Pershing when I relaunched.
So when David and you decide to go your ways, I think you set up Pershing in a different way. You didn't have a co-partner to start it. What led to that decision, and how did you think about the initial team given what you had learned in the past?
Sure. So look, I think there are very few examples where co-CEOs are successful. I think at the end of the day you need someone for whom the buck stops, i.e., the person who has to make the final call, and there are very few equal co-CEO partnerships that ultimately work. David and I have different ways of thinking about investing. We have different interests in terms of how much should be reinvested in the business versus how much you should take in dividends. I was sort of more ambitious in building something, wanted to reinvest more, but he was a wonderful partner, and he's the executor of my estate. You know, he's trusted, very capable. He now manages Seth Klarman's — Seth's family office.
But you know, David actually had a benign brain tumor during Gotham, and he just — the stress of the whole thing was too much for him. And I wanted to return to this business, he was less interested in doing so, and so it was natural for me to handle the wind down. So I was the person, and so I took no compensation for winding down Gotham, and I did a very good job with it, and that really enabled me to go back into business pretty quickly.
So when you start the business, what was the initial philosophy in terms of what to invest in? Because you mentioned something that Gotham had lower-quality companies, that changed.
So the big changes were: one, I mentioned we underestimated the opportunity cost of liquidity. So I wanted Pershing to invest only in liquid assets. So no side pockets, no privates. We're going to focus on large-cap companies for the most part. And then also over time I came to learn about business quality and durability and growth. The problem with, you know, buying a cheap asset is, you know, if you buy it at 50 cents on the dollar and you get a dollar, that's great. But if it takes longer than you think, the return declines, and then you have to pay taxes once you sell, and then you have to find a new one. Whereas if you can find a really great business that you can own for years, that you can compound on a tax-deferred basis, you can grow wealth over time. You learn more and more about a company, get to know the management teams better. It's a better strategy. It's a much more scalable strategy than where we started.
So before we get into what you've done this year, there's a very famous video that you did that I want to get into to talk about the retail investor. You did a lemonade stand video. Why did you do that one?
A friend asked me — he said, a friend who went to Yale said they're starting something called the Big Think, and they want experts in a bunch of different topics. Would you do one on investing for me? And I actually didn't spend — I probably spent — I worked with an analyst to put together a presentation. I did one cut of this thing just as a favor, and Yale had it on their website, and they were charging like $60 for it, and they were making a fortune on this video. And I said, why don't you just release it? And I think it's had some — approaching a couple hundred million views because it's in many different places on the web. But I hear often from investors, but also a lot of founders — like Sequoia and Y Combinator recommend it to, you know, startup founders. So it's kind of a thing that has had a huge impact.
So, in that video, just for the people that haven't seen it, you go through a lemonade stand and how would you start it, how would you capitalize it, how would you do the P&L, and how would you value it? And it's basically talking about the average person and the average investor. One of the things that you mentioned in that is that compounding is very important and the quality of the earnings is very important. How do you think — or what do you think are the biggest mistakes that average investors make when they think about investing?
I think when you go into investing and you're starting out with not very much money, you want to get rich too quickly.
Yeah. Well, there's an age gap there. But Munger would say that people would ask him, 'I want to be like you but faster.' And that was the big mistake.
So I think there are many things in life that — first of all, compounding is amazing. And, you know, look, when you're younger, time passes slower, right? Each incremental year is a much bigger percentage of your life than it is now. So it goes by — so a year seems like a long time, whereas to me it goes by like that. So when you're younger, your experience of time makes you want to be in a little more of a rush.
Why do you think humans have such a difficulty understanding compounding? Because you give an example there, like 10,000 at 22 in 30 years is $600,000, but in 40 years it's close to 4 million. But it's really difficult to explain that compounding. Why do you think people continue to make this mistake?
I think it's just not intuitive math. And so people need to be taught the curve of compounding. And actually, it's very important to understand compounding. Compounding can solve most of your problems — your health issues, your savings issues. There are many, many problems where it doesn't feel like you're making a lot of progress, but eventually the curve of progress pays off.
So let's go back to Pershing and talk about compounding. So you started the business, and I assume most of your investors came back. And at the beginning, you had the overhang of an investigation. So the attorney general, which was Eliot Spitzer, a very famous attorney general, became even more infamous after the fact. But, you know, aspiring to be governor, he just won this huge settlement with Wall Street. We were his second initiative after settling with Wall Street. So it got a huge amount of press. And then actually being under investigation is not a fun thing, but I actually kind of enjoyed it. My lawyers thought I was crazy, but...
Let me interrupt you on that one. For people who haven't read the book, isn't your lawyer telling you not to talk, and you're just going all in?
Yeah. Well, first of all, I had confidence in the system. I knew I had done nothing wrong. And I thought it was just — I had actually sent my white paper on MBIA to the attorney general's office and encouraged them to investigate MBIA, but I was completely ignored. I met with the insurance regulators. I met with the SEC. No one cared. And now I had this audience with regulators. The problem was they were investigating me. But I thought once they understood the facts, they'd turn around and investigate MBIA. And that ultimately is what happened.
So with the overhang, what happened with the beginning of the company? You mentioned that there was an overhang.
Yeah. So the overhang was the investigation, and I didn't feel great about asking people for money, right? Because, you know, Gotham — a surprising and disappointing outcome. We had taken very conservative marks on the private assets. So the last year we were down 20%. I had never really lost money before. So that didn't feel good. And so the notion of asking people for new money before I sent them back the old money didn't feel good. Where we got lucky is actually in February, a month after we decided to wind down the firm, I met in Mexico, Cabo San Lucas. True story. I went with my wife, Karen at the time, to get away from everything. The press was horrible. Everything was — it was not a fun thing to have all these negative articles effectively accusing you of violating the law. And so my wife and I said, let's go away for the weekend, let's leave our kids at home. And we went to a place called Las Ananas in Cabo San Lucas. And if you know the place, you know you arrive, it's like beautiful, it's peaceful, I'm finally getting away from all the bad stuff. And our room wasn't ready, so they're like, 'Oh, Mr. Ackman, you can go hang out by the — there's a bar at the pool.' We go down, and I'm walking down by the pool, and it's this beautiful scene at the beach, and, you know, these guys — the guys with the towels, you know, they're going around to each person and they take their sunglasses and they spritz them and they clean them off. I mean, you can imagine this beautiful, luxurious environment. And then as I'm walking by, a guy gets up from the pool area and he says, 'Ackman, what the hell is going on?'
True story. Turns out it's the chairman of Leucadia National Corp. Leucadia has one of the best track records in the investment business. Many people think of them as, you know, kin to Mr. Buffett. They had been a co-investor of mine in a SPV that owned MBIA credit default swaps. Anyway, I go see him, and he's like, 'Bill, I told you when you put that report out, you were playing with fire, but man, I had no idea.' And he takes me to lunch, and he says, 'I just want you to know, Bill, when this whole thing blows over, you know, Joe and I — his partner Joe, who's president of Leucadia — want to back you in a significant way.' And that was one of the great moments of my life. And I took him at his word, and I worked through the regulatory stuff. And by toward the end of 2003, I was ready to go, and I called them, and they put 50 million in on one condition: they wouldn't let me take money from anyone else while I had their money. They said, 'Look, we don't like to help other rich people get rich.' This was their thing. I'm like, 'Okay.' So I put in 4 million, a million of which was borrowed. Okay, that's literally the liquidity I had at the time. And they put in 50 million. We started Pershing Square, and I recruited an analyst, Scott Ferguson, who had just graduated from Harvard Business School. My former assistant stayed with us, and my former CFO, Nick Bley. And we formed Pershing Square. That was the beginning.
