How does Bill Ackman think before investing? | Questions with Cometa

I'm having a great time. Always impressed by how warm the welcome we get.

Thank you.

So I think for the Microsofts and the Amazons of the world, I don't think capital is a bottleneck or a constraint. I think if you're a so-called neocloud, then it's much more of an issue. Cost of capital has gone up, and it's a levered bet on your ability to deliver compute, etc. But, you know, I think compute represents intelligence. Intelligence is the most valuable asset in the world, you know, as we approach superintelligence. So you're going to continue to see, and the cost is coming down. So people want more intelligence. They want even more. The lower the cost, that will drive demand for compute. So I think being long compute is a good asset class.

Yeah, the most difficult. I certainly think of myself as a business analyst. I'm not building financial models these days; other people on the team do that. But I spend a lot of time thinking about business dynamics, you know, the various forces that affect a company, the competitive dynamics. The biggest challenge for any investor today is to think about disruption. You know, there are businesses that for years generate piles of cash, growing each year, and then one day a new company emerges that takes away their business. And even the greatest investors have experienced this. You know, Warren Buffett, if you go back and read his letters over time, he talked about the newspaper business being one of the best businesses in the world, and that business, because of really the internet, has been challenged. Even the Google search bar, you know, incredibly dominant business that AI has disrupted. So disruption is just a fact of life for businesses, and as an investor, your most important job is not predicting next year's earnings, but predicting, you know, what's the risk of this business being disrupted, and that's something that's one of the hardest things to do, particularly in an era with massive technological change.

And by the way, the narrative can be wrong.

You know, our view on the Uber narrative is it's an incorrect narrative that we think creates a buying opportunity.

So, one, I feel like the kind of adversity I've had to deal with is not that meaningful compared to, you know, I've been in a very fortunate position my whole life. You know, I grew up in a, you know, my father was a successful business person. I knew that my college was paid for, so I wasn't going to graduate with big student loans. I've always been healthy, so I think, you know, I was never worried about having a roof over my head, getting an education, and, you know, God bless, my health has been excellent. But I certainly had some business adversity, and then more recently, you know, a child who's had a major health incident, which I would say is, you know, among the most difficult challenges. And in my experience, the way to deal with challenging moments and big reversals, and I think is one, to expect them. That's life, okay? You're going to, things are going to happen. You know, either you'll have a health incident, or your loved one, or a child, or a parent. It's almost a certainty. You might get fired from your first job. You might, you know, launch a startup, raise money at a hundred million dollar valuation, you know, everything's going great, and then Meta launches a product and puts you out of business. And the key is just one, always remain an optimist. And two, what can't be taken away from you are kind of your innate skills, drive, passion, and the learnings that you get from mistakes that you make. So in investing, it's a certainty you're going to make mistakes. I don't know an investor that's had a perfect, literally every investment has worked. So you're going to make mistakes. The key is to learn from them. If you have a major reversal, you know, you get fired from a job, your company goes bankrupt, you know, things like this, or you have a major drawdown when you're managing capital. The way that, you know, in our case, we had, I've had two significant business reversals. My first fund, Gotham Partners, toward the end of its life, we took on a very politically influential company, betting against the company, a company called MBIA, and they were much more politically powerful than our little firm, and ultimately, you know, led to, we had an adverse court decision that was later reversed, but it forced us, if you will, out of business. I went under investigation for this research report I wrote on a company called MBIA. I was ultimately proven right. I was never, you know, I was completely exonerated from the investigations. But it was a very challenging moment, and the way that I dealt with the first moment that I went through this challenge was I just committed to myself that each day I would make a little progress on working through the various issues. Make progress with the investigation, make progress with the portfolio, keep my investors informed. One of the really important things to do when you're in business and you have partners, limited partners, investors who have given you money, is just be honest with them. You know, people really respect honesty and, you know, acknowledgement of mistakes. And then, okay, now what are you going to do about it? And, you know, the remarkable thing is when I launched Pershing Square, even at, you know, the Gotham Fund didn't end in my ideal manner, every one of the investors returned, which is, you know, kind of a wonderful thing. So if you treat your partners fairly, you're honest with your partners even when you're going through difficult moments, and then you just commit to yourself each day, I'll make more and more progress, the curve of the compounding of progress is like the compounding of a stock or of money, and pretty soon you've made massive progress and you're on to the next one. You know, so I think there are many examples. Almost every successful business person has had a massive failure, so expect it.

You know, as you say, investing is this balance between you need to be confident enough to pull the trigger, and the best investments are ones where pretty much everyone's going to tell you you're wrong, but humble enough to recognize when the facts are inconsistent with the original thesis. At the end of Gotham, you know, what caused the challenge is that actually our fund structure was not robust enough to deal with any adversity. We had a mix of liquid and illiquid assets, and we had an adverse event, a court decision initially went against us, put us in this awkward position where we couldn't, didn't manage through. So I committed that when I launched Pershing Square, I would eventually get to a place where we had permanent capital. And so if you look at Pershing Square today, 98% of the capital we manage is in a few public entities. We just today, we rang the bell on PSUS, which is now listed on the Mexican stock exchange. PS, the Pershing Square, the management company, but the fund Pershing Square US is a permanent pool of capital, so we can withstand the inevitable, you know, kind of challenges. So half the battle is making sure you're in the right vehicle when you're on your way.