#413 – Bill Ackman: Investing, Financial Battles, Harvard, DEI, X & Free Speech

Bill Ackman is an investor who has led some of the biggest and controversial financial trades in history. He is founder and CEO of Pershing Square Capital Management. Please support this podcast by checking out our sponsors: – LMNT: https://drinkLMNT.com/lex to get free sample pack – Policygenius: https://policygenius.com/lex – AG1: https://drinkag1.com/lex to get 1 month supply of fish oil – Eight Sleep: https://eightsleep.com/lex to get special savings – BetterHelp: https://betterhelp.com/lex to get 10% off Transcript: https://lexfridman.com/bill-ackman-transcript EPISODE LINKS: Bill’s X: https://twitter.com/BillAckman Pershing Square Holdings: https://pershingsquareholdings.com/ Pershing Square Foundation: https://pershingsquarefoundation.org Neri Oxman conversation: https://www.youtube.com/watch?v=XbPHojL_61U Books mentioned: The Intelligent Investor: https://amzn.to/3ONnaZy America’s Cultural Revolution: https://amzn.to/3SDz1dY PODCAST INFO: Podcast website: https://lexfridman.com/podcast Apple Podcasts: https://apple.co/2lwqZIr Spotify: https://spoti.fi/2nEwCF8 RSS: https://lexfridman.com/feed/podcast/ YouTube Full Episodes: https://youtube.com/lexfridman YouTube Clips: https://youtube.com/lexclips SUPPORT & CONNECT: – Check out the sponsors above, it’s the best way to support this podcast – Support on Patreon: https://www.patreon.com/lexfridman – Twitter: https://twitter.com/lexfridman – Instagram: https://www.instagram.com/lexfridman – LinkedIn: https://www.linkedin.com/in/lexfridman – Facebook: https://www.facebook.com/lexfridman – Medium: https://medium.com/@lexfridman OUTLINE: Here’s the timestamps for the episode. On some podcast players you should be able to click the timestamp to jump to that time. (00:00) – Introduction (08:55) – Investing basics (13:47) – Investing in music (22:08) – Process of researching companies (26:47) – Investing in restaurants (32:16) – Investing in Google (37:58) – AI (43:13) – Warren Buffet (45:22) – Psychology of investing (54:53) – Activist investing (1:04:41) – General Growth Properties (1:20:57) – Canadian Pacific Railway (1:28:21) – OpenAI (1:32:32) – Biggest loss and lowest point (1:47:21) – Herbalife and Carl Icahn (2:04:11) – Oct 7 (2:10:42) – College campus protests (2:29:09) – DEI in universities (2:50:00) – Neri Oxman (3:15:30) – X and free speech (3:19:54) – Trump (3:27:30) – Dean Phillips (3:34:36) – Future

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Lex Fridman?

  The following is a conversation with Bill Ackman, a legendary activist investor who has been part of some of the biggest and at times controversial trades in history. Also, he is fearlessly vocal on X, FKA Twitter, and uses the platform to fight for ideas he believes in. For example, he was a central figure in the resignation of the president of Harvard University, Claudine Gay, the saga of which we discuss in this episode.

• 0:31Lex Fridman?

  And now, a quick few second mention of each sponsor. Check them out in the description. It's the best way to support this podcast. We got Element for delicious electrolytes, Policy Genius for insurance, AG1 for overall delicious health, Aidsleep for naps, and BetterHelp for mental health. Choose wisely, my friends. Also, if you want to work with our amazing team or just want to get in touch with me, go to lexfridman.com/contact. And now, onto the full ad reads. As always, no ads in the middle. I try to make this interesting, but if you skip them, please still check out the sponsors. We love them. I love them. Maybe you will love them, too. This episode is brought to you by Element, the thing I'm drinking right now, the thing

• 1:16Lex Fridman?

  I drink throughout the day, all days, when I travel. It is forever with me. The only flavor I now acknowledge exists is watermelon salt. There's many other flavors, and other people say they're also delicious. I don't know what they're saying. They probably don't know what they're talking about, because the greatest flavor of all time is watermelon salt. Do you ever just go to a thing, to a very particular flavor of a thing, and that becomes your thing? There's never a doubt. When you go to a particular restaurant, or you go into an ice cream shop, or you go to the grocery store aisle with the delicious snacks, and you know exactly which snack you're getting. I have that. There's these

• 1:58Lex Fridman?

  chips that have very low carbs. And there's a lot of different kinds, but there's a particular kind of really like and a particular flavor. But I'm not ready to reveal what the brand or the flavor is to maintain a sense of mystery about my life. But more honestly, because I don't actually remember. I just remember the color. Anyway, that's me with watermelon salt and element. It's delicious. I have found the thing I need in my life, especially when I'm fasting or doing low carb stuff. Get a simple pack for free with any purchase. Try it at drink element.com/lex.

• 2:42Lex Fridman?

  This episode is also brought to you by Policy Genius, a marketplace for all kinds of insurance, life insurance, auto insurance, home insurance, disability insurance. They have really nice tools for comparison. This is the thing I need in my life for everything. This is where the good aspect of capitalism can come in, where you have freely competing entities, honestly, competing, transparent with full information available to the consumer where they get to choose and choose honestly based on well-defined, clear, full set of parameters. All right, I love it. I need that for other things I'm doing in my life.

• 3:26Lex Fridman?

  I need that for everything. In fact, going back to the other thing I mentioned, I need that for ice cream. I need a full detailed comparison of the different flavors. I also need data on who enjoyed which flavor throughout human history. I'm not talking about just that ice cream shop, across all ice cream shops. I want the data. And I don't just want the mean or the median, because that's going to end up on vanilla or chocolate, whatever. I want like the clusters and I want to know which cluster I belong to. I want, I want, I want the data. Anyway. So the tools that allow you to explore the parameters are very important and that's what Policy Genius provides. With Policy Genius, you can find life insurance policies that start at just $292 per year

• 4:11Lex Fridman?

  for $1 million of coverage. Head to policygenius.com/lex or click the link in the description to get your free life insurance quotes and see how much you could save. That's policygenius.com/lex.

• 4:26Lex Fridman?

  This episode is also brought to you by AG1, an all-in-one daily drink that I drink to support better health and peak performance. The degree to which I love AG1 and my very good, close friend Andrew Huberman loves AG1 has become a meme. And, you know, every meme is grounded in reality and truth. And my truth is that it just brings me happiness. You know, on days like I talk about in this episode where all I eat is some McDonald's beef patties, it just brings me both sort of physiological and psychological comfort, knowing that I have at least some of the nutritional bases covered.

• 5:11Lex Fridman?

  Meat does make me feel good, but your body probably needs a lot of other stuff, especially for long-term longevity and long-term health and flourishing. But of course, in the long term, we're all driving towards a cliff. And one day, too soon, we'll be driving off that cliff, hopefully with a smile. And maybe on that day, I will also be drinking AG1. I drink it twice a day now. It's actually one of my favorite ways to take a break. I just sit on the couch and sip, listen to this peaceful kind of music, and just think, prepare my mind for the work ahead.

• 5:53Lex Fridman?

  They'll give you one month's supply of fish oil when you sign up at drinkag1.com/lex. This episode is also brought to you by Eight Sleep and its Pod3 mattress. It controls temperature with an app. It can cool you down to as low as 55 degrees or as hot as 110 degrees, but you're gonna need the next sponsor if you're the kind of person that puts it up to 110 degrees. I have a lot of questions. Next sponsor's about health, by the way. 110 degrees, I just have questions. I think I saw a social media post from Tim Kennedy saying, "When you're alone, that guy's a poet."

• 6:35Lex Fridman?

  Also, he's insane on the mat. Anyway, he was posting, I think, on Instagram that when you're alone, the only correct temperature to exist in is 60 degrees, 58 degrees, something like this. Basically, he likes it freezing. And I can somewhat agree, especially on the surface of the bed. Cold bed, warm blanket, that's just the best way to take a nap. I need to go see Tim. Training jujitsu with him is really fun. But he goes pretty intense. That guy lives life on 11. Anyway, check it out and get special savings when you go

• 7:13Lex Fridman?

  to eightsleep.com/lex. This episode is brought to you by BetterHelp, spelled H E L P, help. They figure out what you need and match you with a licensed therapist in under 48 hours. Individual or couples, it's easy to create, affordable, available anywhere. Listen, this is the easiest way to start talking and start diving deep into the recesses of your subconscious mind. I'm a huge fan of talk therapy, of talking, talking rigorously, talking like it's an important thing with a goal in mind, like you're digging for something. That's what I try to do with this podcast. That's what I try to do with conversations

• 7:56Lex Fridman?

  in my private life. When I'm just sitting there at a coffee shop and a stranger sits down and says hello. I'm not a licensed therapist. Neither is the other person. We're just there for an open mic or a music thing or whatever the hell. We're amateur. We're amateur therapists to each other. Anyway, you should, you should work with professionals. And that's what BetterHelp provides. The whole point is they make it easy. Check them out at betterhelp.com/lex and save on your first month. That's betterhelp.com/lex. This is the Lex Fridman Podcast. To support it, please check out our sponsors in the description. And now, dear friends, here's Bill Ackman.

• 8:55Lex Fridman?

  In your lecture on the basics of finance and investing, you mentioned a book Intelligent Investor by Benjamin Graham as being formative in your life. What key lesson do you take away from that book that informs your own investing?

• 9:08Speaker 01

  Sure. Actually, it was the first investment book I read. And as such, it was kind of the inspiration for my career and a lot of my life. So important book. You know, bear in mind, this is sort of after the Great Depression. People lost confidence in investing in markets, World War II. And then he writes this book. It's for like the average man. And basically, he says that you have to understand the difference between price and value, right? Price is what you pay. Value is what you get. And he said, the stock market is here to serve you, right? And it's a bit like the neighbor that comes by every day and makes you an offer for your house. Makes you a stupid offer, you ignore it. Makes you a great offer, you can take it. And that's the stock market. And the

• 9:52Speaker 01

  key is to figure out what something's worth. And you have to kind of weigh it. He talked about the difference between, you said, the stock market in the short term is a voting machine. It represents speculative interests, you know, supply and demand of people in the short term. But in the long term, it's the stock market's a weighing machine. You're much more accurate. It's going to tell you what something's worth. And so if you can divine what something's worth, then you can really take advantage of the market because it's really here to to help you. And that's kind of the message of the book.

• 10:22Lex Fridman?

  In that same way, there's a kind of difference between speculation and investing.

• 10:26Speaker 01

  Yeah. Speculation is just, it's a bit like buying, trading crypto, right?

• 10:33Lex Fridman?

  Strong words.

• 10:35Speaker 01

  Well, short term trading crypto. Maybe in the long run, there's intrinsic value. But the

• 10:42Speaker 01

  You know, it's many investors, you know, in a bubble going into the, you know, the crash were really just pure speculators. They didn't know what things were worth. They just knew they were going up, right? That's speculation. And investing is, you know, doing your homework, digging down, understanding a business, understanding the competitive dynamics of an industry, understanding what management's going to do, understanding what price you're going to pay. You know, the value of anything, I would say, other than love, let's say, is the present value of the cash you can take out of it over its life. Now, some people think about love that way. It's not, it's not the right way to think about love. But it's, um, yeah. So investing is about basically building

• 11:25Speaker 01

  a, a model of what this business is going to produce over its lifetime.

• 11:29Lex Fridman?

  So how do you get to that? This idea of called value investing? How do you get to the value of a thing? Even like philosophically, value of anything really, but we can just talk about the things that are on the stock market.

• 11:42Speaker 01

  Sure.

• 11:42Lex Fridman?

  Companies.

• 11:43Speaker 01

  The value of a, a security, the value is the present value of the cash you can take out of it over its life. So if you think about a bond, your bond, you know, pays a 5% coupon interest rate. You get that, you know, let's say every year or twice a year, split in half. And it's very predictable. And if it's a US government bond, you know you're going to get it. So that's a pretty easy thing to value. A stock is an interest in a business. It's like owning a piece of a company. And a business, a profitable one is like a bond in that it generates these coupons or these earnings or cash flow, you know, every year. The difference with a stock and a bond is that the bond, it's a contract. You know what you're going to get as long as they don't go bankrupt

• 12:27Speaker 01

  and default. With a stock, you have to make predictions about the business. You know, how many widgets are going to sell this year? How many are going to sell next year? What are their costs going to be? How much of the money that they generate? Do they need to reinvest in the business to keep the business going? And that's more complicated. But, you know, what we do is we try to find businesses where with a very high degree of confidence, we know what those cash flows are going to be for a very long time. And there are very few businesses that you can have a really high degree of certainty about. As a result, you know, many investments are speculations because it's really very difficult to predict the future. So what we do for a living, what I do for a living, is find those rare companies that you can kind of predict what they're going to look like over a very long period of time.

• 13:09Lex Fridman?

  So what are the factors that indicate that a company is something, is going to be something that's going to make a lot of money, it's going to have a lot of value, and it's going to be reliable over a long period of time? And what is your process of figuring out whether a company is or isn't that?

• 13:27Speaker 01

  So every consumer has a view on different brands and different companies. And you know, what we look for are sort of these non-disruptible businesses, a business where you can kind of close your eyes, stock market shuts for a decade, and you know that 10 years from now, it's going to be a more valuable, more profitable company. So we own a business called Universal Music Group. It's in the business of helping artists become global artists, sort of recorded music business. And it's in the business of, you know, owning rights to sort of the music publishing rights of songwriters. And, you know, I think music

• 14:06Speaker 01

  is forever, right? Music is a many thousand year old part of the human experience. And I think it will be, you know, thousands of years from now. And so that's a pretty good backdrop to invest in a company. And the company basically owns a third of the global recorded music. And that's, you know, the most dominant sort of market share in the business. They're the best at taking an artist who's 18 years old, who's got a great voice, and has started to get a presence on YouTube and Instagram, and helping that artist become a superstar. And that's a unique talent. And the result is, the best artists in the world want to come work for them. But they also have this incredible library

• 14:48Speaker 01

  of, you know, The Beatles, The Rolling Stones, U2, et cetera. So, and then if you think about what music has become, it used to be about records and CDs and, you know, eight-track tapes for those of whom, and it was about a new format, and that's how they drive sales. And it's become a business which is like the podcast business, about streaming. And you can, streaming is a lot more predictable than selling records. Right? You can sort of say, okay, how many people have smartphones? How many people are going to have smartphones next year? There's a kind of global penetration over time of smartphones. You pay, call it 10, 11 bucks a month for a subscription or less for a family plan. And you can kind of build a model of what the world looks like and predict,

• 15:33Speaker 01

  you know, the growth of the streaming business. You predict what kind of market share Universal is going to have over time. And you can't get to a precise view of value. You can get to an approximation. And the key is to buy at a price that represents a big discount to that approximation. And that gets back to Ben Graham. Ben Graham was about, what he called, invented this concept of margin of safety. Right? You want to buy a company at a price that if you're wrong about what you think it's worth, and it turns out to be worth 30% less, you paid a deep enough discount to your estimate that you're still okay. It's about investing, a big part of investing is not losing money. If you can avoid losing money and then have a few great hits, you can do very, very well over time.

• 16:17Lex Fridman?

  Well, music is interesting because, yes, music's been around for a very long time. But the way to make money from music has been evolving. Like you mentioned, streaming, there's a big transition initiated by, I guess, Napster, then created Spotify of how you make money on music with Apple and with all of this. And the question is, how well are companies like UMG able to adjust to such transformations? One, I could ask you about the future, which is artificial intelligence, being able to generate music, for example. There have been a lot of amazing advancements with. So do you have to also think about that? Like, when you close your eyes, all the things you think about. Are you imagining the possible ways that the?

• 17:02Lex Fridman?

  The future is completely different from the present and how well this company will be able to like surf the wave of that.

• 17:08Speaker 01

  Sure, and they've had to surf a lot of waves. And actually, the music business peaked the last time in like the late 90s or 2000 timeframe. And then really innovation, Napster, digitization of music almost killed the industry. And Universal really led an effort to save the industry and actually made an early deal with Spotify. That enabled, you know, the the industry to really recover. And so by virtue of their market position and their credibility and their willingness to kind of adopt new technologies, they've kept their position. Now, they of course had this huge advantage because I think the Beatles are forever. I think U2 is forever. I think Rolling Stones are forever. So they had a nice base of of assets that were important and I think will forever be. And forever is a long time, but you know, the

• 17:55Speaker 01

  again, there's enormous, there are all kinds of risks in every business. This is one that I think has a very high degree of persistence. And I can't envision a world where beyond streaming, in a sense. Now, you may have a Neuralink chip in your head that instead of a phone, but the music can come in a digitized, you know, kind of format. You're going to want to have an infinite library that you can walk around in your pocket or in your brain. It's not going to matter that much if the form factor, you know, the device changes. It's not really that important, whether it's Spotify or Apple or Amazon, that are the so-called DSPs or the providers. I think the values really gonna reside in the in the content owners, and that's really the artists and the label.

• 18:40Lex Fridman?

  And I actually think AI is not going to be the primary creator of music. I think we're going to actually face the reality that it's not that music has been around for thousands of years, but

• 18:56Lex Fridman?

  Musicians and music has been around. Like, we actually care to know who's the musician that created it. Just like, wanna know that who's the artist, human artist, that created a piece of art.

• 19:06Speaker 01

  I totally agree. And I think, if you think about it, there's other, lots of other technologies and computers that have been used to generate music over time. But no one wants to, no one falls in love with a computer-generated track, right? And, you know, Taylor Swift, you know, incredible music, but it's also about the artist and her story and her physical presence and, you know, the, uh, the live experience. I don't think you're gonna sit there and someone's gonna put a computer up on stage and then, and it's gonna play and people are gonna get excited around it. So I think AI is really gonna be a tool to make artists better artists. And, and, uh, you know, the, I think, like a synthesizer, right?

• 19:51Speaker 01

  Really created the opportunity for, you know, one man to have an orchestra. Maybe a bit of a threat to a percussionist, but maybe not. Maybe it drove even more demand for, for, for the live experience.

• 20:05Lex Fridman?

  Unless that computer has human-like sentience, which I believe is a real possibility. But then it's really, from a business perspective, no different than a human. If it has an identity that's basically fame and influence and there'd be a robot Taylor Swift, and it doesn't really matter.

• 20:22Speaker 01

  It's a copyrightable asset, I would think, right? Yeah.

• 20:26Lex Fridman?

  And then there'll be...

• 20:27Speaker 01

  Not sure that's the world I'm excited about.

• 20:28Lex Fridman?

  That's a different discussion. The world is not gonna ask you permission to become what it's becoming, so... But you can still make money on it. Presumably, there'd be a capital system and there'd be some laws under which AI, which I believe AI systems will have rights that are akin to human rights. And we're gonna have to contend with what that means.

• 20:48Speaker 01

  Well, there's sort of name and likeness rights, right? That have to be protected now. Can a name be attributed to a Tesla robot? I don't know.

• 20:58Lex Fridman?

  I think so. I think it's quite obvious.

• 21:00Speaker 01

  Okay, so those are more potential artists for us to represent at Universal.

• 21:03Lex Fridman?

  Exactly, exactly. All right.

• 21:05Speaker 01

  That's sort of one example. Another example could be just, you know, the restaurant industry, right? If you can, if you look at businesses like McDonald's, right? It's a, whatever the company's like a 1950 vintage business and here we are, it's, you know, 75 years later. And you can kind of predict what it's going to look like over time. And the menu's going to adjust over time to consumer tastes. And, but I think the hamburger and fries is probably forever.

• 21:29Lex Fridman?

  The Beatles, the Rolling Stones, the hamburger and fries are forever.

• 21:32Speaker 01

  Yeah.

• 21:33Lex Fridman?

  I was eating at Chipotle last night as I was preparing these.

• 21:37Speaker 01

  Excellent. Thank you. Thank you.

• 21:39Lex Fridman?

  And yeah, it is, it is one of my favorite places to eat. You said it is a place that you eat. You obviously also invest in it. What do you get at Chipotle?

• 21:49Speaker 01

  I tend to get a double chicken.

• 21:51Lex Fridman?

  Bowl or burrito?

• 21:53Speaker 01

  I like the burrito, but I generally try to order the bowl.

• 21:56Lex Fridman?

  Yeah.

• 21:57Speaker 01

  Cut the carb.

• 21:57Lex Fridman?

  For health reasons. All right.

• 21:59Speaker 01

  And, you know, double chicken, guac, lettuce, black beans.

• 22:02Lex Fridman?

  And I'm more of a steak guy. Just, just putting that on the record. What's the actual process you go through? Like, literally, like, the process of figuring out what the value of a company is? Like, how do you do the research? Is it reading documents? Is it talking to people? Is, how do you do it?

• 22:24Speaker 01

  It's all about, so Chipotle, what attracted us initially is the stock price dropped by about 50%. Great company, great concept.

• 22:34Speaker 01

  Athletes love it, consumers love it. Healthy, sustainable, fresh food made in front of your eyes. And, you know, great, Steve Ells, the founder, did an amazing job. But ultimately, the company's lacking some of the systems and had a food safety issue. Consumers got sick, almost killed the brand. But the reality of the fast food, quick service industry is almost every fast food company has had a food safety issue over time and the vast majority have survived. And we said, look, such a great concept, but they, you know, their approach was not, was far from ideal. But we start with usually reading the SEC filings. So companies file a 10K or an annual report and they file these quarterly reports called

• 23:16Speaker 01

  10Qs. They have a proxy statement which describes kind of the governance, the board structure. Conference call transcripts are publicly available. It's kind of very helpful to go back five years and kind of learn the story. You know, here's how management describes their business. Here's what they say they're going to do. And then you can follow along to see what they do. It's like a historical record of, you know, of how competent and truthful they are. It's a very useful device. And then, of course, looking at competitors and thinking about, you know, who could, what could dislodge this company? You know, and then we'll talk to, if it's an industry we don't know well, we know the restaurant industry really well, music industry, we'll talk to people in the industry. We'll try

• 23:59Speaker 01

  to understand, you know, the difference between publishing and recorded music. We'll look at the competitors. We'll talk to, we'll read books. I read a book about the music industry or a couple of books about the industry. So it's, it's a bit like a big research project. And you, there are these so-called expert networks now, and you can get pretty much anyone on the phone. And they'll talk to you about an aspect of the industry that you don't understand, want to learn more about. Try to get a sense, you know, public filings of companies generally give you a lot of information, but not everything you want to know. And you can learn more by talking to experts about some of the industry dynamics, the personalities. You want to get a sense of management. I like watching,

• 24:42Speaker 01

  you know, podcasts, if a CEO were to do a podcast or a YouTube interview, you get a sense of the people.

• 24:47Lex Fridman?

  So in the case of Chipotle, for example, by the way, I could talk about Chipotle all day. I just love it. I love it. I wish there was a sponsor.

• 24:56Speaker 01

  I'll mention it to the CEO.

• 24:57Lex Fridman?

  Don't make promises you can't keep, Bill.

• 24:59Speaker 01

  I'm not making, Brian Nichols is a fantastic CEO. He's not going to spend $1 if he doesn't think it's the company's best interest.

• 25:06Lex Fridman?

  All right. All I want is free Chipotle. Come on now.

• 25:10Lex Fridman?

  What was I saying? Oh, and so you look at a company like Chipotle and then you see there's a difficult moment in its history, like you said, that there was a food safety issue. And then you say, okay, well, I see a path where we can fix this. And therefore, even though the price is low, we can get it to where the price goes up to its value.

• 25:31Speaker 01

  So the kind of business we're looking for is sort of the kind of business everyone should be looking for, right? A great business. It's got a long term trajectory of growth out into the force, you know, even beyond the foreseeable distance, right? Those are the kind of businesses you want to own. You want businesses that generate a lot of cash. You want businesses that you can easily understand. You want businesses with these sort of huge barriers to entry where it's difficult for others to compete. You want companies that don't have to constantly raise capital. And these are some of the great businesses in the world. But people figured out that those are the great businesses. So the problem is those companies tend to have very high stock prices and the value is generally built into the price you have to pay for the business. So we can't earn

• 26:13Speaker 01

  the kind of returns we want to earn for investors by paying a really high price. Price matters a lot. You can buy the best business in the world. And if you overpay, you're not going to earn particularly attractive returns. So we get involved in cases where a great business has kind of made a big mistake, or you've a company that's kind of lost its way, but it's recoverable. And that's we buy from shareholders who are disappointed, who've lost confidence, selling at a low price relative to what it's worth if fixed. And then we try to be helpful in fixing the company.

• 26:47Lex Fridman?

  You said that barriers to entry, you said a lot of really interesting qualities of companies very quickly in a sequence of statements that took like less than 10 seconds to say, but some of them were fascinating, all of them were fascinating. So you said barriers to entry. How do you know if there's a type of moat protecting?

• 27:08Lex Fridman?

  Of the competitors from stepping up to the plate.

• 27:12Speaker 01

  I mean, the most difficult analysis to do as an investor is that. It's kind of figuring out how wide is the moat? How, you know, how much at risk is the business to disruption? And we're in, I would say, a period, the greatest period of disruptability in history, right? Technology, you know, a couple of 19 year olds can, you know, leave whatever university, or maybe they didn't go in the first place. They can raise, you know, millions of dollars. They can get access to infinite bandwidth, storage. They can contract with engineers in low cost markets around the world. They could build a virtual company and they can disrupt businesses that seem super established over time.

• 27:55Speaker 01

  And then on top of that, you have major companies with multi trillion dollar market caps, working to find profits wherever they can. And so that's a dangerous world in a way to be an investor. And so you want to, you have to find businesses that it's hard to foresee a world in which they get disrupted. And the beauty of the restaurant business, and we've actually, our best track record is in restaurants. We've never lost money. We've only made a fortune, interestingly, investing in restaurants. A big part of it's a really simple business. And if you, you know, get Chipotle right and you're at 100 stores, you know, it's not so hard to envision getting to 200 stores and then getting to 500 stores, right? And the key is maintaining the brand image, growing intelligently, having the right systems.

• 28:39Speaker 01

  You know, and when you go from 100 stores to 3,500 stores, you have to know what you're doing. There's a lot of complexity, right? You know, if you think about your local restaurant, you know, the family's working in the business, they're, they're watching the cash register. And you can probably open another restaurant, you know, across town. But there are very few restaurant operators that own more than a few restaurants and operate them successfully. And the, and the quick service business is about systems. And building a model that a stranger who doesn't know the restaurant industry can come in and enter the business and build a successful, successful franchise. Now Chipotle's not a franchise company. They actually own all their own stores, but many of the most

• 29:21Speaker 01

  successful restaurant companies are franchise models like a Burger King, a McDonald's, Tim Hortons, you know, all these various brands, Popeyes. And there it's about systems, but the same systems apply whether you own all the stores and it's run by a big corporation or whether the owners of the restaurants are, are sort of franchisees, you know, local entrepreneurs.

• 29:40Lex Fridman?

  So if the restaurant has scaled to a certain number, that means they've figured out some kind of system that works.

• 29:46Speaker 01

  Yes.

• 29:46Lex Fridman?

  It's very difficult to develop that kind of system. So that's a moat.

• 29:49Speaker 01

  A moat is you get to a certain scale and you do it successfully and the brand is now in the, in the understood by the consumer. And what's interesting about Chipotle is what they've achieved is difficult, right? They're not buying frozen hamburgers, getting shipped in. They're buying fresh, you know, sustainably sourced ingredients. They're preparing food in the store. That was a first, right? The quality of the product at Chipotle is incredible. It's the highest quality food you can get for, you can get a serious dinner for under 20 bucks and eat really health, you know, healthfully and very high quality ingredients. And that's just not available anywhere else. And it's very hard to replicate and to build those relationships with, you know, farmers around the country. It's a lot easier to

• 30:33Speaker 01

  make a deal with one of the big, you know, massive food producers and buy your pork from them than to buy from a whole bunch of farmers around the country. And so it's, that is a big moat for Chipotle, very difficult to replicate.

• 30:46Lex Fridman?

  And by the way, another company I think you have a stake is, is McDonald's?

• 30:49Speaker 01

  No, we own a company called Restaurant Brands. Restaurant Brands owns a number of quick service companies, one of which is Burger King.

• 30:56Lex Fridman?

  Burger King. Okay. Well, it's been a meme for a while, but I've, Burger King is great too, Wendy's, whatever. But usually I go McDonald's. I'll just eat burger patties. I don't know if you knew you could do this, but a burger patty at Burger King can do this. McDonald's, it's actually way cheaper.

• 31:13Speaker 01

  They'll just sell you the pat.

• 31:14Lex Fridman?

  The patty. And it's cheap. It's like a dollar 50 or $2 for per patty. And it's about 250 calories and it's just meat. And despite like the criticism and memes out there, that's.

• 31:26Speaker 01

  Pretty healthy stuff.

• 31:27Lex Fridman?

  It's healthy stuff. And so when I do, when I go, my, the healthiest I feel is when I do carnivore. It doesn't sound healthy, but if I eat only meat, I feel really good. I lose weight. I have all this energy. It's crazy. And the, when I'm traveling, the easiest way to get meat is that.

• 31:42Speaker 01

  You go to McDonald's, you order six patties.

• 31:43Lex Fridman?

  Exactly. So there's this sad meme of me just sitting alone in the car when I'm traveling, just eating beef patties at McDonald's. But I love it. And you gotta do what, what you love, what makes you happy. And that's what makes me happy.

• 31:54Speaker 01

  Okay, we should maybe we'll have Burger King feature in it. What about Flame World? What's with these fried burgers? We gotta get you to Burger King, you know, grilled burgers.

• 32:01Lex Fridman?

  Wait, is this like fast food trash? I didn't know. I don't know the details of how they're made. I'm not, I don't have allegiance.

• 32:08Speaker 01

  I think we got a chance to switch you to Burger King.

• 32:10Lex Fridman?

  Great. We'll see. I'm, I'm making so many deals today. It's wonderful. Okay. You were talking about most, and this kind of remind me of Alphabet, the parent company.

• 32:21Speaker 01

  Sure. We're making, we're, it's a big position for us.

• 32:23Lex Fridman?

  So it's interesting that you're, uh, think that maybe Alphabet fits some of these characteristics.

• 32:33Lex Fridman?

  It's tricky to know with everything that's happening in, in AI and I'm interviewing Sundar Pichai soon. It's interesting that you think that there's a moat. And it's also interesting to analyze that because the consumer is just a fan of technology. Why is Google still around? Like they've been, it's not just the search engine is doing it all. The basics of the business of search really well, but they're doing all these other stuff. So what, what's your analysis of Alphabet? Why are you still positive about it?

• 33:01Speaker 01

  Sure. So it's a business we've admired as a firm for, you know, whatever, 15 years. But rarely got to a price that we felt we could own it because again, the expectations were so high and price really matters. And really the sort of AI scare, I would call it, you know, Microsoft comes out with ChatGPT. They do an amazing demonstration. People like this most incredible product. And Google, which had been working on AI even earlier, obviously the Microsoft, Microsoft was behind in AI. It was really their ChatGPT deal that gave them a kind of a market presence.

• 33:35Speaker 01

  And then Google does this fairly disastrous demonstration of Bard. And the world says, oh, my God, Google's fallen behind in AI. AI is the future. Stock gets crushed. Google gets to a price around 15 times earnings, which for a business of this quality is an extremely, extremely low price. And our view on Google, one way to think about it, when a business becomes a verb, that's usually a pretty good sign about the mode around the business. So, you know, you open your computer and you open your search and very high percentage of the world starts with a Google, you know, page in a one line. When you type in your, your search, you know, the Google advertising, search YouTube franchise

• 34:18Speaker 01

  is one of the most dominant franchises in the world, very difficult to disrupt, extremely profitable. The world is moving from offline advertising to online advertising. And that trend, I think, continues. Why? Because you can actually see whether your ads work. You know, they used to say about advertising, you know, you spend a fortune and you just don't know which 50% of it works, but you just sort of spend the money because you know, ultimately that's going to bring in the customer. And now with online advertising, you can see with granularity which dollars I'm spending, you know, when people click on the search term and end up buying something and I pay, you know, the, it's a very high return on investment for the advertiser. And they really dominate that business. Now, AI, of course, is a risk.

• 35:03Speaker 01

  If all of a sudden people start searching or asking questions of ChatGPT and don't start with the Google search bar, that's a risk to the company. And so our view, based on work we had done and talked to industry experts, is that Google, if anything, had a, by virtue of the, the investment they've made, the time, the energy that people put into it, we felt their AI capabilities were, if anything, potentially greater than Microsoft ChatGPT. And that the market had overreacted. And because Google, you know, is a big company, global business regulators scrutinize it incredibly carefully, they couldn't take some of the same liberties. A startup like OpenAI did in releasing a product. And I think Google took a more cautious approach

• 35:47Speaker 01

  in releasing that early version of Bard in terms of its capabilities. And that led Lamarck, the world, to believe that they were behind. And we ultimately concluded if they're tied or ahead, and you're paying nothing for that potential business. And they're going to, and they also have huge advantages by virtue, you think of all the data Google has, like the search data, all the various applications, you know, email and otherwise, and the kind of the Google suite of products, it's an incredible data set. So they have more training data than pretty much any company in the world. They have incredible engineers, they have enormous financial resources. So that was kind of the bet. And we still think it's probably the cheapest of the big seven companies in terms of price you're paying for the business relative to its current earnings. It also

• 36:32Speaker 01

  is a business that has a lot of potential for efficiency. You know, sometimes when you have this enormously profitable dominant company, you know, all of the technology companies in the post-March 20 world grew enormously in terms of their teams, and they probably over hired. And so you've seen some, you know, the Facebooks of the world, and now even Google, starting to get a little more efficient in terms of their operations. So we paid a low multiple for their, the business. One way to think about the value of the business is the price you pay for the earnings. Or alternatively, what's the yield? If you flip over the price over the earnings, it gives you kind of the yield of the business. So a 15 multiple is about a, almost a seven and a half percent yield,

• 37:14Speaker 01

  and that earnings yield is growing over time as the business grows. That's a, you know, compared to what you can earn lending your money to the government, you know, 4%, that's a very attractive going in yield. And then there's all kinds of what we call optionality in all the various businesses and investments they've made that are losing money. They've got a cloud business that's growing very rapidly, but they're investing basically 100% of the profits from that business in growth. So you're in that earnings number, you're not seeing any earnings from the cloud business. And, you know, they're one of the top cloud players. So very interesting, generally well managed company with incredible assets and resources and dominance, you know, and has no debt, it's got a ton of cash. And so, pretty good story.

• 37:59Lex Fridman?

  Is there something fundamentally different about AI that makes all of this more complicated? Which is the sort of the exponential possibilities of the kinds of products and impact that AI could create when you're looking at Meta, Microsoft, Alphabet, Google, all these companies, XAI, or maybe startups, like is there some more risk introduced by the possibilities of AI?

• 38:28Speaker 01

  Absolutely. That's a great question. You know, business investing is about finding companies that can't be disrupted. AI is the ultimate disruptible asset or technology. And that's what makes investing treacherous, is that you own a business that's enormously profitable. Management gets, if you will, fat and happy. And then a new technology emerges that just takes away all their profitability. And AI is this incredibly powerful tool, which is why every business is saying, how can I use AI in my business to make us more profitable, more successful, grow faster, and also disrupt or protect ourselves from the, you know, the incomings. You know, it's a bit like Buffett talks about a great business like a castle

• 39:12Speaker 01

  surrounded by this really wide moat, but you have all these barbarians trying to get in and steal the princess. And it happens, you know, Kodak, for example, was an amazing, incredibly dominant company until it disappeared. Polaroid, you know, this incredible technology. And that's why we have tended to stay away from companies that are technology companies, because technology companies generally, the world is such a dynamic place that someone's always working on a better version. And, you know, Kodak was caught up in the analog film world. And then the world changed.

• 39:48Lex Fridman?

  Well, Google was pretty fat and happy until Chagri Peti came out.

• 39:52Speaker 01

  Yeah.

• 39:52Lex Fridman?

  How would you rate their ability to wake up, lose weight, and be less happy and aggressively rediscover their

• 40:02Lex Fridman?

  Search for happiness.

• 40:03Speaker 01

  I think you've seen a lot of that in the last year. And I would say some combination of embarrassment and pride are huge motivators for everyone from Sergey Brin, you know, to the management of the company.

• 40:18Lex Fridman?

  And Demis Hassabis thrown into the picture and all of DeepMind teams and the unification of teams and like all the shakeups. It was interesting to watch the chaos. I love it. I love it when everybody freaks out. Like you said, partly embarrassment and partly that competitive drive that drives engineers is great. I can't wait to see what they've diminished a lot of improvement in the product. Let's see. Let's see where it goes. You mentioned management. How do you analyze the governance structure and the individual humans that are the managers of a company?

• 40:50Speaker 01

  So as I like to say, incentives drive all human behavior and that certainly applies in the business world. So understanding the people and what drives them and what the actual financial and other incentives of a business are very important part of the analysis for investing in a company. And you can learn a lot. You know, I mentioned before, one great way to learn about a business is go back a decade and read everything that management has written about the business and see what they've done over time. See what they've said. You know, conference calls are actually relatively recent. When I started in the business, there weren't conference call transcripts. Now you have, you know, a written record of everything management has said and response to questions from analysts

• 41:33Speaker 01

  at conferences and otherwise. And so just you learn a lot about people by listening to what they say, how they answer questions, and ultimately their track record for doing what they say they're going to do. Do they under promise and over deliver? Do they over promise and under deliver? Do they say what they're going to do? Do they admit mistakes? Do they build great teams? Do people want to come work for them? Are they able to retain their talent? You know, and then part of it is, do they, how much are they running the business for the benefit of the business? How much are they running the business for the benefit of themselves? And, you know, that's kind of the analysis you do.

• 42:11Lex Fridman?

  Are we talking about CEO, COO? What does management mean? How deep does it go?

• 42:17Speaker 01

  Sure. So This very senior management matters enormously. You know, we use the Chipotle example. Steve Ells, great entrepreneur. Business got to a scale he really couldn't run it. We recruited a guy named Brian, helped a company recruit a guy named Brian Nickel.

• 42:32Speaker 01

  And he was considered the best person in the quick service industry. He came in and completely rebuilt the company. Actually, we moved the company. Chipotle was moved to California. And sometimes one way to redo the culture of a company is just to move it geographically. And then you can kind of reboot the business. But a great leader has great followership. You know, well, over the course of their career, they'll have a team they've built that will come follow them into the next opportunity.

• 42:57Speaker 01

  But the key is, you know, really the top person matters enormously because and then it's who they recruit. You know, you recruit an A plus leader and they're going to recruit other A type people. You recruit a B leader, you're not going to recruit any great talent beneath them.

• 43:13Lex Fridman?

  You mentioned Warren Buffett. You said you admire him as an investor. What do you find most interesting and powerful about his approach? What aspects of his approach to investing do you also practice?

• 43:27Speaker 01

  Sure. So most of what I've learned in the investment business, I've learned from Warren Buffett. He's been my great professor of this business. I, my first book I read in the business was the Ben Graham Intelligent Investor. But fairly quickly you get to learn about Warren Buffett. And I started by reading the Berkshire Hathaway annual reports. And then I eventually got the Buffett partnership letters that you could see, which are an amazing read to go back to the 19, mid 1950s. And read what he wrote to his limited partners when he first started out and just follow that trajectory over a long period of time. So what's remarkable about him is one, duration, right? He's still at it at 93.

• 44:04Speaker 01

  You know, two, you know, takes a very long term view. But a big thing that you learn from him, investing requires this incredible dispassionate, unemotional quality. You have to be extremely economically rational, which is not a basic, it's not something you learn in the jungle. You know, I don't think it's something that, you know, if you think about the, the, you know, surviving the jungle, you know, the lion shows up. You know, you, and everyone starts running, you run with them. That does not work well in markets. In fact, you generally have to do the opposite. When the lemmings are running over the cliff, that's the time where you're facing the other direction and you're running the other direction, i.e. you're stepping in, you're buying stocks

• 44:48Speaker 01

  at really low prices. Buffett's been great at that and great at teaching about what he calls temperament, which is this sort of emotional kind of or unemotional quality that you need to be able to dispassionately look at the world and say, okay, is this a real risk? Are people overreacting? People tend to get excited about investments when stocks are going up and they get depressed when they're going down. And I think that's just inherently human. You have to reverse that. You have to get excited when things get cheaper and you got to get concerned when things get more expensive.

• 45:23Lex Fridman?

  You've been a part of some big battles, some big losses, some big wins. It's been a roller coaster. So in terms of temperament, psychologically, how do you not let that break you? How do you maintain a calm demeanor and avoid running with the lemmings?

• 45:44Speaker 01

  I think it's something you kind of learn over time. A key success factor is you want to have enough money in the bank that you're going to survive, regardless of what's going on with volatility in markets. People who, one, you shouldn't borrow money. So if you've borrowed money, you own stocks on margin, markets are going down and you have your livelihood at risk. It's very difficult to be rational. So key is getting yourself to a place where you're financially secure. You're not going to lose your house. That's a kind of a key thing. And then also doing your homework. Stock prices, stocks can trade at any price in the short term. And if you know what a business is worth,

• 46:29Speaker 01

  And you understand the management, you know it extremely well. It's not nearly as, it doesn't bother you when a stock price goes down. Or it has much less impact on you because you know, again, as Mr. Graham said, you know, the short term, the market's a voting machine. You have a bunch of lemmings voting one direction. That's concerning, but if it's a great business, doesn't have a lot of debt. And people are going to just listen to more music next year than this year. You know, you're going to do well. So it's a bit, some combination of being personally secure. And also just knowing what you own. And over time, you build calluses, I would say.

• 47:06Lex Fridman?

  So psychologically, just as a human being, speaking of lines and gazelles and all this kind of stuff.

• 47:12Speaker 01

  Yeah.

• 47:12Lex Fridman?

  Is there some, is it as simple as just being financially secure? Is there some just human qualities that you have to be born with slash develop?

• 47:24Speaker 01

  I think so. I think, now, I'm a pretty emotional person, I would say. I feel pretty strong emotions, but not in investing. I'm remarkably immune to kind of volatility. And that's a big advantage. And it took some time for me to develop that.

• 47:41Lex Fridman?

  So you weren't born with that, you think?

• 47:43Speaker 01

  No.

• 47:43Lex Fridman?

  So being emotional, you want to respond to volatility?

• 47:48Speaker 01

  Yeah, and you just, it's a bit, again, you can learn a lot from other people's experience. It's one of the few businesses where you can learn an enormous amount by reading about other periods in history, you know, watching, following Buffett's career, the mistakes he made. If you're investing a lot of capital, every one of your mistakes can be big. Right? So we've made big mistakes. The good news is that the vast majority of things we've done have worked out really well. And so that also gives you, you know, confidence over time. But because we make very few investments, you know, we own eight things today or seven companies of that matter. If we get one wrong, it's going to be big news.

• 48:31Speaker 01

  And so the other nature of our business you have to be comfortable with is a lot of public scrutiny, a lot of public criticism, and that requires some experience. I call it that.

• 48:43Lex Fridman?

  I think we'll talk about some of that. Financially secure is something I believe also recommend for even just everyday investors. Is there some general advice? From the things you've been talking about that applies to everyday investors.

• 48:58Speaker 01

  Sure. So never invest money you can't afford to lose. Where it would, if you'd lost this, this money and you know, you lose your house, et cetera. So having, being in a place where you're investing money that you don't care about the price in the short term. It's money for your retirement and you take a really long-term view. I think that's key. Never investing where you borrow money against your securities. You know, the, the markets offer you the opportunity to leverage your investment. And in most worlds, you'll be okay. Except if, you know, there's a financial crisis or, you know, a nuclear device gets detonated, God forbid, somewhere in the world.

• 49:42Speaker 01

  Or there's a unexpected war or someone kills a leader unexpectedly. Things happen that can change the course of history and markets react very negatively to those kinds of events. And you've known the greatest business in the world, trading for a hundred dollars a share and next moment it could be 50. So as long as you don't borrow against securities, you own really high-quality businesses and it's not money that you need in the short term. Then you can, you can actually be thoughtful about it and that is a huge advantage. The vast majority of investors, it seems, tend to be the ones that panic and the downturns get overelated and when markets are doing well.

• 50:21Lex Fridman?

  So be able to think long-term and be sufficiently financially secure such that you can afford to think long-term.

• 50:30Speaker 01

  Buffett is the ultimate long-term thinker and just the decisions he makes. The consistency of the decisions he's made over time and fitting into that sort of long-term framework is a very, uh, very educational, let's put it that way, for the, for learning about this business.

• 50:50Lex Fridman?

  So you mentioned eight companies, but what do you think about mutual funds that for everyday investors that diversify across a larger number of companies?

• 51:01Speaker 01

  I think there are very few mutual funds. There are thousands and thousands of mutual funds. There are very few that earn their keep in terms of the fees they charge. They tend to be too diversified. And

• 51:17Speaker 01

  You know, too short term and you're often much better off just buying an index fund. And many of them perform, they look, if you look carefully at their portfolios, they're not so different from the underlying index itself and you tend to pay a much higher fee. Now, all of that being said, there's some very talented mutual fund managers, a guy named Will Danoff at Fidelity's had a great record over a long period of time, you know, the famous Peter Lynch, Ron Baron, another great long-term growth stock investor. So there's some great mutual funds, but I put them in the handful versus the thousands. And if you're in, you know, the thousands, I'd rather someone bought just an index fund, basically.

• 52:02Lex Fridman?

  Yeah, index funds, but what, what would be the leap for an everyday investor to go to investing in a small number of companies, like two, three, four, five companies?

• 52:13Speaker 01

  I even recommend for individual investors to invest in, you know, a dozen companies. You don't get that much more benefit of diversification going from a dozen to 25 or even 50. You know, most of the benefits of diversification come in the first, you know, call it 10 or 12. And if you're investing in businesses that don't have a lot of debt, they're businesses that you can understand yourself. You understand, you know, actually individual investors did a much better job analyzing Tesla than the so-called professional investors or analysts, the vast majority of them. So if it's a business you understand, you, if you bought a Tesla, you understand the product and its appeal to consumers, you know, it's a good place to start when you're analyzing a company. So I would invest in

• 52:56Speaker 01

  things you can understand. That's kind of a key. You know, you like Chipotle, you, you understand why they're successful. You can, you know, go there every week and you can monitor, you know, is anything changing? You know, how are these new kind of, how's chicken El Pastor? Is that, is that a good upgrade from the basic chicken? You know, the drink offerings improving, the stores clean? I think you should invest in companies you really understand. Simple businesses where you can predict with a high degree of confidence what it's going to look like over time. And if you do that in a not particularly concentrated fashion and you don't borrow money against your securities, you'll probably do much better than your typical mutual fund.

• 53:34Lex Fridman?

  Yeah, it's interesting. Consumers that love a thing are actually good analysts of that thing, or I guess a good starting point.

• 53:40Speaker 01

  By the way, there's much more information available today. When I was first investing, literally, we had people faxing us documents from the SEC filings in Washington DC. Now, everything's available online. Conference call transcripts are free. You know, you have AI, you have unlimited data and all kinds of message boards and Reddit forums and things where people are sharing advice. And everyone has their own, you know, by virtue of their career or experience, they'll know about an industry or a business. And that gives them, I would take advantage of your own competitive advantages.

• 54:20Lex Fridman?

  I'm just afraid if I invest in Chipotle, I'll be like analyzing every little change of menu from a financial perspective and just be very critical.

• 54:28Speaker 01

  If it's going to affect your experience, I wouldn't buy the stock.

• 54:32Lex Fridman?

  Yeah, I mean, I should also say that I am somebody that emotionally does respond to volatility, which is why I've never bought index funds. And I just, I just noticed myself psychologically being affected by the ups and downs of the market and I want to tune out because if I'm at all tuned in, it has a negative impact to my life.

• 54:51Speaker 01

  Yeah, that's really important.

• 54:53Lex Fridman?

  Can you explain what activist investing is? You've been talking about investing and then looking at companies when they're struggling, stepping in and reconfiguring things within that company and helping it become great. So that's part of it, but let's just zoom out. What's this idea of activist investing?

• 55:13Speaker 01

  I think recently, in the last couple of days, I read an article saying that more than 50% of the capital in the world today invest in the stock markets, passive indexed money. And that's the most passive form, right? So if you think about an index fund, a machine buys a fixed set of securities in certain proportion. There's no human judgment at all and there's no real person behind it in a way. They never take steps to improve a business. They just quietly own securities.

• 55:47Speaker 01

  What we do is we invest our capital in a handful of things. We get to know them really, really well because you're going to put 20% of your assets in something. You need to know it really well. But once you become a big holder, and if you've got some thoughts on how to make a business more valuable, you can do more than just be a passive investor. So our strategy is built upon finding great companies in some cases that have lost their way, and then helping them succeed. And we can do that with ideas from outside the boardroom. Sometimes we take a seat on a board or more than one. And we work with the best management teams in the world to help these businesses succeed. So when I first went into this business, no one knew who we were.

• 56:32Speaker 01

  And we didn't have that much money. And so to influence what was to us a big company, we had to make a fair bit more noise, right? So we would buy a stake, we'd announce it publicly, we'd attempt to engage with management. The first activist investment we made at Pershing Square was Wendy's. I couldn't get the CEO to ever return my call. He didn't return my call. So we, actually in that case, our idea was Wendy's owned a company called Tim Hortons, which was this coffee donut chain. And you could buy Wendy's for basically $5 billion. And they owned 100% of Tim Hortons, which itself was worth more than $5 billion. You could literally buy Wendy's, separate Tim Hortons, and get Wendy's for negative value.

• 57:15Speaker 01

  That seemed like a pretty good opportunity, even though the business wasn't doing that well. So we bought the stake, called the CEO, couldn't get a meeting, nothing. So we hired actually Blackstone, which was at that time had an investment bank. And we hired them to do what's called a fairness opinion of what Wendy's would be worth if they followed our advice. And they agreed to do it, paid them a fee for it. And then we mailed in a letter with a copy of the fairness opinion saying Wendy's would basically be worth 80% more if they did what we said. And six weeks later, they did what we said. So that's activism, at least the early form of activism. With that kind of under our belt, we had a little more credibility. And now we started to take things and stakes in companies. The media would pay attention, so the media became a kind of an important partner.

• 57:59Speaker 01

  And you know, some combination of shame, embarrassment and opportunity motivated management teams to do the right thing. And then, you know, beyond that, there's certain steps you can take if management's recalcitrant and the shareholders are on your side. But it's a bit like running for office. You've got to get all the constituents to support you and your ideas. And if they support you and your ideas, you can overthrow, if you will, the board of a company. You bring in new talent and then take over the management of a business. And that's the most extreme form of activism. So that's kind of the early days and what we did. And a lot of the early things that we did were, you know, call it, what we call sort of like investment banking activism, where we'd go in and recommend

• 58:42Speaker 01

  something a good investment bank would have recommended. And if they do it, we make a bunch of money and then we moved on to the next one. And then we realized an investment, a company called General Growth, was the first time we took a board seat on a company. And there was some financial restructuring, and also an opportunity to improve the operations of the business, sit on the board of a company. And that was one of the best investments we ever made. And we said, okay, we can do more than just be an outside the boardroom investor, and we can get involved in helping select the right management teams and helping guide the right management teams. And then we've done that over years. And then I would say the last seven years, we haven't had to be an activist. An activist is generally someone who's outside banging on the door, trying to get in. We're sort of built enough

• 59:27Speaker 01

  credibility that they open the door. And they say, hey, Bill, what ideas do you have? So, welcome. Would you like to join the board? We're treated differently today than we were in the beginning. And that is, I would say, some people might just call it being an engaged owner. By the way, that's the way investing was done in the Andrew Carnegie, JP Morgan days, you know, 150 years ago. Right? You had these iconic business leaders that would own 20% of US Steel. And when things would go wrong, they'd replace the board and the management and fix them. And over time, we went to a world where mutual funds were created, like in the 1920s, 30s, index funds with Vanguard and others. And

• 1:00:12Speaker 01

  that all these controlling shareholders would, you know, kind of gave their stock to society or their children and multiple generations. And there were no longer kind of controlling owners of businesses or very few. And that led to underperformance and the opportunity for activists over time. And what activism has done, and I think we've helped lead this movement, is it restored kind of the balance of power between the owners of the business and the managements of the company. And that's been a very good thing for the performance of the of the US stock market, actually.

• 1:00:41Lex Fridman?

  So the owners, meaning the shareholders?

• 1:00:43Speaker 01

  Yes.

• 1:00:43Lex Fridman?

  And so there's a more direct channel of communication with with activists investing between the shareholders and the people running the company?

• 1:00:52Speaker 01

  Yes. So activists generally never own more than 5% or 10% of a business, so they don't have control. So the way they get influence is they have to convince the other, you know, but they have to get to a sort of majority of the other shareholders to support them. And if they can get that kind of support, they can behave almost like a controlling shareholder. And that's how it works.

• 1:01:14Lex Fridman?

  So the running of a company is, according to Bill Ackman, is more democratic now?

• 1:01:18Speaker 01

  It is. It is. But you need some thought leaders. So activists are kind of thought leaders because they can spend the time and the money. You know, a retail investor that owns 1,000 shares doesn't have the the the resources of the time. They got a day job. Whereas an activist's day job is finding the handful of things where there are opportunities.

• 1:01:37Lex Fridman?

  So on average, is it good to have such an engaged, powerful, influential investor helping control, direct the direction of a company?

• 1:01:49Speaker 01

  It depends who that investor is, but generally I think it's a good thing. And that's why, you know, one of the problems with being CEO of a company today and having a very diversified shareholder base is the kind of short term, long term balance. And you have investors who have all different interests in terms of what they want to achieve and when they want it achieved. And CEO of a new company hasn't, a new CEO of an old company, let's say, hasn't had the chance to develop the credibility to make the kind of longer term decisions and can be stuck in a cycle of being judged on a quarterly basis. And a business, the best businesses are forever assets, and decisions you make now have impact

• 1:02:33Speaker 01

  three, four, or five years from now. In order to make, and sometimes there are decisions we make that have the effect of reducing the earnings of a company in the short term, because in the long term, it's going to make the business much more valuable. But sometimes it's hard to have that kind of credibility when you're a new CEO of a company. So when you have a major owner that's respected by other shareholders, sitting on the board saying, hey, the CEO is doing the right thing and making this expensive investment in a new factory. We're spending more money on R and D because we're developing something that's going to pay off over time. That large owner on the board can help buy the time necessary for management to behave in a longer term way. And that's, I think, good for all the shareholders.

• 1:03:15Lex Fridman?

  So that's the good story, but can it get bad? Can you have a CEO who is a visionary and sees the long-term future of a company and then investors come in and have very selfish interest in just making more money in the short term and therefore destroy and manipulate the opinions of the shareholders and other people on the board in order to sink the company, maybe increase the price, but destroy the possibility of long-term value?

• 1:03:48Speaker 01

  It could theoretically happen, but again, the activist in your example, generally doesn't own a lot of stock. The shareholder basis today, the biggest shareholders are these index funds that are forever, right? The BlackRock, Vanguard, State Street, their ownership stakes are just, at this point, only growing because of the inflows of capital they have from shareholders. So they have to think, or they should think, very long-term, and they're going to be very skeptical of someone coming in with a short-term idea that drives the stock price up, you know, in the next six months, but impairs the company's long-term ability to compete. And basically, that ownership group prevents this kind of activity from really happening.

• 1:04:27Lex Fridman?

  So people are generally skeptical of short-term activist investors?

• 1:04:33Speaker 01

  Yes. And they're very few. I don't really know any short-term activist investors.

• 1:04:38Lex Fridman?

  That's a hopeful message.

• 1:04:39Speaker 01

  Not ones with credibility.

• 1:04:40Lex Fridman?

  You mentioned general growth. I read somewhere called arguably one of the best hedge fund trades of all time.

• 1:04:50Lex Fridman?

  So I guess it went from $60 million to over $3 billion.

• 1:04:55Speaker 01

  It was a good one.

• 1:04:56Lex Fridman?

  All right.

• 1:04:57Speaker 01

  But it wasn't a trade. I wouldn't describe it as a trade. A trade is something you buy and you flip. This is something where we made the investment initially in November of 2008.

• 1:05:07Speaker 01

  And we still own a company we spun off of General Growth and it's now 15 years later.

• 1:05:13Lex Fridman?

  Can you describe what went into making that decision to actually increase the value of the company?

• 1:05:18Speaker 01

  Sure. So this was at the time of the financial crisis circa November 2008. What real estate's always been a kind of sector that I've been interested in. I began my career in the real estate business, working for my dad, actually, arranging mortgages for real estate developers. So I have a kind of deep ties and interest in the business. And General Growth was the second largest shopping mall company in the country. Simon Properties, many people have heard of. General Growth was number two. They own some of the best malls in the country. And at that time, people thought of shopping malls as these non-disruptible things. Again, we talk about disruption. Malls have been disrupted in many ways.

• 1:05:57Speaker 01

  And General Growth stock, the company, the CFO in particular, was very aggressive in the way that he borrowed money. And he borrowed money from a kind of Wall Street, not long-term mortgages, but generally relatively short-term mortgages. He was pretty aggressive. As the value went up, he would borrow more and more against the assets. And that helped the short-term results of the business. The problem was during the financial crisis, the market for what's called CMBS, commercial mortgage-backed securities, basically shut. And the company, because its debt was relatively short-term, had a lot of big maturities coming up that they had no ability to refinance. And the market said, oh, my God, the lenders are going to foreclose and the shareholders are going to get wiped. The company's going to go bankrupt. They're going to get wiped out.

• 1:06:42Speaker 01

  The stock went from $63 a share to 34 cents. So and there was a family, the Buck's Bound family, owned, I think about 25% of the company. And they had a $5 billion, $5 billion of stock that was worth 25 million or something by the time we bought a stake in the business. And what interested me was I thought the assets were worth substantially more than the liabilities. The company had 27 billion of debt. And had a hundred million dollar value of the equity, down from like 20 billion. Okay. And one, that, you know, sort of an interesting place to start with a stock down 99%. But the fundamental drivers, the mall business are occupancy, how occupied are the malls? Occupancy was up year on year between oh seven and oh eight, interestingly.

• 1:07:27Speaker 01

  Net operating income, which is kind of a measure of cash flow from the malls, that was up year on year. So kind of the underlying fundamentals were doing fine. The only problem they had is they had billions of dollars of debt that they had to repay. They couldn't repay. And if you kind of examine the bankruptcy code,

• 1:07:46Speaker 01

  it's precisely designed for a situation like this, where it's kind of this resting place you can go to kind of restructure your business. Now, the problem was that every other company that had gone bankrupt, the shareholders got wiped out. And so the market seeing every previous example, the shareholders get wiped out. The assumption is the stock is going to go to zero. But that's not what the bankruptcy code says. What the bankruptcy code says is that the value gets apportioned based on value. And if you could prove to a judge that there was the assets worth more than the liabilities, then the shareholders actually get to keep their investment in the company. And that was the bet we made. And so we stepped into the market and we bought 25% of the company

• 1:08:28Speaker 01

  in the open market for, we had to pay up, it started out at 34 cents. I think there were 300 million shares. So it was at a hundred million dollar value. By the time we were done, we paid an average of, we paid 60 million for 25% of the business. So about 240 million dollars for the equity of the company. And then we had to get on the board to convince the directors the right thing to do. And the board was in complete panic, didn't know what to do, spending a ton of money on advisors. And, you know, I was a shareholder activist, you know, four years into Pershing Square. And no one had any idea what we were doing. They thought we were crazy. Every day, every day we'd go into the market and we'd buy this penny stock. And we'd file what's called a 13D, every 1% increase in our stake.

• 1:09:14Speaker 01

  And people just thought we were crazy. We're buying stock in a company that's going to go bankrupt. Bill, you're going to lose all your money. You know, run. Okay. And I said, well, wait, you know, bankruptcy code says that it was more asset value than liabilities. We should be fine. And the key moment, if you're looking for fun moments, is there's a woman named Maddie Buxbaum, who was from the Buxbaum family. And her cousin, John, was chairman of the board, CEO of the company. And I said, as she called me after we disclosed our stake in the company, she's like, Billy Ackman, I'm really glad to see you here. And I met her, like, I don't think it was a date, but I kind of met her in a social context when I was like 25 or something. And she said, look, I'm really glad to see you here. And if there's

• 1:09:56Speaker 01

  anything I can do to help you, call me. I said, sure. We kept trying to get on the board of the company. They wouldn't invite us on, couldn't really run a proxy contest, you know, not with a company going bankrupt. And their advisors actually were Goldman Sachs. And they're like, you don't want the fox in the hen house. And they were listening to their advisors. So I called Maddie up. And I said, Maddie, I need to get on the board of the company to help. And she says, you know what, I will call my cousin, I'll get it done. Like, you know, she calls back a few hours later, you'll be going on to the board. And I don't know what she said.

• 1:10:32Speaker 01

  But she was convincing. Next thing you know, I'm invited to on the board of the company. And the board is talking about the old equity of general growth. Old equity is what you talk about, the shareholders are getting wiped out. I said, no, no, no, this board represents the current equity of the company. And I'm a major shareholder. John's a major shareholder. There's plenty of asset value here. This company should be able to be restructured for the benefit of shareholders. And we led a restructuring for the benefit of shareholders. And it took, let's say, eight months. And the company emerged from chapter 11. We made an incremental investment into the company. And the shareholders kept the vast majority of their investment. All the creditors got their, you know, face amount of their investment, par plus accrued interest. And it

• 1:11:17Speaker 01

  was a great outcome. All the employees kept their jobs. The mall stayed open. There was no liquidation. The bankruptcy system worked the way it should. You know, I was in court, you know, all the time. And the first meeting with the judge, the judge is like, look, this would never have happened were it not for a financial crisis. And once the judge said that, I knew we were going to be fine. Because the company really not done anything fundamentally wrong. Maybe a little too aggressive in how they borrowed money. And stock went from 34 cents to $31 a share.

• 1:11:47Speaker 01

  And actually fun little anecdote, we made a lot of people a lot of money who followed us into it. I got a lot of nice thank you notes, which you get on occasion in this business, believe it or not. And then one day I get a voicemail. This is when there was something called voicemail, probably a few years later. And it's a guy with a very thick Jamaican accent, leaving a message for Bill Ackman. So, you know, I return all my calls, call the guy back. He's like, hi, it's Bill Ackman. I'm just returning your call. He's like, oh, Mr. Ackman. Thank you so much for calling me. I said, oh, how can I help? He says, I wanted to thank you. I said, what do you mean? He said, I saw you on CNBC, you know, a couple of years ago, and you were talking about this general growth.

• 1:12:29Speaker 01

  And the stock, I said, where was the stock at the time? He said, it's 60 cents or something like this. And I bought a lot of stock.

• 1:12:36Speaker 01

  And I'm like, well, how much did you invest? Oh, I invest all of my money in the company. And he was a New York City taxi driver. And he invested like $50,000 or something like this at 60 cents a share. And he was still holding it. And he went into retirement and he made, you know, 50 times his money. And, uh, you know, those are the moments that you feel pretty good about investing.

• 1:13:01Lex Fridman?

  Well, gave you confidence through that. Went to penny stock and I'm sure you were getting a lot of naysayers and people saying that this is crazy.

• 1:13:09Speaker 01

  It's the same thing. You just do the work. Like, we got a lot of pushback from our investors, actually, because we had never invested in a bankrupt company before. It's a field called distressed investing and they're dedicated distressed investors. And we weren't considered one of them. So, Bill, what are you doing? You don't know anything about distressed investing. You don't know anything about bankruptcy investing.

• 1:13:30Speaker 01

  But I can read.

• 1:13:31Lex Fridman?

  And you learned.

• 1:13:32Speaker 01

  And I learned. And it sometimes is very helpful not to be a practitioner, an expert in something. Because you get used to the conventional wisdom. And so we just, you know, abstractly read the, uh, step back and look at the facts. And it was just a really interesting setup for one of the best investments we ever made.

• 1:13:51Lex Fridman?

  How hard is it to learn some of the legal aspects of this? Like you mentioned bankruptcy code. Like, I imagine it's very sort of dense language and dense ideas and the loopholes and all that kind of stuff. Like, if you're just stepping in and you've never done distressed investing, how hard is it to figure out?

• 1:14:09Speaker 01

  It's not that hard. No, it's not that hard.

• 1:14:12Lex Fridman?

  Okay.

• 1:14:13Speaker 01

  I mean, I literally read a book on distressed investing.

• 1:14:15Lex Fridman?

  Okay.

• 1:14:16Speaker 01

  Ben Branch or something, something on distressed invest.

• 1:14:19Lex Fridman?

  So you were able to pick up the intuition from that, just all the the basic skills involved, the basic facts to know, all that kind of stuff.

• 1:14:27Speaker 01

  Most of the world's knowledge has already been written somewhere. You've just got to read the right books and also had great lawyers. You know, built up some great relationships. We, we work with Sullivan and Cromwell and their lawyer there named Joe Schenker, who I met earlier in my career. Pershing Square is actually my second act in the hedge fund business. I started a fund called Gotham Partners when I was 26. One of my early investments was a company called Rockefeller Center Properties that was heading for bankruptcy. And the lawyer on the other side representing Goldman Sachs was a guy named Joe Schenker. So he was like an obvious phone call because it had yet another real estate bankruptcy. And that one, we did, we did very well, but I missed the big opportunity. And I, I suffered severe psychological torture every time I walked by Rockefeller Center

• 1:15:12Speaker 01

  because we could have made, we knew more about that property than anyone else, but I knew less about deal making and didn't have the resources. And I was 28 years old or 27.

• 1:15:21Speaker 01

  And they hired a better lawyer than we did. And they outsmarted us on that one in a way. So I said, okay, I'm going to go hire this guy the next time around.

• 1:15:30Lex Fridman?

  Okay, well, we'll probably talk about Rockefeller Center and some failures. But first you said fox in the hen house.

• 1:15:39Speaker 01

  Yes.

• 1:15:39Lex Fridman?

  Something that the board and the chairman were worried about. Why would they call you a fox? So you, you keep saying activist investing is, there's nothing to worry about. It's always good.

• 1:15:51Speaker 01

  Sure.

• 1:15:51Lex Fridman?

  Mostly good. But, you know, that expression applied in this context. You know, they were still worried about that.

• 1:15:59Speaker 01

  Sure.

• 1:15:59Lex Fridman?

  And so maybe, I mean, there's a million questions here, but first of all, what is the process of getting on the board look like?

• 1:16:06Speaker 01

  So a board can always admit a member at any time in their discretion for a US company.

• 1:16:13Speaker 01

  In that, maybe there's some jurisdiction where you need a shareholder vote, but in most cases a board can vote on any director that they want. If the board doesn't invite you to the party, you have to apply to be a member, in effect. And that process is called, you know, basically is this the process of ultimately running a slate for a meeting where you propose a number, every, any shareholder can propose to be on a board of a company if they own one share of stock in the business. And getting your name in the company's, you know, the materials they send to shareholders, those rules were written in a way that were very unfavorable, very difficult to get in the door. And those rules have been changed very recently, where the company now has

• 1:16:55Speaker 01

  to include a candidate, really all the candidates in the materials they send to shareholders. So the shareholders pick the best ones. When we applied, or when we applied, when we ran proxy contests in the past, that was not the case. And so you have to spend a lot of money, mostly mailing fees and all kinds of other legal and other expenses to, to let everyone know you're running, like running a political campaign. And then you got to run around and meet with the big shareholders, you know, fly around the country, explain your case to them. And then there's a shareholder meeting. And if you get a majority of the votes, you get on.

• 1:17:26Lex Fridman?

  What's this proxy contest slash battle idea? What's, what's, what's?

• 1:17:31Speaker 01

  The battle comes when they don't want you down.

• 1:17:32Lex Fridman?

  Okay.

• 1:17:33Speaker 01

  And a lot of that has to do with, I would say, pride, normal human kind of stuff. You know, a lot of times, a board of an underperforming company doesn't want to admit that they've underperformed. And boards of directors, 20 years ago, when we started Pershing Square, were pretty cushy jobs. Sit on a board of a company, you play golf with the CEO, you know, at nice golf courses, you make a few hundred thousand dollars a year to go to four meetings. It was kind of a rubber stamp world where boards, you know, at the end of the day, they, the CEO really ran the show.

• 1:18:09Speaker 01

  Once shareholders could actually dislodge board members and they could lose their seats, and that's really the, the rise of shareholder activism, boards started taking their responsibilities much more seriously. Because directors are typically, you know, there are many cases, they're retired CEOs. This is kind of how they're making a living in the later part of their career. They'll sit on four boards, they collect a million, a million and a half dollars a year in director's fees. If they get thrown off the board by the shareholders, that's embarrassing, obviously. And it affects their ability to get on other boards. So again, incentives, as I said earlier, drive all human behavior. The incentives of directors, they want to preserve their board seats. So if you have a director, now, the directors on board serve in various roles.

• 1:18:52Speaker 01

  The most vulnerable ones are ones who, for example, chair a compensation committee. And if they put in a bad plan or they overpaid management, you know, they're subject to attack by shareholders. But, you know, these contests are not dissimilar to political contests where it's mudslinging. And other side puts out false information about you. You have to respond and they're spending the shareholders' money. So they have sort of unlimited resources and you're spending your and your investors' money. You know, when you're a small firm, finite resources, so they can outspend you, they can sue you. They can try to, you know, jigger the, the mechanics in such a way that you're going to lose. There's some unfortunate stuff that's happened in the past, you know, some manipulative stuff.

• 1:19:32Lex Fridman?

  So also some stuff that's public, like in the press and all this kind of stuff?

• 1:19:35Speaker 01

  Oh, of course, you know, there'll be, you know, articles about, you know, the, the dirty days where they would go through your trash and, you know, make sure that, you know, you're not sleeping around and, you know, things like this. But that's okay. I, I can, I'm subject, I can survive extreme scrutiny because I've been through this for a long time.

• 1:19:56Lex Fridman?

  So you're saying the fat and happy hens can get very wolf-like? When the fox is trying to break in, is this how we extend?

• 1:20:07Speaker 01

  Well, the fox is a threat to the hens.

• 1:20:09Lex Fridman?

  Yeah, yeah, but, but you're, you're just, the charismatic fox just explained to me why the fox is good for everybody in the hen house.

• 1:20:18Speaker 01

  At the end of the day, it's actually very good on a board to have someone, you know, if you, there are many examples over time. And some handful of high-profile ones where the board fought tooth and nail to keep the activist off the board. And then once the activist got on the board and they said, you know, the guy's not so bad. After all, the shareholders voted them on, he's got some decent ideas and let's all work together to have this work out. And so there are very few cases where after the contest, when the, and by the way, sometimes you have to replace the entire board. We've done that. But some, in most cases, you get a couple of seats on the board. And it's just, you know, you, you want to build a board. Comprised of diverse points of view and that's how you get to the truth.

• 1:20:57Lex Fridman?

  What was the most dramatic battle for the board that you have been a part of?

• 1:21:03Speaker 01

  The Canadian Pacific Proxy Contest. So Canadian Pacific was like considered the most iconic company in Canada. It literally built the country because the rail that got built over Canada is what united the various provinces into a country. And then over time, because the railroad business is a pretty good business, they built a ton of hotels, they owned a lot of real estate, and it became this massive conglomerate, but it was horribly mismanaged for decades. By the time we got involved, it was by far the worst-run railroad in North America. They had the lowest profit margins, they had the lowest growth rate. Every quarter, management would make excuses generally about the weather as to why they underperformed versus...

• 1:21:47Speaker 01

  And there, there's a direct competitor, a company called Canadian National, as the rail goes right across the country. And Canadian Pacific would constantly be complaining about the weather. Basically, you know, same country, same regions, tracks weren't that far apart.

• 1:22:03Speaker 01

  But it was a really important company and being on this board was like an honorary thing. And everyone on the board was an icon of Canada, you know, the chairman of the Royal Bank of Canada, you know, the head of the most important grain, privately-held grain company, the, you know, sort of an important collection of, you know, big-time Canadian executives. Here we were, you know, this is probably about 13 years ago. And, you know, still maybe 44-year-old from New York, not a Canadian, basically saying this is the worst-run railroad in North America. And we bought 12% of the railroad at a really low price.

• 1:22:42Speaker 01

  And we brought with us to our first meeting, the greatest railroader ever, a guy named Hunter Harrison, who had turned around Canadian National. So we'd like, okay, we've got a great asset. We've got the greatest railroad CEO of all time. He's come out of retirement to step in and run the railroad. And we brought him to the first meeting and they wouldn't even meet with him. And they wouldn't certainly wouldn't consider hiring him. And that led us to a proxy contest.

• 1:23:09Lex Fridman?

  And this is where the the engine starts churning to figure out how this contest can be won. So what's involved?

• 1:23:19Speaker 01

  Well, the key is we had to, one, come up with a group of directors who would be willing to step into a battle. And we didn't want a bunch of New York directors or even American directors. We wanted Canadians. The problem was this was the most iconic company in Canada. And we wanted high profile people. So we talked to all the high profile people in Canada. Every one of them would say, Bill, you're entirely right. This thing is the worst road. It needs to be fixed. But, you know, I see John at the club. You know, I see him at the Toronto club. You know, I can't, you know, I can't do this, but you're totally right. And we had to, and that was the concern because you have to file your materials by a certain day. You got to put together a slate. We needed a big slate because we knew that we had to replace basically all the directors.

• 1:24:01Speaker 01

  And then one, I spoke to a guy who was one of the wealthiest guys in Canada, who was on the board at one point in time. And he said, Bill, I have an idea for you. There's this woman, Rebecca McDonald. Why don't you give her a call? And I called Rebecca and she was the first woman to take a company public in Canada as CEO. And she was a kind of anti establishment, not afraid to take on anything kind of person. And I called her, we had a great conversation. And she, she was in the Dominican Republic at her house and I flew down to see her. And she said, yeah, I'm all in. And actually, once we got her, that enabled us to get others. And then we put together our slate.

• 1:24:44Speaker 01

  And we had some pretty interesting dialogue with the company. They tried to embarrass us all the time.

• 1:24:50Lex Fridman?

  In the press publicly, what are we?

• 1:24:52Speaker 01

  Press publicly. You know, at one point I wrote an email saying, look, let's come to peace on this thing. But if we don't, you're really forcing my hand. And we're going to have to rent the largest hall in Toronto and invite all the shareholders. And it's going to be embarrassing for management. And I made reference to some nuclear winter. Let's not have a nuclear winter. And they thought they'd embarrass me by releasing the email, but it only inspired us. And we rented the largest hall in Canada and we put up a presentation, walking through, you know, here's Canadian National, here's Canadian Pacific, here's what they said, here's what they did. And then we had Hunter get up, who's this incredibly charismatic guy from Tennessee, an amazing, you know, he's like a lion, incredibly deep voice, unbelievable

• 1:25:37Speaker 01

  track record, incredibly respected guy. It's like getting Michael Jordan to come out of retirement and come run the company. And Hunter was incredible and other, other members of my team were, you know, super engaged. And the board, you know, Canadians are known to be nice. So one of the problems we had is shareholders would never tell management or the board that they were losing. It was not until the night before the meeting when the vote came in, the management realized that they lost. We got 99% of the vote and they offered us a deal, when they begged us to take a deal, they said, look, we'll resign tonight so that we don't have to come to the meeting tomorrow. That's how embarrassed they were. That was kind of an interesting one.

• 1:26:21Lex Fridman?

  So in both this proxy battle and the company itself, this was one of your more successful investments?

• 1:26:29Speaker 01

  It was. I mean, the stock's up about 10 times and it's an industrial company. It's a railroad. It's not like a growth, like it's not Google. So it's a great story. And the company's now run by a guy named Keith Creel. And Keith was Hunter's protege. And in so many ways, he's actually better than Hunter. He's doing an incredible job. And we're, the sad part here is we made, we did very well. We tripled our money over several years. And then I went through a very challenging period because of a couple of bad investments. And we had to sell our Canadian Pacific to pay, to raise capital to pay for investors who were, who were leaving. But we had another opportunity to buy it back last, in the last couple of years. And so we're, we're now again, a major owner of the company. But had we held on to original stock?

• 1:27:15Speaker 01

  It would have been epic, if you will.

• 1:27:19Lex Fridman?

  So on this one, you were right.

• 1:27:21Speaker 01

  Yes.

• 1:27:21Lex Fridman?

  And I read an article about you, and there's many articles about you. I read an article that said, Bill is often right, but you approach it with a scorched earth approach that can often do more, sort of can do damage.

• 1:27:38Speaker 01

  I haven't read the often right article, but the good news is we are often right. And I say we because we're a team, a small team, but a fortunately very successful one. You know, so our batting average as investors is extremely high. And the good news is our record is totally public. You can see everything we've ever done. But the press doesn't generally write about the success stories. They write about the failures. And so we've had some epic failures, you know, big losses. Good news is they've been a tiny minority of the cases. Now, no one likes to lose money. It's even worse to lose other people's money. And I've done that occasionally. The good news is if you stuck with us, you've done very well, you know, over a long time.

• 1:28:21Lex Fridman?

  On a small tangent, since we're talking about boards. Did you get a chance to see what happened with the OpenAI board? Cause I'm talking to Sam Altman soon.

• 1:28:32Lex Fridman?

  Is there any insight you have, just maybe lessons you draw from this kind of

• 1:28:37Speaker 01

  Sure.

• 1:28:37Lex Fridman?

  these kinds of events, especially with an AI technology company, such dramatic things happening?

• 1:28:42Speaker 01

  Yeah, that was an incredible story. Look, governance really matters and the governance structure of OpenAI, I think, leaves something to be desired. You know, I think Sam's point was this, and maybe Musk, Elon Musk's point, originally set up as a nonprofit. And it reminds me, actually, I invested in a nonprofit run by a former Facebook founder, where he was going to create a Facebook-like entity for nonprofits to promote, you know, goodness in the world. And the problem was he couldn't hire the talent he wanted because he couldn't grant stock options. He couldn't pay market salaries. And ultimately, we ended up, he ended up selling the business to a for-profit. So it taught me for-profit solutions to problems are much better than nonprofits. And here you had kind of a blend, right?

• 1:29:27Speaker 01

  It was set up as a nonprofit, but I think they found the same thing. They couldn't hire the talent they wanted without having a for-profit subsidiary. But the nonprofit entity, as I understand it, owns a big chunk of OpenAI. And the investors own sort of a capped interest where their upside is capped. And they don't have representation on the board. And I think that's a, you know, was a setup for a problem. And that's clearly what happened here.

• 1:29:57Lex Fridman?

  And there's, I guess, some kind of complexity in the governance. I mean, because of this nonprofit and capped profit thing, it seems like there's a bunch of complexity and non-standard aspects to it that perhaps also contributed to the problem.

• 1:30:16Speaker 01

  Yeah. Governance really matters. Boards of directors really matter. Giving the shareholders the right to have input at least once a year on the structure of the governance of companies is really important. And private, you know, venture-backed boards are also not ideal. You know, I'm an active investor in ventures. And there are some complicated issues that emerge in private, sort of venture-stage companies, where board members have somewhat divergent incentives from, you know, the long-term owners of a business. And what you see a lot in venture boards is, you know, they're presided over generally by venture capital investors who are big investors in the company.

• 1:31:01Speaker 01

  And oftentimes, it's more important to them to give the, to have the public perception that they're good directors, so they get the next best deal, right? If they get a, you know, if they have a reputation for kind of taking on management too aggressively, word will get out in the small community of founders and they'll miss the next Google. And so they, their interests are not just in that particular company. That's also, you know, one of the problems. Again, it all comes back to incentives.

• 1:31:29Lex Fridman?

  Can you explain to me the difference in venture-backed, like, VCs and shareholders? So this means before the company goes public?

• 1:31:36Speaker 01

  Yeah, so private venture-backed companies. The boards tend to be very small. Could be a handful of the venture investors and management. They're often very rarely independent directors. It's just not an ideal structure.

• 1:31:51Lex Fridman?

  Oh, I see. You want independent.

• 1:31:53Speaker 01

  It's beneficial to have people who have an economic interest in the business and they care only about the success of that company. As opposed to someone who, you know, if you think about the venture business, getting into the best deals is more important than any one deal. And you see cases where, you know, the boards go along with, in some cases, bad behavior on the part of management because they want a reputation for being kind of a founder-friendly director. You know, that's, that's kind of problematic. You don't have the same issue in public company boards.

• 1:32:24Lex Fridman?

  So we talked about some of the, some of the big wins and your track record, but you said there were some big losses. So what's, uh, what's the biggest loss of your career?

• 1:32:35Speaker 01

  Biggest loss of my career is a company called Valiant Pharmaceuticals. We made an investment in a business that didn't meet our core principles. Problem of the pharmaceutical industry, and there are many problems as I've learned, is it's a very volatile business, right? It's based on drug discovery. It's based on, you know, predicting kind of the future revenues of a drug before it goes off patent. You know, lots, lots of complexities. And we thought we had founded a pharmaceutical company we could own because of a very unusual founder in the way he approached this business. We, it was a company where another activist was on the board of directors of the company and kind of governing and overseeing the day-to-day decisions. And we ended up making a passive investment in the company. And up until this point in time, we really didn't make passive investments.

• 1:33:20Speaker 01

  And the company made a series of decisions that were, you know, disastrous. And then we stepped in to try to solve the problem. It was the first time I ever joined a board and the mess was much larger than I realized from the outside. And then I was kind of stuck. And it was very much a confidence-sensitive strategy because they, they built their business by acquiring pharmaceutical assets. And they often issued stock when they acquired targets. And so, once the market lost confidence in management, the stock price got crushed and it impaired their ability to continue to acquire low-cost, you know, drugs. And we lost $4 billion.

• 1:33:57Lex Fridman?

  $4 billion.

• 1:33:58Speaker 01

  Yeah. How's that for a big loss?

• 1:34:00Lex Fridman?

  That's.

• 1:34:01Speaker 01

  It's up there.

• 1:34:03Lex Fridman?

  I'm sweating this whole conversation, both the wins and the losses and the stakes involved.

• 1:34:07Speaker 01

  And by the way, that that loss catalyzed other, what I call mark to market losses. So very high profile, huge number, disastrous press.

• 1:34:19Speaker 01

  Then people said, okay, Bill's going to go out of business. So we're going to bet against everything he's doing. And we know his entire portfolio because we only own 10 things. And we were short a company called Herbalife. Very famously, we've only really shorted two companies. The first one, there's a book. The second one, there's a movie. We no longer short companies, but so people pushed up the price of Herbalife. Which is when you're a short seller, that's catastrophic. I can explain that. And then they also shorted the other stocks that we owned. And so that valiant loss led to an overall more than 30% loss in the value of our portfolio. The valiant loss was real and was crystallized. We ended up selling the position, taking that loss.

• 1:35:03Speaker 01

  Most of the other losses were what I would call mark to market losses. They were temporary. But many people go out of business because, as I mentioned before, large move in a price, if investors are redeeming or you have leverage, you know, it can put you out of business. And if people assumed if we got put out of business, we'd have to sell everything or cover our short position. And that would make the losses even worse. So Wall Street is kind of ruthless.

• 1:35:25Lex Fridman?

  So they can make money off of that whole thing?

• 1:35:27Speaker 01

  Absolutely.

• 1:35:28Lex Fridman?

  So they use the opportunity of valiant to try to destroy you?

• 1:35:31Speaker 01

  Yes.

• 1:35:32Lex Fridman?

  Reputation financially and then capitalize and make money off of that?

• 1:35:36Speaker 01

  Yes.

• 1:35:37Lex Fridman?

  Well, that's a terrifying spot to be in. What was the like going through that?

• 1:35:42Speaker 01

  It was pretty grim. It was, it's actually much worse than that because I had a lot of stuff going on personally as well. So, and these things tend to be correlated. The valiant mistake came at a time where I was contemplating my marriage. And I was also, you know, the problem with the hedge fund business is when you get to a certain scale, the CEO becomes like the chief marketing officer of the business. And I'm really an investor as opposed to a marketing guy. But when you have investors who give you a few hundred million dollars, they want to see you, you know, once a year, Bill, I'd love to see you for an hour. But if you've got a couple hundred of those, you find yourself on a plane to the Middle East, to Asia, flying around the country. This is pre-Zoom.

• 1:36:24Speaker 01

  And that takes you away from the investment process. You have to delegate more. That was a contributor to the Valiant mistake. So now we lose a ton of money on Valiant. My ex-wife and I were talking about separating, getting divorced. I put that on hold. I didn't want to make a decision in the middle of this crisis. And things just kept getting worse. We were also sued. When you lose a lot of money, we didn't get sued by our investors, but we got sued by a shareholder because when the stock price goes down, shareholders sue. We'd done nothing wrong other than make a big mistake. But, you know, so you have litigation. Your investors are taking their money out. I'm in the middle of a divorce. The divorce starts to proceed.

• 1:37:08Speaker 01

  My ex-wife's lawyer's expectations of what my net worth was was about three times what it actually was. And it was going lower in the middle of this. And I remember the lawyer saying, look, Bill, you know, estimate your net worth at X, but don't worry, we only want a third. But X was 3X, so a third was 100%. And then I had litigation. And actually, never before publicly disclosed, and I'll share it with you now. We had a public company that owned about a third of our portfolio. That was called our version of Berkshire Hathaway. I tried to learn from Mr. Buffett over time.

• 1:37:52Speaker 01

  And it was, so to speak, permanent capital. The beauty of, the problem with hedge funds, people can take their money out every quarter. What Buffett has is a company where people want to take their money out. They sell the stock, but the money stays. So we set up a similar structure in October of 2014. And then a year later, Valiant happens. And then a year later, we're in the middle of the mess. And we're still in the mess, you know, like by kind of mid 2017, we've got litigation underway.

• 1:38:20Speaker 01

  And another activist investor, a firm called LED Associates, which is run by a guy named Paul Singer, took a big position in our public company. That was the bulk of our capital. And they shorted all the stocks that we owned and they went long the short, probably went long the short that we were short. And they were making a bet that we'd be forced to liquidate. And then they would make money on, you know, our public company was trading at a discount to what all the securities were. So they bought the, they bought the public company, they shorted the securities. And then they, you know, came to see us and to try to, you know, be activists and force us to liquidate. And that sort of.

• 1:39:01Lex Fridman?

  Wow.

• 1:39:02Speaker 01

  So I thought this was going to be.

• 1:39:03Lex Fridman?

  Wow.

• 1:39:03Speaker 01

  I envisioned an end where the divorce takes all of my resources. The permanent capital vehicle ends up getting liquidated. And another activist in my industry puts me out of business. And I had met Neri Oxman right around this time. And I had fallen completely in love with her. And I was envisioning a world where I was bankrupt. A judge found me guilty of, you know, whatever, you know, he sends me off to jail. Not that judge, because he was a civil judge, but another judge sues the SEC, Department of Justice. And I find myself in this incredible mess. And I decided I didn't want things to end that way. So I, I did something I'd never done before. I talked all before about you don't borrow money.

• 1:39:45Speaker 01

  I borrowed money and I borrowed $300 million from JP Morgan in the middle of this mess. And I give JP Morgan enormous credit and seeing through it. And also, you know, I had been a good client over a long period of time. And it's like, you know, it's a handshake bank. And they bet that I would succeed. And I took that money to buy enough stock in my public company that could prevent an activist from taking over. And effectively buy control of our little public company. And I got that done. And that I knew was the moment, the turning point. And I resolved my divorce and divorces get easier to resolve when things are going badly. I was able to resolve that. We settled litigation.

• 1:40:29Speaker 01

  I was buying blocks of our stock in the market. I remember a day I bought a big block of stock in the market. And I get a call from Gordon Singer, who is Paul Singer's son, who runs their London part of their business. He's like, Bill, was that you buying that block? I said, yes. And he's like, fuck.

• 1:40:47Lex Fridman?

  So he knew.

• 1:40:48Speaker 01

  He knew that once I got that, they were not going to be able to succeed and they went away. And that that was the bottom. And I, I, we've had an incredible run since then.

• 1:40:59Lex Fridman?

  And there you were able to protect your reputation from the valiant failure still?

• 1:41:04Speaker 01

  I mean, you know, this is a business where you're going to make some mistakes. It was a big one. It was very reputationally damaging. The press was a total disaster. But I'm not a quitter. And actually, the key moments for us. We'd never taken our core investment principles and actually really written them down. Something we talked about at meetings, investor, you know, kind of our investment team meetings. I had a member of the team, I said, look, go find a big piece of granite and a chisel. And let's take those core principles. I want them like Moses's 10 commandments. Okay, we're going to chisel them and then we're going to put it up on the wall. And once we produced those, we put one on everyone's desk. I said, look, if we ever again veer from the core principles, you know, it hit me with a baseball bat.

• 1:41:48Lex Fridman?

  Yeah.

• 1:41:49Speaker 01

  And that was the bottom. And ever since then, we've done, we've had the best six years in the history of the firm.

• 1:41:53Lex Fridman?

  So refocus on the fundamentals.

• 1:41:57Speaker 01

  And love helps.

• 1:41:57Lex Fridman?

  The story.

• 1:41:58Speaker 01

  Love helps. I literally met Neri at the absolute bottom. Our first date was September 7th of 2017. That was very close to the bottom. Actually, there's one other element to the story. So this went on for a few months after I met her. The other element is that one day I got a call from Neri. She's like, Bill, guess what? I'm like, what? Brad Pitt is coming to the media lab. He wants to see my work. I'm like, that's beautiful, sweetheart. I didn't know Brad Pitt was interested in your work.

• 1:42:25Lex Fridman?

  As a man, that's a difficult phone call to take.

• 1:42:27Speaker 01

  And apparently, he's really interested in architecture. Okay. Now, Neri and I were like, you know, we would WhatsApp all day, every day. We'd talk throughout the day. Brad Pitt shows up at the media lab at 10 o'clock. I was, you know, talked to her in the morning. I'd kind of text her to see how things are going. Don't hear back. And on WhatsApp, you can see like whether the other person's read it or not.

• 1:42:49Lex Fridman?

  Yeah.

• 1:42:51Speaker 01

  No response.

• 1:42:51Lex Fridman?

  Yeah.

• 1:42:52Speaker 01

  Couple hours later, send another text, no response. 6 o'clock, no response. 8 o'clock, no response. 10 o'clock, no response. And, you know.

• 1:43:02Lex Fridman?

  Yeah.

• 1:43:02Speaker 01

  She finally calls me at 10:30 and tells me how great Brad Pitt is. So I had this scenario, okay, I'm gonna, a judge is gonna find me, uh, we're gonna lose to the judge. Uh, all my assets will disappear.

• 1:43:14Lex Fridman?

  Yeah.

• 1:43:15Speaker 01

  And then Brad Pitt's gonna take my girlfriend.

• 1:43:16Lex Fridman?

  Yeah. Brad Pitt's your competition. This is great.

• 1:43:19Speaker 01

  So it was like a moment. That was sort of the bottom. And then sort of, you know, the motivational thing, I didn't want to lose to an activist. Didn't want to lose my girl to some other guy, so.

• 1:43:30Lex Fridman?

  Brad Pitt, and you emerged from all that, the winner on all fronts.

• 1:43:34Speaker 01

  I'm a very fortunate guy. Very fortunate and lucky.

• 1:43:38Lex Fridman?

  You talked about some of the technical aspects of that, but psychologically, just, is there a... Like, what are you doing at night by yourself?

• 1:43:47Speaker 01

  That was a hard time. Hard time because I was separated from my wife and my kids. I was living in, you know, not the greatest apartment. You know, I had a beautiful home and so I had to go find like a bachelor place. And I was, I didn't want to be away from my kids. I moved like 10 blocks away and I wasn't seeing them and they didn't like it. So I ended up buying an apartment I didn't like, uh, in the same building as my kids, like with a different, different entrance. So I could be near them. And I was home alone. I got a dog. That was a Babar. We call him Babar, not the elephant. He's a black labradoodle.

• 1:44:24Lex Fridman?

  Nice.

• 1:44:25Speaker 01

  He was supposed to be a mini, but he's not so as mini. But I got him at six weeks old and he would keep me company. And I started meditating, actually. And a friend recommended TM. And I would meditate 20 minutes in the morning, 20 minutes in the evening. And I also, big believer in exercise and, you know, weightlifting and I played tennis. And I had been, this is not my first, you know, proximity to disaster. I had another moment in my career like, you know, 2002. And I learned this method for dealing with these kind of moments, which is you just make a little progress every day. So today I'm going to wake up, I'm going to make progress.

• 1:45:10Speaker 01

  You know, I'll make progress in the litigation, make progress in the portfolio, I'll make progress with my life and progress compounds a bit like money compounds. You don't see a lot of progress in the first few weeks, but like 30 days in like, oh, okay. You know, like you can't look up at the mountaintop where you used to be because then you'll, you'll give up, right? But you just, okay, just make step by step by step. And then 90 days in, you're like, okay, I was way down there. Okay, I'm not, okay, I don't look up. Just keep making, you know, progress, progress, progress and progress really does compound. And, and one day you wake up and like, wow, it's amazing how far I've come. And if you look at a chart of Pershing Square, our company, you can see the absolute bottom.

• 1:45:54Speaker 01

  You can see where we were, you can see the drop and you can see where we are now. And that huge drop that felt like a complete unbelievable disaster. Looks like a little bump on the curve and it really gives you perspective on these things. You just have to power through. And I think the key is, you know, I've always been fortunate, like from a mental health point of view and, you know, nutrition, sleep, exercise, a little progress every day. It's, you know, very, that's it. And, you know, good friends and family, you know, I had, you know, go take a walk with a friend every night, you know, and a sister who loves me and parents who are supportive, but they were, you know, they were all worried about their.

• 1:46:39Speaker 01

  Their son, their brother, you know, it was, it was a moment. And also, by the way, the other thing to think about is when you recover from something like this, you really appreciate it, you know? And, and also the, you know, as much of the, the media loves, okay, when some successful person falls, they love writing the story of success, they love even more the story of failure, but when you recover from that, it's kind of like the American story.

• 1:47:06Lex Fridman?

  Yeah.

• 1:47:06Speaker 01

  Right? You know, America, you know, you think of the great entrepreneurs and how many failures they had before they succeeded, you know, how many rocket launches, you know, did SpaceX have explode on the pad, right? And then you look at success, I mean, that's why Musk is so admired.

• 1:47:22Lex Fridman?

  You mentioned Herbalife, can you take me through the saga of that? It's historic?

• 1:47:29Speaker 01

  So, we at Pershing Square, short of very few stocks, and the reason for that, short selling is just inherently treacherous. So, if you buy a stock, it's called going long, right? You're buying something, your worst case scenario is you lose your whole investment. You buy a stock for a hundred, it goes to zero, you lose a hundred dollars, right? Per share, you buy one share, you lose a hundred. You short a stock at a hundred, what it means is you borrow the security from someone else. The analogy I gave that made it easy for people to understand, it's a bit like you think, you know, silver coins are going to go down in value. And you have a friend who's got a whole pile of these 1880 silver, silver US dollars, and you think it's going to go down in value, you say, hey, can I borrow, you know, 10 of those dollars from you?

• 1:48:14Speaker 01

  He's like, sure, but what are you going to pay me to borrow them? I'll pay you, you know, I'll pay you interest on your, on the value of the dollars today. So you borrow the dollars that are worth a hundred dollars each today, you pay them interest while you're borrowing them, and then you go sell them in the market for a hundred dollars, that's what they're worth. And then they go down in price to 50, you go back in, you buy the silver dollars back at 50 dollars, and you give them back to your friend. Your friend is, fine, you borrowed 10, you gave him the 10 back, and he got interest in the meantime, he's happy, he made money on his coin collection. You, however, made 50 dollars times the 10 coins, you made 500 bucks, that's pretty good. The problem with that is, what if you sell them and they go from a hundred to a thousand? Now you're gonna have to go buy them back.

• 1:48:58Speaker 01

  And you're gonna pay, you know, whatever, $10,000 to buy back coins. You know, that you sold for 500, you're gonna lose $9,500. And there's no limit, right, to how high a stock price can go. Companies go to $3 trillion in value, right? Tesla, a lot of people shorted Tesla, saying, oh, it's overvalued. He's never gonna be able to make a successful electric car. Well, I'm sure there are people went bankrupt shorting Tesla. That's why we didn't short stocks. But I was presented with this, actually, reporter that covered the other short investment we made early in the career, a company called MBIA. Came to me and said, Bill, I found this incredible company. You gotta take a look at it. It's a total fraud and they're scamming poor people. And we should say that MBIA was a very successful short. It was.

• 1:49:42Speaker 01

  A big part of it was that we used a different kind of instrument to short it. Where you, we reversed that sort of, we made the investment asymmetric in our favor. Meaning, put up a small amount of money, if it works, we'll make a fortune. Whereas short selling is, you kind of sell something and you have to buy it back at a higher price. Herbalife didn't have the, what's called credit default swaps that you could purchase. Not a big enough company, didn't have enough debt outstanding to be able to implement it. You had to short the stock in order to make it as successful, to bet against the company. And the more work I did in the company, the more I was like, oh my God, this thing's an incredible scam. You know, that they purport to sell weight loss shakes. But in reality, they're selling, you know, kind of a fake business plan.

• 1:50:23Speaker 01

  And the people that adopt it lose money and they, they go after poor people. They go after, actually, in many cases, undocumented immigrants who are pitched on the American dream opportunity. And because they have few other options, because they can't get legal employment, they become Herbalife distributors. And it's a business where you, so-called multi-level marketing, or pyramid, you know, multi-level marketing is sort of the, the name for a legitimate company like this. Or it's a pyramid scheme, where basically your sales are really only coming from people who are, you're convinced to buy the product by getting them into the business. That's precisely what this company is. And, uh, like, okay, shorting a pyramid scheme seems like, one, we'll make a bunch of money.

• 1:51:07Speaker 01

  But, you know, two, the world will be behind us because they're harming poor people. You know, regulators will get interested in a company like this. And we said, you know, the FTC is gonna shut this thing down. And we did a ton of work and I gave this sort of epic presentation laying out all the facts. Stock got completely crushed and we were on our way and the government actually got interested early on, launched an investigation pretty early, SEC and other, otherwise. But then, a guy named Carl Icon showed up and there's, we have a little bit of a backstory, but his motivations here were not really principally driven by thinking Herbalife was a good company. He thought it was a good way to hurt me. So he, he basically bought

• 1:51:52Speaker 01

  a bunch of stock and said it was a really great company. And, you know, Carl, at least at the time, threw his weight around a bit. I was a credible investor, had a lot of resources. And that began the saga.

• 1:52:05Lex Fridman?

  So he was, we should say, a legendary investor himself?

• 1:52:11Speaker 01

  I'd say legendary in a sense, yes, for sure. An iconic.

• 1:52:14Lex Fridman?

  Iconic?

• 1:52:15Speaker 01

  Carl Icon.

• 1:52:16Lex Fridman?

  Oh, that's very well done.

• 1:52:17Speaker 01

  So definitely an iconic investor.

• 1:52:19Lex Fridman?

  So what was the backstory between the two of you?

• 1:52:23Speaker 01

  So I mentioned that I had another period of time where significant business challenges. This was my first fund called Gotham Partners and we had a court stop a transaction between some private, a private company we owned and a public company. It's another long story, if you want to go there.

• 1:52:37Lex Fridman?

  I would love, I would love to hear it as well.

• 1:52:39Speaker 01

  But it was really my deciding to wind up my former fund and we owned a big stake in a company called Hallwood Realty Partners, which was a company that owned real estate assets. It was worth a lot more than where it was trading, but it needed an activist to really unlock the value. And we were, in fact, going out of business and didn't have the time or the resources to pursue it. So I sold it to Carl Icon. But, and I sold it to him at a premium to where the stock was trading. I think the stock was like 66. I sold it to him for 80, but it was worth about 150. And I said, look, and part of the deal was Carl's like, look, I'll give you schmuck insurance. You know, I'll make you sure you don't look bad. And I had another deal at a higher price without schmuck insurance,

• 1:53:22Speaker 01

  but I deal with Carl at a lower price with schmuck insurance. And the way the schmuck insurance went, he said, look, Bill, if I sell the stock in the next three years, you know, for a higher price, I'll give you 50% of my profit. Well, that's a pretty good deal. So we made that deal and because I was dealing with Carl Icon, who had a reputation for, you know, being difficult. I was, you know, very focused on the agreement and we didn't want him to be able to be cute. So the agreement said, if we sell, if he sells or otherwise transfers his shares, we came up with a definition, include every version of sale. Okay. Cause you know, it's Carl. Uh, well, he then, uh, buys the stake and

• 1:54:05Speaker 01

  then makes a bid for the company. And, you know, plan is for him to get the company. And he bids like 120 a share and the company hires Morgan Stanley to sell itself. And he raises bid to 125 and the 130 eventually gets sold. I don't remember the exact price. Let's say a hundred and $45 a share and Carl's not the winning bidder. And he sells his stock or loses or transfers his shares for a hundred and $45 a share. So he owes actually our investors, the difference between 145 and 80, uh, times 50%. And I had like, you know, lawyers never like you to put like a arithmetic example. I put like a formula, you know, like out of a math book in, in the documents. So there can be no confusion.

• 1:54:48Speaker 01

  It was only an eight page, really simple agreement. So the deal closes and he's supposed to pay us in two business days or three business days. I waited a few business days. No money comes in. I call Carl. I'm like, Carl, um, congratulations on, on the Hall wood Realty. Thanks, Bill. I said, Carl, just want to remind you, I know it's been a few years, but, um, you know, you, we have this agreement. Remember the schmuck insurance? He's like, yeah. I said, well, you owe us our schmuck insurance. He says, what do you mean? I didn't sell my shares. I said, do you, do you still have the shares? He says, no. I said, what happened to them? Well, the company did a merger for cash and they took away my shares, but I didn't sell them.

• 1:55:33Speaker 01

  You understand what happened. So I had, and I said, Carl, I'm gonna have to sue you. I said, sue me. I'm gonna sue you.

• 1:55:41Speaker 01

  So I sued him. And the legal system in America takes, can take some time. And what he would do is, we sued and then we won in the, in the whatever, New York Supreme Court.

• 1:55:53Speaker 01

  And then he appealed. And you can appeal like six months after the case. We waited to the 179th day. And then he would appeal. And then we fought at the next level. And then he would appeal. And he appealed always Supreme Court. Of course, the Supreme Court wouldn't take the case. It took years. Now, we had, as part of our agreement, we got 9% interest on the money that he owed us. So I viewed it as my Carl Icahn money market account with a much higher interest rate. And eventually, I won.

• 1:56:20Lex Fridman?

  What was the amount?

• 1:56:21Speaker 01

  Tiny. No, it was material to my investors. So my first fund, I wound it down. But I wanted to maximize everything for my investors, right? These are the people back me at 26 years old. I was right out of business school and no experience. And they supported me. So I'm gonna go to the end of the earth for them. And four and a half million relative to our, our fund at the end was maybe 400 million. So it wasn't a huge number. But it was a big percentage of what was left after I sold all our liquid securities. So I was fighting for it. So we got four and a half million plus interest for eight years or something. That's how long the litigation took. So we got about double. So he owed me $9 million, which to Carl Icahn, who had probably a $20 billion net worth at the time. This was nothing.

• 1:57:04Speaker 01

  But to me, it was like, okay, it's my investors' money. I'm gonna get it back.

• 1:57:09Speaker 01

  And so, you know, eventually we won. Eventually, he paid. And then he called me. He said, Bill, congratulations.

• 1:57:19Speaker 01

  Now we can be friends. And we can, we can invest, do some investing together. I'm like, Carl, fuck you.

• 1:57:26Lex Fridman?

  You actually said fuck you?

• 1:57:28Speaker 01

  And I'm not that kind of person generally, but, you know, he made eight years to pay me, not me, even me, my investors' money they owed. And so I, yeah. So he probably didn't like that. So he kind of hung around in the weeds, waiting for an opportunity. And then from there, I, you know, started Pershing. We had a kind of straight line up, you know, we were up, the first 12 years, we could do nothing wrong. Then Valiant.

• 1:57:54Speaker 01

  Herbalife, right? He sees an opportunity and he buys the stock. He figures he's going to run me off the road. And so that was the beginning of that. And kind of the moment, and I think it's the, I'm told by CNBC, it's the most watched segment in business television history. They're interviewing me about the Herbalife investment on CNBC. And then Carl Icahn calls into the show. And we have kind of a interesting conversation where he calls me all kinds of names and stuff. So it was a moment. It was a moment in my life.

• 1:58:27Lex Fridman?

  It wasn't public information that he was long on Herbalife?

• 1:58:32Speaker 01

  He didn't yet disclose he had a stake.

• 1:58:34Lex Fridman?

  Yeah.

• 1:58:35Speaker 01

  But he was just telling me how stupid I was to be short this company.

• 1:58:38Lex Fridman?

  So for him, it wasn't about the fundamentals of the company. It was about, it was just personal.

• 1:58:43Speaker 01

  A hundred percent.

• 1:58:45Lex Fridman?

  Is there a part of you that regrets saying fuck you on that phone call to Carl Icahn?

• 1:58:52Speaker 01

  No. I generally have, I generally have no regrets because I'm very happy with where I am now. And I feel like, you know, it's a bit like, you know, you step on the butterfly in the forest and the world changes because, you know, every action has a reaction. You know, if you're happy with who you are, where you are in life, every decision you've made, good or bad, over the course of your life, got you to precisely where you are. I wouldn't change anything.

• 1:59:18Lex Fridman?

  He said you lost money on Herbalife. So what, so he did the long-term battle?

• 1:59:24Speaker 01

  What he did is he, he got on the board of the company and used the company's financial resources, plus his stake in the business to squeeze, squeeze us. And a squeeze in short selling is where you restrict the supply of the securities. So that there's a scarcity. And then you encourage people to buy the stock and you drive the stock up. And as I explained before, you're short those coins at 10, they go to 100. You can lose theoretically an unlimited amount of money. And that's scary. That's why we don't short stocks. That's why I didn't short stocks before this. But this was, unfortunately, I had to have the personal lesson.

• 2:00:01Lex Fridman?

  So how much was for him, personal versus?

• 2:00:05Lex Fridman?

  Part of the game of investing.

• 2:00:07Speaker 01

  Well, he thought he could make money doing this. He wouldn't have done it if he did otherwise. He thought his bully pulpit, his ability to create a short squeeze, his control over the company would enable him to achieve this. And he made a billion, we lost a billion.

• 2:00:22Lex Fridman?

  So you think it was a financial decision, not a personal?

• 2:00:24Speaker 01

  It was a personal decision to pursue it, but he was waiting for an opportunity where he can make money at our expense. It was kind of a brilliant opportunity for him. Now, the irony is, well, first of all, the FTC found a few interesting facts. So one, the government launched an investigation. They ended up settling with the company and the company paid $220 million in fines. I met a professor from Berkeley a couple of years ago who told me that he had been hired by the government as their expert on Herbalife and he got access to all their data, was able to prove that they're a pyramid scheme. But the government ultimately settled with Carl because they were afraid they could, you know, they could possibly lose in court. So they settled with him. But if you look at the stock, if we'd been able to stay short the entire time, we would have made

• 2:01:09Speaker 01

  a bunch of money because the stock had a $6 billion market cap and we shorted it. Today it's probably a billion, billion and a half.

• 2:01:16Lex Fridman?

  So you left the short position or whatever that's called.

• 2:01:19Speaker 01

  Covered. We closed it out.

• 2:01:21Lex Fridman?

  Yeah.

• 2:01:21Speaker 01

  We sold Valiant, we covered Herbalife. That was the resetting moment for the firm because it would just psychologically. And you know, the beauty of investing is you don't need to make it back the way you lost it, right? You can just take your loss. By the way, losses are valuable and that the government allows you to take a tax loss and that can shelter other gains. And we just refocused.

• 2:01:43Lex Fridman?

  Can you say one thing you really like about Carl Icahn and one thing you really don't like about him?

• 2:01:48Speaker 01

  Sure. So he's a very charming guy. So in the midst of all this,

• 2:01:55Speaker 01

  the Hallwood one, he took me out for dinner to his favorite Italian restaurant.

• 2:01:59Lex Fridman?

  Really?

• 2:01:59Speaker 01

  Yeah. We were in the middle of the litigation to see if he could resolve it. And he offered 10 million to my favorite charity.

• 2:02:07Speaker 01

  The problem was that it wasn't my money, it was my investors' money, so I couldn't settle with them on that basis. But, you know, I had the chance to spend real time with him at dinner. He's funny, he's charismatic, he's got incredible stories. And, you know, actually, I made peace with him over time. We had a little hug out on CNBC, even had him to my house, believe it or not. I hosted a, something called the Finance Cup, which is a tennis tournament between people in finance in Europe and the US. And we had the event at my house, and one guy thought to invite Carl Icahn, and so we had Carl Icahn there to present awards. And, again, I have to say, I kind of liked the guy. But

• 2:02:52Speaker 01

  I didn't like him much during this.

• 2:02:54Lex Fridman?

  Is there, because at least from the outsider perspective, there's a bit of a personal vengeance here, or anger can build up. Do you ever worry the personal attacks between powerful investors can cloud your judgment? Or what is the right financial decision?

• 2:03:11Speaker 01

  I think it's possible, but again, I try to be extremely economically rational. And actually, the last seven years have been quite peaceful. I really have not been an activist in the old form for many years. And the vast majority of even our activist investments historically were very polite, respectful cases. The press, of course, focuses on the more interesting ones. Like Chipotle was one of the best investments we ever made. We've, you know, we got four of eight board seats, and we worked with management, and it was a great outcome. I don't think there's ever been a story about it. And the stock's up, you know, almost 10 times from the time we hired Brian Nicolle as CEO. But it's not interesting, because there was no battle. Whereas Herbalife, of course, was

• 2:03:56Speaker 01

  like an epic battle, even Canadian Pacific. So, you know, for a period there, most people, when they meet me in person, they're like, wow, you seem like a really nice guy. So, but things have been pretty calm for the last seven years.

• 2:04:11Lex Fridman?

  Of course, there's more than just investing that your life is about, especially recently.

• 2:04:19Lex Fridman?

  Let me just ask you about what's going on in the world first. Oh, what was your reaction? And what is your reaction and thoughts with respect to the October 7th attacks by Hamas on Israel?

• 2:04:35Speaker 01

  You know, it's a sad world that we live in that, one, we have terrorists and two, that we could have such barbaric terrorism. And yeah, just a reminder of that.

• 2:04:46Lex Fridman?

  So there's several things I can ask here. First, on the, your views on the, the prospects of the Middle East, but also on the, the reaction to this war. And in the United States, especially on university campuses. So first, let me just ask, you've said that you're pro Palestinian. Can you explain what you mean by that?

• 2:05:07Speaker 01

  You know, with all of my posts about Israel, I'm obviously very supportive of the country of Israel, Israel's right to exist, Israel's right to defend itself. My Arab friends, my Palestinian friends, you know, were kind of saying, hey, Bill, where are you? You know, what about Palestinian lives? And I was pretty early in my life, a guy named Marty Parrots, who's been important to me over the course of my life, professor, first investor in my fund, introduced me to Neri.

• 2:05:38Speaker 01

  Asked me, when I was right out of school, to join this nonprofit called the Jerusalem Foundation, which was a charitable foundation that supported Teddy Colick when he was mayor of Jerusalem. I ended up becoming the youngest chairman of the Jerusalem Foundation in my 30s, and I spent some time in Israel. And the early philanthropic stuff I did with the Jerusalem Foundation, I think I was most interested in was, was kind of the Palestinian, the plight of the Palestinians. And kind of peaceful coexistence. And so I had kind of an early kind of perspective and, you know, as chairman of the Jerusalem Foundation, I would go into, you know, Arab communities. I would meet the families in their homes. You know, you get a sense of the, the humanity of, of a people and I care about humanity.

• 2:06:22Speaker 01

  I generally take the side of people who've been disadvantaged.

• 2:06:27Speaker 01

  Almost all of our philanthropic work has been in that capacity. So it's sort of my natural perspective. But I don't take the side of terrorists ever, obviously. And the whole thing is just a tragedy.

• 2:06:42Lex Fridman?

  So to you, this is about Hamas, not about Palestine?

• 2:06:45Speaker 01

  Yes, I mean, you know, the problem, of course, is when Hamas controls, you know, for the last almost 20 years has controlled Gaza. You know, they've, including the education system, they're educating. You know, you see these, you know, training videos of kindergarteners indoctrinating them into hating Jews in Israel. So it's, it's, of course, you don't like to see Palestinians celebrating, you know, some of those early videos of October 7th, where, you know, dead bodies in the back of trucks and people, you know, cheering. So it's, it's a really unfortunate situation. But I, you know, I think about, you know, a Palestinian life is important and as valuable

• 2:07:29Speaker 01

  as a Jewish life, as a American life. And, you know, what do people really want? They want a place, they want a home, they want to be able to feed their family, they want a job that generates the resources to feed their family. They want their kids to have a better life than they've had. They want peace. I think these are basic human things. I'm sure the vast majority of Palestinians share these views. But it's such an embedded situation with hatred and, as I say, indoctrination. And then, you know, going back to incentives, you know, terrorists generate their resources by committing terrorism, and that's how they get funding. And that's, you know, there's a lot of graft.

• 2:08:13Speaker 01

  You know, it's a plutocracy, right? The top of the terrorist pyramid, you know, if you accept the numbers that are in the press, you know, the top leaders, you know, have billions of dollars, you know, 40 billion or so has gone into Gaza over the last, and the West Bank over the last 30 years, a number like that. And a lot of it's disappeared into some combination of corruption, or tunnels, or weapons. And the tragedy is, you know, you look at what Singapore has achieved in the last 30 years, right?

• 2:08:45Lex Fridman?

  Do you think that's still possible if we look into the future of 10, 20, 50 years from now?

• 2:08:50Speaker 01

  Absolutely.

• 2:08:51Lex Fridman?

  So not just peace?

• 2:08:53Speaker 01

  But peace comes with prosperity. You know, people are, you know, under the leadership of terrorists. You're not going to have prosperity and you're not going to have peace. And I think the, you know, the Israelis withdrew in 2005 and fairly quickly Hamas took control of the situation. That was, that should never have been allowed to happen. And I think, you know, if you think about, I had the opportunity to spend a, I'll call it an hour with Henry Kissinger, a few months before he passed away. And we were talking about Gaza or in the early stage of the war. He said, look, you know, this is not, you can think about Gaza as the, as a test of a two-state solution. It's not looking good.

• 2:09:38Speaker 01

  These were his words. So the next time around, you know, Palestinian people should have their own state, but it can't be a state where, you know, 40 billion resources goes in and is spent on weaponry and missiles and rockets going into Israel. And I do think a consortium of the Gulf states, you know, the Saudis and others have to ultimately oversee the governance of this region. I think if that can happen, I think you can have peace, you can have prosperity. And, you know, I'm fundamentally an optimist.

• 2:10:13Lex Fridman?

  So coalition of governance.

• 2:10:16Speaker 01

  Governance matters, you know, going back to what we talked about before.

• 2:10:21Lex Fridman?

  And, you know, that kind of approach can give the people a chance to flourish.

• 2:10:27Speaker 01

  Hundred percent. I mean, look at what Dubai has accomplished with, you know, nomads in the desert, right? And that's become a major, it's a tourist destination. Gaza could have been a tourist destination.

• 2:10:41Lex Fridman?

  Take me through the saga of university presidents testifying on this topic, on the topic of protests on college campuses, protests that call for the genocide of Jewish people and the university presidents. Maybe you could describe it more precisely, but they fail to denounce the calls for genocide.

• 2:11:08Speaker 01

  So it begins on October 8th, probably. And.

• 2:11:16Speaker 01

  You know, you can do a compare and contrast with how Dartmouth managed the events of October 7th and the aftermath and how Harvard did.

• 2:11:25Speaker 01

  And October 8th or shortly thereafter, you know, the Dartmouth president, who had been in her job for precisely the same number of months that the Harvard president had been in her job, the first thing she did is she got the most important professors of Middle East Studies who were Arab and who were Jews and convened them and held, you know, an open session, Q and A for students to talk about what's going on in the Middle East and began an opportunity for common understanding among the student body. And Dartmouth has been a relatively benign environment on this issue and students are

• 2:12:07Speaker 01

  able to do work and there aren't disruptive protests with people with bullhorns walking into classrooms interfering with, you know, people pay today $82,000 a year, which itself is crazy to go to Harvard, but imagine your family borrows the money or you borrow the money as a student and your learning is disrupted by constant protests and the university does nothing. You know, when George Floyd died, you know, the Harvard president wrote a very strong letter denouncing what had taken place and, you know, calling this an important moment in American history and took it incredibly seriously. Her first letter about October 7th was not that, let's put it that way. And then her second letter was not that.

• 2:12:51Speaker 01

  And then ultimately, you know, she was sort of forced by the board or the pressure to make a more public statement, but it was clear that it was hard for her to come to an understanding of, of this terrorist act. And then the protests erupted on campus and they started out reasonably benign and then the protesters got more and more aggressive in terms of violating university rules on things like bullying and the university did nothing. And that obviously for the Jewish students, the Israeli students, the Israeli faculty, Jewish faculty created an incredibly uncomfortable environment and the president seemed indifferent.

• 2:13:32Speaker 01

  And, you know, I went up to campus and I met with hundreds of students in small groups and larger groups and they're like, Bill, why is, why is the president doing nothing? Why is the administration doing nothing? And that was really the beginning and that, you know, I reached out to the president, reached out to the, the board of Harvard. I said, look, this thing is headed in the wrong direction and you need to fix it. And I have some ideas, love to share. And I got the heist man, as they say, you know, they just kept pushing off the opportunity for me to meet with the president and meet with the board. And a certain point in time I pushed,

• 2:14:12Speaker 01

  you know, I'm kind of a activist when you push me. It reminded me of, you know, like early days of activism where I couldn't get the CEO of Wendy's to return my call. I couldn't get the CEO of Harvard, you know, to take a meeting. And then finally I spoke to the chairman of the board, a woman by the name of Penny Pritzker, who I, you know, knew from on a business school board with her. And it was, as I described, one of the more disappointing conversations of my life. And it did not seem, she seemed a bit like, if you will, deer in the headlights. They couldn't do this, they couldn't do that. The law was preventing them from doing various things. And that led to my first ledge to the university. And I sort of ended the letter, you know, sort of giving this president of Harvard

• 2:14:57Speaker 01

  dared be great speech. This is your opportunity. You know, you can fix this. This could be your legacy. And I sent it to the, I emailed it to the president and the board members whose email addresses I had. I posted it on Twitter and I got no response, no acknowledgement, nothing. And in fact, the open dialogue I had with a couple of people on the board basically got shut down after that. And that led to letter number two. And then, and then when the Congress led by Lisa Stefanik, announced an investigation of antisemitism on campus and concern about, you know, violations of law.

• 2:15:41Speaker 01

  The president was called to testify along with two other, you know, the president of MIT, you know, the president of University of Pennsylvania, who were having similar issues on campus. I reached out to the president of Harvard and said, well, one, the Israeli government had gotten in touch and offered the opportunity for me to see the Hamas, if you will, GoPro film. And I said, you know what? I'd love to show it at Harvard and they thought that would be a great idea. And so I partnered with the head of Harvard, Chabad, a guy named Rabbi Hershey. And we were putting the film up on campus and I thought, you know, if the president were to see this, it would give her a lot of perspective on what happened and she should see it before her testimony. And so I reached out to her, or actually Rabbi Hershey did.

• 2:16:25Speaker 01

  And he was told she would be out of town and couldn't see it. And then I reached out to her again, said, look, I'll facilitate your attendance in the, in the Congress, you know, come see the film, I'll fly you down. That was rejected. And then she testified. And I watched, you know, a good percentage, 80% of the testimony of all three presidents. And it was an embarrassment to the country, embarrassment to the universities. You know, they were evasive, they didn't answer questions, they were rude, they smirked. You know, they looked, you know, very disrespectful to, to our Congress. And, and then of course, there was that several minutes where finally, at least Stefanik was not getting answers to her questions.

• 2:17:10Speaker 01

  And she said, you know, let me be, you know, kind of clear. What if protesters were calling for genocide for the Jews? Does that violate your rules on bullying and harassment? And the three of them basically gave the same answer. You know, it depends on the context. And not until they actually executed on the genocide that the university have the right to intervene.

• 2:17:34Speaker 01

  And the thing that perhaps bothered me the most was the incredible hypocrisy. You know, Harvard was, you know, each of these universities are ranked by this entity called FIRE, which is a nonprofit that focuses on free speech on campus. And Harvard has been in the bottom quartile for the last five years and dropped to last before October 7th out of like 250.

• 2:17:55Lex Fridman?

  I should mention briefly that I've interviewed on this podcast the founder of FIRE and the current head of FIRE, we discussed this at length, including running for the board of Harvard and the whole procedure of all that. It's quite a fascinating investigation of free speech. For people who care about free speech absolutism, that's a good episode to listen to because those folks kind of fight for this idea. It's a difficult idea actually to internalize. What does free speech in college campuses look like?

• 2:18:25Speaker 01

  Harvard has become a place where free speech is not tolerated on campus, or at least free speech that's not part of the accepted dialogue. Or, you know, this whole notion of speech codes and microaggressions really emerged on the elite, you know, the Harvard Yale campuses of the world. And, you know, the president of Harvard's, then president of Harvard's explanation for why, you know, you could call for the genocide of the Jewish people on campus was Harvard's commitment to free expression. And, you know, one of the more hypocritical statements of all time. And you really can't have it both ways. Either Harvard has to be a place where it's a free speech, she basically said, we're a free speech absolutist place, which is why we have to allow this.

• 2:19:09Speaker 01

  And Harvard could not be further from that. And so that was a big part of it. And I, I, I was in the barber chair, if you will, getting a haircut. And I had a guy on my team send me the three minute section. I said, cut that line of questioning. And I put out a little tweet on that and I call it my greatest hits of, of, of posts. It's got something like 110 million views. And, and, you know, everyone looked at this and said, what is wrong with, you know, university campuses?

• 2:19:44Speaker 01

  And their leadership and their governance, by the way, you know, in a way, this whole conversation has been about governance. Harvard has a disastrous governance structure, which is why we have the problem we have.

• 2:19:54Lex Fridman?

  And just to linger on the testimony, you mentioned, you know, smirks and this kind of stuff, and you mentioned dare to be great. I myself am kind of a sucker for great leadership. And those moments, you mentioned Churchill or so on, even great speeches. People talk down on speeches like it's maybe just words, but I think speeches can define a culture and define a place, define a people that can inspire. And I think actually, the testimony before Congress could have been an opportunity to redefine what Harvard is, dare to be great, for dare to be a great leader.

• 2:20:37Speaker 01

  President of Harvard had a huge opportunity because she went third, right? The first two gave the world's most disastrous answers to the question. And she literally just copied their answer, which is itself, you know, kind of ironic in light of ultimately what happened.

• 2:20:53Lex Fridman?

  It's tough because you can get busy as a president, as a leader, and so on. There's these meetings. And so you think Congress, maybe you're smirking at the ridiculousness of the meeting. You need to remember that many of these are opportunities to give a speech of a lifetime.

• 2:21:13Speaker 01

  Sure.

• 2:21:13Lex Fridman?

  Like that if there is principles which you want to see an institution become and embody in the next several decades, there's opportunities to do that. And you, as a great leader, also need to have a sense of when is the opportunity to do that. And October 7th really woke up the world on all sides, honestly. Like, there is serious issue going on here. And then the protests woke up the university to there's a serious issue going on here. It's an opportunity to speak on free speech and on genocide, both.

• 2:21:51Speaker 01

  Yes.

• 2:21:53Lex Fridman?

  Do you see the criticism that you are a billionaire donor? And you sort of used your power and financial influence unfairly to affect the governing structure of Harvard in this case?

• 2:22:07Speaker 01

  First of all, I did, I never threatened to use financial or other resources. The only thing I did here was wrote, I wrote public letters. I spoke privately to a couple of members of the board. I spoke for 45 minutes to the chairman. None of those conversations were effective or went anywhere as far as I could tell. I think my public letters and then some of the posts I did.

• 2:22:27Lex Fridman?

  Tweets, yeah.

• 2:22:28Speaker 01

  And that, you know, that little three minute video excerpt had it, had an impact. But it wasn't about, I mean, you can criticize me for being a billionaire, but that had, you know, it was really the words. It's a bit like, again, going back to the corporate analogy. It's not the fact that you own 5% of the company that causes people to vote in your favor. It's the fact that your ideas are right. And I think, you know, I was disappointed after the congressional testimony, the board of Harvard said that they were 100% behind unanimously, 100% behind President Gay. And so clearly I was ineffective. And ultimately what took her down was other, I would say activists who identified issues with academic integrity.

• 2:23:13Speaker 01

  And then she lost the confidence of the faculty. And once that happens, it's hard to stay. And I wanted her to be fired basically, or be forced to resign because of failures of leadership. Because that would have sent a message about the importance of leadership, you know, failure to stop a emergence of antisemitism on campus. And, you know, there's some news today. The protests are getting worse.

• 2:23:36Lex Fridman?

  Is there some tension between free speech on college campuses and disciplining students for calls of genocide?

• 2:23:42Speaker 01

  Yes, there's certainly a tension. And I think. First of all, I think free speech is incredibly important and I'm on the side. I'm a lot closer to absolutism on free speech than otherwise. The issue I had was the hypocrisy, right? They were restricting other kinds of speech on campus, principally conservative speech, conservative views. So it wasn't a free speech absolutist campus. And the protests were actually quite threatening to students. And there are limits to even absolutist free speech. And they begin where people feel intimidation, harassment and threat to bodily harm, et cetera. That kind of speech is generally, again, it's pretty technical.

• 2:24:27Speaker 01

  But as people feel that they're in imminent harm by virtue of the protest, that speech is at risk of not meeting the standards for free speech. But Harvard is a private corporation. And as a private corporation, they can put on what restrictions they want. And Harvard had introduced only a few months before bullying and harassment policies. And that's why Representative Stefanik focused on, it's not like she said, this calling for genocide against the Jews violate your free speech policy. She says, this calling for genocide against the Jews violate your policies on bullying, harassment. And I think everyone looked at this when they said, it depends on the context. And they said, look, if you replace Jews with some other ethnic group. Students who've used the N-word, for example, have been thrown off campus, were suspended.

• 2:25:09Speaker 01

  Students who've hate speech directed at LGBTQ people has led to disciplinary action. But attacking, spitting on Jewish students or kind of roughing them up a bit seemed like, or calling for their elimination didn't seem to violate the policies. So it's, look, I think a university should be a place where you have broad views and open viewpoints and broad discussion. But it should also be a place where students don't feel threatened going to class, where their learning is not interrupted, when final exams are not interrupted by, you know, people coming in and with loud protest. Students asked me when I went up there, what would you do if you were Harvard president? I said, and this was before I

• 2:25:54Speaker 01

  knew what was happening on the Dartmouth campus. I said, I would, I convene everyone together. This is Harvard. We have access to the best minds in the world. Let's have a better understanding of the history. Let's understand the backdrop. Let's focus on solutions. Let's bring Arab and Jewish and Israeli students together. Let's form groups to create communication. That's how you solve this kind of problem. And none of that stuff has been done. It's not that hard.

• 2:26:17Lex Fridman?

  Do you think this reveals a deeper problem in terms of ideology and the governance of Harvard, in maybe the culture of Harvard?

• 2:26:30Speaker 01

  Yes. So on governance, the governance structure is a disaster. So the way it works today is Harvard has two principal boards. There's the Board of the Corporation, the so-called Fellows of Harvard. It's a board of, I think, 12 independent directors and the president. There's no shareholder vote. There's no proxy system. It's really a self-perpetuating board that elects, effectively elects its own members. So there's, you know, once it becomes, once the balance tips politically one way or another, they can, you know, it can be kept that way forever. There's no kind of rebalancing system. You know, if a US corporation goes off the rails, so to speak, the shareholders can get together and vote off the directors. There's no ability to vote off the directors. Then there's the

• 2:27:13Speaker 01

  Board of Overseers, which is, I think, 32 directors. And there, a few years ago, if you could put together 600 signatures, you could run for that board and put up a bunch of candidates, and about five or six get elected each year. And a group did exactly that, and it was an oil and gas kind of disinvestment group. They got the signatures, a couple of them got elected, and Harvard then changed the rules. And they said, now we need 3200 signatures. And by the way, if there are these dissident directors on the board, we're only going to allow, we're going to cap them at five. So if three were elected in the oil and gas thing, now there are only two seats available. And then a group of former students, kind of younger alums, one of whom I

• 2:27:58Speaker 01

  knew, approached me and said, look, Bill, we should run for the board. And they decided this pretty late, only a few weeks before the signatures were due and love your support. You know, I took a look at their platform. I thought it looked great. I said, look, happy to support. And I posted about them, you know, did a Zoom with them. And they got thousands of signatures, you know, collectively, the four got whatever 12,000 signatures or something like this. And they missed by about 10% the threshold. What did Harvard do in the middle of the election? They made it very, very difficult to sign up, you know, for a vote. And it just makes them look terrible. And they've got now thousands of alums upset that, and again, this wasn't an election. This was just to put the names on the slate. So the only candidates on

• 2:28:42Speaker 01

  the slate are the ones selected by the, you know, the existing members. And so it's, it's

• 2:28:49Speaker 01

  businesses fail because of governance failures. Universities fail because of governance failures. It's not really the president's fault, because the job of the board is to fire, hire and fire the president and help guide the institution academically and otherwise. So that's governance. An ideology, I was like, how can this be? October 7th, the event that woke me up was 30 student organizations came out with a public letter on October 8th, that literally the morning after this letter was created and said, Israel is solely responsible for Hamas's violent acts. Again, Israel had not even mounted a defense at this point. And there were still terrorists running around in the southern part of Israel.

• 2:29:33Speaker 01

  And I'm like Harvard students, you know, 34 Harvard student organizations sign this letter. And I'm like, what is going on? You know, WTF, right? And that's when I went up on campus and I started talking to the faculty. And that's when I started hearing about, actually, Bill, it's it's this DEI ideology. I'm like, what? Like, diversity, equity, inclusion, you know, you know, obviously, I'm familiar with these words and and, you know, I see this in the corporate context. And they say, yeah, and they started talking to me about this oppressor oppressed framework, which is effectively taught on campus and

• 2:30:16Speaker 01

  represents the backdrop for many of the courses that are offered and and the various some of the studies and other degree offerings. I'm like, I had not even heard of this. And you know, I'm a pretty aware person. But I was completely unaware. And basically, they're like, look, Israel is deemed an oppressor. And the Palestinians are deemed the oppressed. And you take the side of the oppressed, and any acts of the oppressed to dislodge the oppressor, regardless of how vile or barbaric, okay. I'm like, okay, this is a super dangerous ideology. And so I wrote a like, questioning post about this. Like, here's what I'm hearing.

• 2:30:57Speaker 01

  You know, my is this right? Then I had someone, a friend of mine, sent me a Christopher Rufo's book, America's Culture Revolution, which is sort of a sociological study of the origins of the DEI movement and critical race theory. And I found it actually, one of the more important books I've read. And also found it quite concerning. And and really, the it's sort of a ultimately, DEI comes out of a kind of a Marxist socialist backdrop way to look at the world. And so I think there are a lot of issues with it. But unfortunately, it's advancing, like ultimately concluded racism, as opposed to fighting it, which is

• 2:31:42Speaker 01

  what I thought it was ultimately about.

• 2:31:44Lex Fridman?

  So maybe you can speak to that book a little bit. So there's a history that traces back across decades.

• 2:31:53Lex Fridman?

  And then that infiltrated college campuses.

• 2:31:55Speaker 01

  Basically, Ruffo argues is that the black power movement of the 60s really failed. It was a very violent movement and many of the protagonists ended up in jail. And out of that movement, a number of kind of thought leaders, this guy named Mark Hughes and others, built this framework, kind of an approach. Said, look, if we're going to be successful, can't be a violent movement, number one. And number two, we need to infiltrate, if you will, the universities. And we need to become part of the faculty and we need to teach the students. And then, once we take over the universities with this ideology, then we can go into government

• 2:32:40Speaker 01

  and then we can go into corporations and we can change the world. So I thought important book and the more I dug in, the more I felt there was credibility to this, not just the kind of sociological backdrop, but to what it meant on campus. And faculty, Harvard faculty were telling me that, you know, there's really is no such thing as free speech on campus and that, you know, there was a survey done a year or so ago, the Harvard faculty and only 2% of the faculty admitted, even in an anonymous survey, admitted to being, having a conservative point of view. So we have a campus that's 98% non-conservative, liberal, progressive, that's adopted this DEI construct.

• 2:33:25Speaker 01

  And this, and then I learned from a member of the search committee for the Harvard president that they were restricted in looking at candidates, only those who met the DEI offices criteria. And I shared this in one of my postings and I was accused of being a racist.

• 2:33:43Speaker 01

  But and that's someone who believes in that diversity is a very good thing for organizations and that equity and fairness isn't really important and having an inclusive culture is critical, you know, for a function of organization, you know. So here I was, someone who was like, okay, DEI sounds good to me, at least in the small D, small E, I version of events, but this DEI ideology is really problematic.

• 2:34:10Lex Fridman?

  So what's the way to fix this in the next few years? The infiltration of DEI with the uppercase version of universities and the things that have troubled you, the things you saw at Harvard and elsewhere?

• 2:34:27Speaker 01

  The same way this was an eye-opening event for me, it has been for a very broad range of other people. I've never gotten, you know, I mentioned general growth, I got a lot of nice letters from people for making money on a stock that went up 100 times. But I literally get hundreds of emails, letters, texts, handwritten letters, typed letters from people the ages of 25 to 85 saying, Bill, this is so important. Thanks for speaking out on this. You were saying what, you know, so many of us believe but have been afraid to say. You know, it's a, I described it as almost a McCarthy-esque kind of movement and that if you challenge the DEI construct, people accuse you of being racist. It's happened to me already.

• 2:35:08Speaker 01

  You know, I'm perhaps, you know, I'm much less vulnerable than a university professor who can get shouted off campus, canceled. I'm sort of difficult to cancel, but that doesn't mean people aren't going to try. And, you know, I've had, I've been the victim of a couple of interesting articles in the last few days, or at least one in particular in the Washington Post, written by what I thought was a well-meaning reporter, but it's just clear that, you know, I've taken on some big parts of at least the progressive establishment, DEI. I'm also a, you know, believer that Biden should have stepped aside a long time ago and it's only getting worse.

• 2:35:47Speaker 01

  You know, so I'm attacking the president, DEI, elite universities, and you make some enemies doing that.

• 2:35:59Lex Fridman?

  But I should say, I, you know, I'm still at MIT and I love MIT and I believe in the power of great universities.

• 2:36:08Lex Fridman?

  To explore ideas, to inspire young people to think, to be, to inspire young people to lead.

• 2:36:15Speaker 01

  Let me ask, okay, how can you explore how to think when you're only shared a certain point of view? Right? How can you learn about leadership when, when the governance and leadership of the institution is, is broken? And exposure to ideas, if you're limited in the ideas that you're exposed to. So I think universities at risk, I mean, the concerning thing, right? Is if thirty four student organizations that each have, I don't know, thirty members or maybe more, right? That's a thousand. That's a meaningful percentage of the, of the campus, perhaps, that ultimately respond. Now, a ten or so, the thirty withdrew the statement once many of the members realized what they had written.

• 2:36:58Speaker 01

  So I don't think, it, it seems like the statement was signed by the leadership and not necessarily supported by all the various students that were, were members. But if the university teaches people these precepts, this is the next generation of, you know, that normally, if you think about, I wrote my college thesis on university admissions, the reason why controlling, you know, the gates of the Harvard institution, the admissions office is important, isn't that many of these people who graduate end up with, you know, the top jobs in government and, and ultimately become judges. They, they're, you know, permeate through society. And so it really matters what they learn.

• 2:37:39Speaker 01

  And if it, if they're limited to one side of the political aisle and they're not open to a broad array of, of views, and this represents some of the most elite institutions in our country. I think it's very problematic for the country long term.

• 2:37:55Lex Fridman?

  Yeah, I one hundred percent agree. And I also felt like the leadership. Wasn't even part of the problem as much as they were almost out of touch, like unaware that this is an important moment. It's an important crisis. It's an important opportunity to step up as a leader and define the future of an institution. So I don't even know where the source of the problem is. It could be literally governance structure.

• 2:38:25Speaker 01

  Well, it's two things. I think it's governance structure. I also think universities are selecting, they're not selecting leaders.

• 2:38:32Lex Fridman?

  Yeah.

• 2:38:34Speaker 01

  You know, it's not clear to me that universities should necessarily be run by academics. Right, you know, the dean of a university, you know, the person who helps, sort of the business of the university, right? And then there's the academics of the university and having a, I would argue, having a business leader run these institutions and then having a board that's involved, a board that has itself diverse viewpoints. And by the way, permanently structured to have diverse viewpoints is a much better way to run a university than picking an academic that the faculty supports.

• 2:39:18Speaker 01

  Because, you know, one of the things I learned about how faculty get hired at universities ultimately it's signed off by the board, but you know, the new faculty are chosen by each of the various departments. And once the departments tip, there's sort of a tipping point politically where if, once they tip in one direction, the faculty recruit more people like themselves. And so the departments become more and more progressive, if you will, with the passage of time. And they only advance candidates that, that match their, that meet their political objectives. It's, it's not a great way to, to build an institution which allows for.

• 2:39:56Lex Fridman?

  Small d diversity.

• 2:39:58Speaker 01

  Allows for, yeah, diversity. And diversity, by the way, is not just race and gender. And that's also something I feel very strongly about.

• 2:40:08Lex Fridman?

  Well, luckily, engineering robotics is touched last by this. It is touched, but you know, I've, when I am at the computing building, Stata and the new one, politics doesn't infiltrate, or I haven't seen it infiltrate quite as deeply as elsewhere, but.

• 2:40:25Speaker 01

  It's in the biology department at Harvard, because biology is controversial now.

• 2:40:30Lex Fridman?

  Yes, yes, yes.

• 2:40:31Speaker 01

  Because biology and gender, you know, there are faculty, there's a woman at Harvard who was literally canceled from the faculty as a member, I think she was at the med school. And she was, you know, she made the argument that there are basically, you know, two genders determined by biology. She wasn't allowed to stay. That's another topic for another time.

• 2:40:54Lex Fridman?

  Topic.

• 2:40:55Speaker 01

  You should do a show on that one. That'd be an interesting one.

• 2:40:58Lex Fridman?

  So as you said, technically, Claude Dingay, the president of Harvard, resigned over plagiarism, not over the thing that you were initially troubled by.

• 2:41:09Speaker 01

  It's hard to really know, right? It's not like approvable fact. I would say at a certain point in time, she lost the confidence of the faculty, and that was ultimately the catalyst. And whether that was, how much of that was the plagiarism issue, and how much of that was some of the things that preceded it, or was it all of these issues in their entirety? We don't really, there's no way to do a calculus.

• 2:41:29Lex Fridman?

  Can you explain the nature of this plagiarism from what you remember?

• 2:41:33Speaker 01

  So Aaron Serberium and Christopher Ruffo, one from the Free Beacon, Chris, you know, surfaced some allegations on, or identified some plagiarism issues that I would say the initial examples were, you know, use of the same words with proper attribution, some missing quote, you know, footnotes. And then over time, with, I guess, more digging, they released, I think ultimately, something like 76 examples of.

• 2:42:04Speaker 01

  What they call plagiarism in, I think, eight of 11 of her articles. And one of the other things that came forth here is as president of the university, she had sort of the thinnest transcript academically of any previous president. You know, very small, relatively small body of work. And then when you couple that with the amount of plagiarism that was pervasive. And then I guess the, some of the other examples that surfaced were not missing quotation marks, where the authors of the work felt that their ideas had been stolen. And really plagiarism is academic fraud. There's their indicia, one indicia plagiarism is a missing footnote. That could also be a clerical error. And so when a, you know, professor is accused of plagiarism, the university does sort of a deep dive.

• 2:42:49Speaker 01

  They have these administrative boards and it can take six months, nine months, a year to evaluate, you know, intent matters. Was this intentional theft of another person's idea? That's academic fraud. Or was this sloppy, you know, you missed, or just humanity, right? You, you miss a footnote here or there. And I think once it got to a place where people felt it was theft of someone else's intellectual property, that's when it became intolerable for her to stay as president of Harvard.

• 2:43:21Lex Fridman?

  So is there a spectrum for you between the different kinds of plagiarism? Maybe plagiarizing words and plagiarizing ideas and plagiarizing novel ideas?

• 2:43:36Speaker 01

  Of course. The common understanding of plagiarism, if you look in the dictionary, it's about theft. Theft requires a intent. Did the person intentionally take someone else's ideas or words? Now, if you're, if you're writing a novel, right? Words matter more, right? If you're taking Shakespeare and presenting it as your own words. If you're, you know, writing about ideas, you know, ideas matter, but you're not supposed to take someone else's words without properly acknowledging them, whether it's quotation marks or otherwise. But in the context of a academic's life's work before AI.

• 2:44:17Speaker 01

  Everyone's gonna have missing quotation marks and footnotes. I remember writing my own thesis, you know, I would write, I would take, there were books you couldn't take out of Wyndham Library, so I'd have index cards, and I'd write stuff on index cards, and I'd put a little citation to make sure I remembered to cite it properly. And, you know, scrambling to do your thesis, get it in on time, what's the chances you forget at what point, what are your words versus the author's words, and you forget to put quotation marks? Just the humanity, you know, the human fallibility of it. So, you know, you don't get, it's not academic fraud to have human fallibility, but it's academic fraud if you take someone else's ideas that are an integral part of your work.

• 2:45:01Lex Fridman?

  Is there a part of you that regrets that, at least from the perception of it, the president of Harvard stepped down over plagiarism versus over refusing to say that the calls for genocide are wrong?

• 2:45:17Speaker 01

  Again, I think it would have sent a better message if a fail, if a leader fails as a leader, and that's the reason for their resignation or dismissal, then she gets, if you will, caught in a technical violation that had nothing to do with failed leadership. Because I don't know what lesson that, you know, what's lesson that teaches the board about selecting the next candidate. I mean, the future of Harvard, a lot of it's going to depend on who they pick as the next leader. Here's an interesting anecdote that I think has not surfaced publicly. So, a guy named Larry Backo was a previous president of Harvard. Larry Backo was on the search committee, and they were looking for a new president.

• 2:46:01Speaker 01

  And what was strange was they picked an old white guy to be president of Harvard when there was, you know, a call for a more diverse president. And what I learned was Harvard actually ran a process, had a diverse new president of Harvard, and in the due diligence on that candidate shortly before the announcement of the new president, they found out that the president, that presidential candidate had a plagiarism problem.

• 2:46:30Speaker 01

  And the search had gone on long enough, they couldn't restart a search to find another candidate. So they picked Larry Backo off the board, off the search committee to be the next president of Harvard as kind of an interim solution. And then there was that much more pressure to have a more diverse candidate this time around because it was a big disappointment to the DEI office, if you will. And I would say to the community at large that Harvard, of all places, couldn't have a racially diverse president. It sent an important message.

• 2:47:01Speaker 01

  So the strange thing is that they didn't do due diligence on President Gay and that it was a relatively quick process. So the whole thing, I think, is worthy of further exploration.

• 2:47:16Lex Fridman?

  So this goes deeper than just the president?

• 2:47:18Speaker 01

  Yeah, for sure. When a company fails, most people blame the CEO. I generally blame the board. Right? Because the board's job is to make sure the right person's running the company. And if they're failing, help the person. If they can't help the person, make a change. That's not what's happened here. The board's hand was sort of forced from the outside, whereas they should have made their own decision from the inside.

• 2:47:40Lex Fridman?

  You still love Harvard?

• 2:47:42Speaker 01

  Sure. It's a 400 odd year institution. It enormously helpful to me in my life, I'm sure. My sister also went to Harvard. And the experiences, learnings, friendships, relationships. Again, I'm very happy with my life. Harvard was an important part of my life. I went there for both undergrad and business school. I learned a ton, met a lot of faculty, a lot of my closest friends who I still really keep in touch with. I made then. So, yeah, it's a great place, but it needs a reboot.

• 2:48:23Lex Fridman?

  Yeah, I still have hope. I think universities are really important institutions.

• 2:48:29Speaker 01

  You know, when I went to Harvard, there were 1,600 people in my class. I think today's class is about the same size. And their online education really has not sort of taken off, right? So I heard Peter Thiel speak at one point in time. And he's like, what great institution do you know? That's truly great that hasn't grown in 100 years. Right? And the incentives in some sense of the alums are for it. It's a bit like a club. If you're proud of the elitism of the club, you don't want any that many new members. But the fact that the population has grown of the country is so, you know, significantly since certainly I was a student in 1984.

• 2:49:11Speaker 01

  And the fact that Harvard recruits people from all over the world. It's really serving a smaller and smaller percentage of the population today. And, you know, some of our most talented and successful entrepreneurs, anyway. You know, it's a, it's a token of success that they didn't make it through their undergraduate years. You know, they left as a freshman or they didn't attend at all.

• 2:49:33Lex Fridman?

  For entrepreneurs, yes, but it's still a place.

• 2:49:36Speaker 01

  Very important for research, very important for advancing ideas. And yes, and shaping dialogue and the next generation of Supreme Court justices.

• 2:49:48Lex Fridman?

  Yes.

• 2:49:48Speaker 01

  And, you know, the members of government, politicians. So yes, it's critically important, but it, it's not, not doing the job it should be doing.

• 2:50:01Lex Fridman?

  Neri Oxman, somebody you mentioned several times throughout this podcast, somebody I had a wonderful conversation with, a friendship with, I've known, looked up to her, admired her, has been a fan. I've been a fan of hers for a long time of her work and of her as a human being. Looks like you're a fan of hers as well.

• 2:50:20Speaker 01

  Yes.

• 2:50:22Lex Fridman?

  What do you love about Neri? What do you admire about her as a scientist, artist, human being?

• 2:50:27Speaker 01

  I think she's the most beautiful person I've ever met. And I mean that from like the center of her soul. She's the most caring, warm, considerate, you know, thoughtful person I've ever met. And.

• 2:50:47Speaker 01

  And she couples those remarkable qualities with brilliance, incredible creativity, beauty, elegance, grace. Yeah, I'm talking about my wife, but I'm talking incredibly dispassionately. But I mean what I say. She's the most remarkable person I've ever met. And I've met a lot of remarkable people. And I'm incredibly fortunate to spend a very high percentage of my life time with her ever since I met her, you know, six years ago.

• 2:51:21Lex Fridman?

  So she's been a help to you through some of the rough moments you described?

• 2:51:25Speaker 01

  For sure. I mean, I met her at the bottom, which is not a bad place to meet someone if it works out.

• 2:51:32Lex Fridman?

  Is there some degree of yin and yang with the two personalities you have? You have described yourself as emotional and so on, but it does seem the two of you have slightly different styles about how you approach the world.

• 2:51:47Speaker 01

  Well, interestingly, we have a lot of like, you know, we come from very similar places in the world. There are times where you feel like we've known each other for centuries. You know, I met her parents for the first time, you know, a long time ago, almost six years ago as well. And I knew her parents were from Eastern Europe originally. So I asked her father, like, what, you know, what city did her family come from originally? And I called my father and asked him, you know, Dad, what's, you know, Grandpa Abraham? Where's he? What's the name of the city? And then I put the two cities into Google Maps. And they were 52 miles apart. That was pretty cool. Then, of course, at some

• 2:52:30Speaker 01

  point, we did genetic testing. Make sure we weren't related, which we were not. But we share incredible commonality on values. We are attracted to the same kind of people. You know, she loves my friends. I love hers. We love doing the same kind of things. We're attracted to, you know, we like spending time the same ways. And she has

• 2:52:56Speaker 01

  Yes, more emotion, more elegance. She doesn't like battles, but she's very strong. But she's more sensitive than I am.

• 2:53:06Lex Fridman?

  Yeah, you are constantly in multiple battles at the same time. And there's often the media, social media is just fire everywhere.

• 2:53:19Speaker 01

  You know, that hasn't really been the case for a while. I've had relative peace for a long time because I, as I stopped being, as I haven't had to be the kind of activist I was earlier in my career. I think since October 7th, yes, I do feel like I've been in a war.

• 2:53:33Lex Fridman?

  Can you tell me the saga of the accusations against Nari?

• 2:53:40Speaker 01

  So I did not actually surface the plagiarism allegations against President Gay that surfaced by, you know, Aaron and maybe Christopher Ruffo as well, or maybe Chris helped promote what Aaron and some anonymous person identified. But I certainly, it was a point in time where the board had said, we're 100% behind her and unanimously, and I really felt she had to go. So it didn't bother me at all that they had identified problems with her work. So I shared, I reposted those posts. And then when the board, she ultimately resigned and she got a $900,000 a year professorship continuing at Harvard, I said, look, in light of her limited academic record and these plagiarism

• 2:54:25Speaker 01

  allegations, she had to go. I knew when I did so, I assumed, I was actually a bit paranoid about that thesis I had written. I only had one academic work, but I hadn't checked it for plagiarism. And I thought, that's gonna, that's gonna happen. Actually, I had a, I had someone, I did not have a copy on hand, so I got a copy of my thesis and I, and I remember writing it. Harvard at the time was pretty, they kind of gave you a lecture about making sure you have all your footnotes in quotation marks. I learned later that apparently they had a copy of my thesis at the New York Public Library and a member of the media told me he was there online with, you know, a dozen

• 2:55:10Speaker 01

  other members of the media, all trying to get a copy of my thesis to run it through some AI. They had to first do optical character recognition to convert the paper document into digital. But fortunately, through a miracle, I didn't have an issue. I didn't think about Neri, of course, who has whatever 130 academic works. And so we were just at the end of a vacation for Christmas break and I was early in the morning for vacation time and all of a sudden I hear my phone ringing in the other room or vibrating in the other room multiple times. I'm like, I pick up the phone. It's our communication guy, Fran

• 2:55:52Speaker 01

  McGill. And he's like, Bill, Business Insider has apparently identified a number of instances of plagiarism in Neri's dissertation. Let me send you this email. He sent me the email. And they had identified four paragraphs in her 330-page dissertation where she had cited the author, but she had used the vast majority of the words in that those paragraphs were from the author and she should have used quotation marks. And then there was one case where she paraphrased correctly an author, but did not footnote that it was from his work. And so we were presented with this and told they're going to publish in a few hours. And we're like, well, can we get to the next day? We're just about to head home.

• 2:56:36Speaker 01

  And they're like, no, we're publishing by noon. We need an answer by noon. And so we downloaded the copy of her thesis on like the slow internet. And, you know, Neri checked it out and she said, you know what? Looks like they're right. And I said, look, you should just admit your mistake. And she wrote a very simple gracious, yes, I should have used quotation marks. And on the author I failed to cite, she pointed out that she cited them 80 other times and wrote a several paragraph section of her thesis acknowledging, you know, his work. And none of these were like important parts of her thesis, but she acknowledged her mistake. And she said, you know, apologize for my mistake. And I apologize

• 2:57:17Speaker 01

  to the author who I failed to cite. And I stand on the shoulders of, you know, all the people who came before me and looking to advance work. We sort of thought it was over. We head home. In flight on the way home, although we didn't realize this till we got back the following day, Business Insider published another article and said, "Nary Oxman Admits to Plagiarism." Plagiarism, of course, is academic fraud, and this thing goes crazy viral. Oh, Bill, the title is Bill Ackman's Wife. Celebrity academic Nary Oxman, and they use the term celebrity because there are limits to what legitimate media can go after, but, you know, celebrities, there's a lot more

• 2:58:02Speaker 01

  leeway in the media and what they can say, so that's why they call her a celebrity. First time ever she'd been called a celebrity. And, uh, and they, they basically, she's admitting to academic fraud. And then they said, and then the next day, uh, at 5:19 PM, I remember the timeline pretty well, uh, an email was sent to Fran McGill saying, um, you know, we've identified, you know, two dozen other instances of plagiarism in her work, 15 of which are Wikipedia entries where she copied definitions, and, uh, the others were mostly software, hardware manuals for various devices or software she used in her work, most of which were in footnotes

• 2:58:46Speaker 01

  where she described a nozzle for a 3D printer or something like this. And they said, "We're publishing, you know, tonight." The email they sent to us was 6,900 words, it was 12 pages, it was practically indecipherable. You couldn't even read it in an hour, and we didn't have some of the documents they were referring to. And I'm like, "Nary, you know what I'm gonna do? It, I think it'll be useful to provide context here. Uh, I'm gonna do a review of every MIT professor's dissertations, every published paper, AI has enabled this." Um, and so that was, I put out a tweet basically saying that, and we're doing a test run now because we have to get it right, and I think it'll be a useful exercise, provide some context, if you will.

• 2:59:30Speaker 01

  And then this thing goes crazy viral. Uh, and...

• 2:59:36Speaker 01

  You know, Neri is a pretty sensitive person, a pretty emotional person, and someone who's a perfectionist. And having everyone in the world thinking you committed academic fraud is a pretty damning thing. Now, they did say they did a thorough review of all of her work. And this is what they found. I'm like, sweetheart, that's remarkable. I did 130 works, 73 of which were peer reviewed, blah, blah, blah. And she's published in Nature, Science, and all these different publications. That's actually, it's a pretty good batting average. But, you know, they can't, this is wrong, right? This is not academic fraud. Okay, these are inadvertent mistakes. And the Wikipedia entries, Neri actually used Wikipedia as a dictionary. This is the early days of Wikipedia.

• 3:00:16Speaker 01

  And they also referred to the MIT handbook, which has a whole section on plagiarism, academic handbook. And if you read it, which I ultimately did, they make clear a few things. Number one, there's plagiarism, academic fraud. And there's what they call inadvertent plagiarism, which is clerical errors where you make a mistake. And it depends on intent. And there's a link that you can go to, which is a section on if you get investigated at MIT, what happens, what's the procedure, what's the initial stage, what's the investigative stage, what's the procedure if they identify it? And they make very clear that academic fraud is, and they list plagiarism,

• 3:00:56Speaker 01

  you know, research theft, a few other things, but it does not include honest errors. Honest errors are not plagiarism under MIT's own policies. And in the handbook, they also have a big section on what they call common knowledge. And common knowledge depends on who you're writing your thesis for. And so if it's a fact that is known by your audience, you're not required to quote or cite. And so all those Wikipedia entries were for things like sustainable design, computer aided design. She just took a definition from Wikipedia. Common knowledge to her readers, no obligation under the handbook, totally exempt. On the, using the same words, she referred to like a whatever, some kind of 3D printer.

• 3:01:41Speaker 01

  She was the Stratasys 3D printer, and she quoted from the manual. Right away, Stratasys is a company you consulted for, they're very, you don't need to, that's not something, you're not stealing their ideas. You're describing a nozzle for a device you use in your work in a footnote. That's not a theft of idea, right?

• 3:02:00Speaker 01

  And so I'm like, this is crazy. And so this has got to stop. And so I reach out to the, a guy I knew was on the board of Business Insider, the chairman. And his name is going to come public shortly. I committed to that time to keep his name confidential. It's now surfaced publicly in the press.

• 3:02:19Lex Fridman?

  Can I just pause real quick here? Just to, I don't know, there's a lot of things I want to say, but you made it pretty clear. But just as a member of the community, there's also like a common sense test. I think you're more precisely like legal and looking at.

• 3:02:39Speaker 01

  Sure.

• 3:02:39Lex Fridman?

  But there's just like a bullshit test and like nothing that Neri did is plagiarism in the bad meaning of the word. Plagiarism right now is becoming another ism like racism or so on, using as an attack word. I don't care what the meaning of it is, but there's the bad academic fraud, like theft, theft of an idea. And maybe you can say a lot of definitions and this kind of stuff, but then there's just a basic bullshit test where everyone knows this is a thief and this is definitely not a thief. And there's nothing about anything that Neri did, anything in her thesis or in her life, everyone that knows her, she's a rock star, right?

• 3:03:24Lex Fridman?

  I just want to make it clear, it really hurt me that the internet, whatever is happening, could go after, could go after a great scientist. Cause I love science and I love celebrating great scientists. And it's just really messed up that whatever the machine, we could talk about Business Insider or whatever, social media, mass hysteria, whatever is happening, like we need the great scientists of the world, because that's like the future depends on them. And so we need to celebrate them and protect them and let them flourish and let their, do their thing and like keep them all.

• 3:04:06Lex Fridman?

  Of this, whatever shitstorm that we're doing to get clicks and advertisements and drama and all this kind, we need to protect them. So I just want to say, there's, there's no, there's nobody I know, and a million friends that are scientists, world-class scientists, Nobel Prize winners. They all love Neri, they all respect Neri, there's, she did zero wrong.

• 3:04:29Lex Fridman?

  And then the rest of the conversation we can have about how broken journalism is and so on, but like, I just want to say that there's nothing that Neri did wrong. It's not a gray area or so on. I also personally don't love that Claudine Gay is a discussion about plagiarism because it distracts from the fundamentals that is broken. It becomes like some weird technical discussion. But in case Neri did nothing wrong, great scientist, great engineer at MIT and beyond, she's doing the cool thing now. So anyway.

• 3:05:03Speaker 01

  Could not have said it better myself. Now, obviously, I'm focused on the technical part.

• 3:05:07Lex Fridman?

  Right, because you want to be.

• 3:05:09Speaker 01

  Oh, yes.

• 3:05:09Lex Fridman?

  Be precise here.

• 3:05:10Speaker 01

  Well, it's not even that. I mean, yes, I have said that we're going to sue Business Insider. And in 35 years of my career, of someone who has not every article has been a favorable one. Not every article has been an accurate one. I've never threatened to sue the media and I've never sued the media. But this is so egregious. It's not just that she did nothing wrong, but they accused her of academic fraud. They did it knowing, they, they make reference to MIT's own handbook. So they had to read all of the same stuff that I read in the handbook. They did that work.

• 3:05:47Speaker 01

  Then, after I escalated this thing to the, you know, Henry Blodgett, the chairman of Business Insider, to the CEO of Axel Springer. I even reached out to Henry Kravis at a certain point in time, one of the controlling shareholders of the company through KKR.

• 3:06:04Speaker 01

  Laying out the factual errors in the article. Business Insider went public after they said Neri committed academic fraud and plagiarism and said, we didn't challenge any, the facts remain undisputed in the article. So it's basically Neri committed plagiarism. That's story one. Neri admits to plagiarism. She admits to plagiarism. She admitted to making a few clerical errors. That's the only thing she admitted to. And she graciously apologized. So they said, Neri admits to plagiarism, apologizes for plagiarism. That's incredibly damning. And by the way, we're doing an investigation because we're concerned that there might have been inappropriate process. But the facts of the story have not been disputed by Neri Oxman or Bill Ackman.

• 3:06:49Speaker 01

  And that was totally false. I had done it privately. I'd done it publicly on Twitter, on X. I laid out, I have a whole tech stream, a WhatsApp stream with the CEO of the company. And they doubled down, they doubled down again. And so I don't sue people lightly. And stay tuned.

• 3:07:10Lex Fridman?

  So you're, at least for now, moving forward with?

• 3:07:16Speaker 01

  It's a certainty we're moving forward. There's a step we can take prior to suing them where we basically send them a letter demanding they make a series of corrections. That if they don't make those corrections, the next step is litigation. I hope we can avoid the next step. And I'm just making sure that when we present the demand to Business Insider and ultimately to Axel Springer, that it's incredibly clear how they defamed her, the factual mistakes in her stories, and what they need to do to fix it. And if we can fix it there, we can move on from this episode and hopefully avoid litigation. So that's where we are.

• 3:07:59Lex Fridman?

  I don't know. You're smarter than me. There's technical stuff, there's legal stuff, there's journalistic stuff, but just fuck you, Business Insider, for doing this. I don't know.

• 3:08:10Lex Fridman?

  I don't know much in this world, but journalists aren't supposed to do that.

• 3:08:14Speaker 01

  Now, look, we're going to surface all this stuff publicly ultimately. The email was not to Neri saying there was plagiarism in her work. The email came from a reporter named Catherine Long. And the headline was, "Your Wife Committed Plagiarism. Shouldn't She Be Fired From MIT?" Just like you caused Claudine Gay to be fired from Harvard.

• 3:08:35Lex Fridman?

  Yeah.

• 3:08:35Speaker 01

  It was a political agenda. She doesn't like me, okay? And she was trying to hurt me. And they couldn't find plagiarism in my thesis. And, you know, being the subject of short, you know, being a short seller, the Herbalife battle went on for years. They tried to do everything to destroy my reputation. So they've already gone through my trash, they've done all that work. So anything they could possibly find, you know, and I've always lived a very clean life, thankfully. And if you're going to be an activist short seller, you better, because they're going to find out dirt on you if it exists. And so they were like, "How can we really hurt Bill?" By the way, Neri had left MIT years earlier.

• 3:09:18Lex Fridman?

  Yes.

• 3:09:18Speaker 01

  When the reporter found out she was no longer a member of the MIT faculty, they were enraged. They didn't believe us. They made us like, you know, prove to us she's no longer on the MIT faculty because they wanted to get her fired. And by the way, malice is one of the, you know, important factors in determining whether defamation's taken place. And this was a malice-driven, this was not about news. And the unfortunate thing about journalism is business insiders have made a fortune from this. This story was published and republished by thousands of media organizations around the world. It was the number one trending thing on Twitter for like two days.

• 3:09:57Speaker 01

  Every newspaper, it was on the front page of every Israeli newspaper, you know, it was on the front page of the Financial Times. Okay, so this, and she's building a business. And, you know, if you're CEO of a science company and you committed academic fraud, that's incredibly damaging. But I ultimately convinced her that this was good. I said, "Sweetheart..." You're amazing. You're incredible. You're incredibly talented, but you're mostly known in the design world. Now, everyone in the universe, okay, has heard of Neri Oxman. Okay, we're gonna get this thing cleared up. You're gonna be doing an event in six months where you're gonna tell the world, you're gonna go out of stealth mode, you're gonna tell the world about all the incredible things that you're building and you're designing

• 3:10:41Speaker 01

  and you're creating. And you're gonna, it's gonna be like the iPhone launch, because everyone's gonna be paying attention and they're gonna, they're gonna wanna see your work. And, you know, that's how I try to cheer her up. But I think it's true.

• 3:10:53Lex Fridman?

  It is true. But then you're doing your, your job as a good partner, seeing the silver lining of all of this. How is, just from observing her, how did she, you know, stay strong through all of this psychologically? Because at least I know she's pushing ahead with the work.

• 3:11:12Speaker 01

  Oh, she's full speed ahead in her work. She's built an amazing team. She's hired thirty scientists, roboticists, people who, biologists, plant specialists, material scientists, engineers, really incredible crew. She's built this thirty-six thousand square foot lab in New York City. That's a one of a kind. It's still, you know, they're working out of it. It's still under construction while they're working out of it. And so she's gonna do amazing things. But, as I said, she's an extremely sensitive person. She's a perfectionist. Okay, imagine thinking that the entire world thinks you committed academic fraud. And so that was very hard for her. She's a very positive person, but I saw her in, I would

• 3:11:54Speaker 01

  say, her darkest emotional period, for sure. She's doing much better now. But you can kill someone. You can kill someone by destroying their reputation. People, people commit suicide. People go into these deep, dark depressions.

• 3:12:13Lex Fridman?

  Well, my worry, primarily when I saw what Business Insider was doing, is that they might dim the light of a, of a truly special scientist and creator.

• 3:12:28Speaker 01

  It's not gonna happen.

• 3:12:29Lex Fridman?

  But I also worry about others like Neri, young Neri's that this sends a signal to that might scare them. And you know, journalism shouldn't scare aspiring young scientists.

• 3:12:46Speaker 01

  The problem is the defamation law in the US is so favorable to the publisher, to the media, and so unfavorable to the victim. And the incentives are all wrong. You know, when you went from a paper version of journalism to digital, and you could track how many people click, and it's a medium that advertising drives the economics. And if you can show an advertiser more clicks, you can make more money. Right? So a journalist is incentivized to write a story that will generate more clicks. How do you write a story that generate more clicks? You get a billionaire guy, okay, and then you go after his wife, and you make

• 3:13:28Speaker 01

  a sensationalist story, and you give them no time to respond. Right? You know, look at the timing here. On the first story, you know, they gave us three hours. On the second one, the following day, 5:19 PM, the email comes in, not to Neri, not to her firm, but to my communications person, who tracks us down by 5:30, you know, 10 minutes later. And they publish their story 92 minutes after, and they sent us, we're going to surface all these documents in our demand. Read the email they sent, whether you could even decipher it. It's, you know, it's, there was no, and by the way, there's a reason why academic

• 3:14:09Speaker 01

  institutions, when a professor's accused of plagiarism, why they have these very careful processes with multiple stages, and they take, they can take a year or more, because it depends on intent. Was this intentional, in order to be a crime, an academic crime, you got to prove that they intentionally stole. Look, in some cases, it's obvious, in some cases, it's very subtle. And they take this stuff super seriously. But they basically accused Neri of academic crime. And then 92 minutes later, they said she committed an academic crime. And that should be a crime. And that should be punishable with litigation. And there should be a real cost. And we're going to make sure there's a real cost, reputationally and otherwise, to Business Insider, and to Axel Springer,

• 3:14:53Speaker 01

  because ultimately, you got to look to the controlling owner. You know, they're responsible.

• 3:14:58Lex Fridman?

  I'll just say that you, in this regard, are inspiring to me for facing, basically, an institution that's whole purpose is to write articles. So you're like going into the fire.

• 3:15:18Speaker 01

  My kid's school, the epithet for the school, or the saying, is "go forth unafraid." I think it's a good way to live. And again, words can't harm me. You know, the power of X, and we do owe Elon enormous thanks for this, is now, so for example, The Washington Post wrote a story about me a couple of days ago. And I didn't think the story was a fair story. So, within a few hours of the story being written, I'm able to put out a response to the story and send it to a million, 200,000 people. And it gets read and reread. I haven't checked, but probably 5 million people saw my response. Now, those are the people on

• 3:16:02Speaker 01

  X. It's not everyone in the world. There's still, there's a disconnection between the X world and the offline world. But, you know, reputation in my business is basically all you have. And as they say, you can take a lifetime to build a reputation and take five minutes to have it disappear. And the media plays a very important role. And they can destroy people. At least, we now have some ability to fight back. We have a platform we can surface our views. You know, the typical old days, they write an incredibly damning article, and you point out factual errors. And then like, two months later, they bury a little correction on page whatever. By then, the person was fired, or their life is destroyed, or their reputation's damaged. You know, I was with Warren Buffett talking about media, and it's something he, a business he really loves. And he says, "You know what,

• 3:16:47Speaker 01

  Bill?" He said, "A thief with a dagger." The only person who can cause you more harm than a thief with a dagger is a journalist with a pen. And those were very powerful words.

• 3:17:00Lex Fridman?

  Formerly known as Twitter as a kind of neutralizing force to that, to the power of centralized journalistic institutions.

• 3:17:07Speaker 01

  A hundred percent. And I think it's a really important one. And it's really been eye opening for me to see how stories get covered in mainstream media. And then you actually, what I do on X is I follow people on multiple sides of an issue. And you can, or I post on a topic and I get to hear the other side. You know, I read the replies. And, you know, the truth is something that people have had a lot of question about, particularly in the last, I would say, five years, you know, beginning with, you know, Trump's talking about fake news. And a lot of what Trump said about fake news is true. You know, the world, a big part of the world hated Trump and did everything they could to discredit

• 3:17:50Speaker 01

  him, destroy him. And, you know, he did a lot of things, perhaps deserving of being being discredited, used by a very imperfect, in some cases harmful, leader. But, you know, everything from pre-election, you know, the Hunter Biden laptop story in the New York Post, that, you know, then Twitter, you know, made it difficult for people to, to share and to read, you know, COVID, you know, the, the Jay Bhattacharya's of the world questioning

• 3:18:29Speaker 01

  the government's response, questioning, you know, the long-term lockdowns, questioning keeping kids out of school, questions about masks, about vaccines, which are still not definitively answered. No counterbalance to the power of the government, when the government can shut down avenues for free speech.

• 3:18:52Speaker 01

  And where the mainstream media has kind of toe the line in many extents to the government's actions. So having a independently owned, powerful platform is very important for truth, for free speech, for hearing the other side of the story, for counterbalancing the power of the government. Elon is getting, you know, a lot of pushback. You know, the SpaceXs and Teslas of the world are experiencing a lot of government, you know, questions and investigations. And, you know, even the President of the United States came out and said, look, he's worth, he needs to be investigated. You know, I'm getting my own version of that in terms of some negative media articles. I don't know what's next. But yeah, if you stick your

• 3:19:36Speaker 01

  neck out in today's world, and you go against the establishment, or at least the existing administration, you can find yourself in a very challenged place. And that discourages people from sharing stuff. And that's why anonymous speech is important, some of which you find on Twitter.

• 3:19:54Lex Fridman?

  You mentioned Trump. I have to talk to you about politics.

• 3:19:58Speaker 01

  Sure.

• 3:19:58Lex Fridman?

  Amongst all the other battles, you've also been a part of that one. Maybe you can correct me on this, but you've been a big supporter of various Democratic candidates over the years.

• 3:20:10Lex Fridman?

  But you did say a lot of nice things about Donald Trump in 2016, I believe.

• 3:20:18Speaker 01

  So I was interviewed by Andrew Sorkin a week after Trump won the election.

• 3:20:21Lex Fridman?

  Yes.

• 3:20:22Speaker 01

  And I made my case for why I thought he could be a good president.

• 3:20:24Lex Fridman?

  Yes. So what was the case back then? And to which degree did that turn out to be true? And to which degree did it not? To which degree was he a good president? To which degree was he not a good president?

• 3:20:35Speaker 01

  Look, I think what I said at the time was, the United States is actually a huge business. And it reminds me a bit of the type of activist investments we've taken on over time, where this really, really great business has kind of lost its way. And with the right leadership, we can fix it. And if you think about the business of the United States today, right? You've got $32 trillion of the debt, so it's over leveraged and/or it's highly leveraged, and the leverage is only increasing. We're losing money, i.e. revenues, aren't covering expenses. The cost of our debt is going up as interest rates have gone up and the debt has to be rolled over. We have enormous administrative bloat in the country.

• 3:21:17Speaker 01

  The regulatory regime is incredibly complicated and burdensome and impeding growth. Our relations with our competitor nations and our friendly nations are far from ideal. And those conditions were present in 2020 as well. They're just, I would say, worse now. And I said, "Look, it's a great thing that we have a businessman as president." And in my lifetime, it's really the first businessman as opposed to, I mean, maybe Bush to some degree was a businessperson. But I thought, "Okay." I was one of the CEO-to-be CEO of America, and now we have Trump. Look, he's got some personal qualities that seem less ideal, but he's going to be President of the United States. He's going to rise to the occasion.

• 3:22:01Speaker 01

  This is going to be his legacy. And he knows how to make deals. And he's got, he's going to recruit some great people into his administration, I hoped. And, you know, growth can solve a lot of our problems. So if we can get rid of a bunch of regulations that are holding back the country, we can have a President. Obama was a, I would say, not a pro-business president. He did not love the business community. He did not love successful people. And having a president who just changed the tone on being a pro-business president, I thought would be good for the country. And that's basically what I said. And I would say Trump did a lot of good things. And a lot of people, you can get criticized for acknowledging that.

• 3:22:46Speaker 01

  But, you know, I think the country's economy accelerated dramatically. And that, by the way, you know, the capitalist system helps the people at the bottom best when the system does well and when the economy does well. You know, the black unemployment rate was the lowest in history when Trump was president, and that's true for other minority groups. So he was good for the economy. And he, you know, he recognized some of the challenges and issues and threats of China early. He kind of woke up NATO. Now, again, the way he did all this stuff, you can object to. But NATO actually started spending more money on defense in the early part of Trump's presidency

• 3:23:28Speaker 01

  because of his threats, which turned out to be a good thing in light of, you know, the ultimately the Russia-Ukraine war. And I think if you analyze Trump objectively based on policies, he did a lot of good for the country. I think what's bad is he did some harm as well. You know, the, I do think civility disappeared in America with Trump as president. A lot of that's his personal style. And how important is civility? I do think it's important. I do think, you know, he was attacked very aggressively by the left, by the media that made him paranoid. It probably interfered with his ability to be successful.

• 3:24:09Speaker 01

  He had, you know, the Russian collusion investigation overhang. And when someone's attacked, they're not going to be at their best, particularly if they're paranoid. I think there's some degree of that. But I'm, you know, I'm giving kind of the best of defense of Trump. You know, just you look at how he managed his team, right? Very few people made it through the Trump administration without getting fired or quitting. And, you know, who would say they're the greatest person in the world when he hired them and they're a total disaster when he fired them? It's not an inspiring way to be a leader and to attract really talented people. I think the events surrounding the election, you know, I think January 6th, he could have

• 3:24:53Speaker 01

  done a lot more to stop a riot. I don't consider it an insurrection, but a riot that takes place in our Capitol and where police officers are killed or die, commit suicide because of failure to, as they sought to do their job. You know, he stepped in way too late to stop that. He could have stopped it early. You know, many of his words, I think, inspired people, you know, some of whom with malintent to go in there and cause harm and literally to shut down the government. There were some evil people, unfortunately, there.

• 3:25:24Speaker 01

  So he's been a very imperfect president and also, I think, contributed to the, you know, extreme amount of divisiveness in our country. So I was ultimately disappointed by, you know, the note of optimism. And again, I always, you know, support the president. I trust the people ultimately to select our next leader. You know, it's a bit like Who Wants to be a Millionaire, you know, when you go to the crowd and then the crowd says a certain thing, you gotta trust the crowd. But usually in Who Wants to be a Millionaire, it's a landslide in one direction. So you know which, which letter to pick. Here we had an incredibly close election, which itself is a problem. So, you know, my dream and what I, you know, I've tried a little bit, played politics in the last little period

• 3:26:07Speaker 01

  to support some alternatives to Trump so that we have a president, you know, I use the, you know, example, imagine you woke up in the morning, it's election day, whatever it is, this November 4th, whatever, 2024, and you still haven't figured out who to vote for because the candidates are so appealing that you don't know which lever to pull because it's a tough call. That's the choice we should be making as Americans. It shouldn't be, I'm a member of this party and I'm only going to vote this way. I'm a member of that party and I'm going to vote the other way and I hate the other side. And that's where we've been unfortunately for too long.

• 3:26:39Lex Fridman?

  Or you might be torn because both candidates are not good.

• 3:26:42Speaker 01

  Yeah.

• 3:26:43Lex Fridman?

  So you want to, I love a future where I'm torn because the choices are so amazing.

• 3:26:50Speaker 01

  The problem is the party system is so screwed up and the parties are self-interested and there, there, there's another governance problem, right, and incentive problem. Michael Porter, who was one of my professors at Harvard Business School, wrote a brilliant piece on the American political system and all the incentives and market dynamics and what he called a competitive analysis. And it's a must read. I should dig it up and, you know, send it around on X, but it explains how the, you know, the parties and the incentives of these sort of self-sustaining. Entities that, you know, where the people involved are not incentivized to do what's best for the country, it's a problem.

• 3:27:29Lex Fridman?

  You've been a supporter of Dean Phillips.

• 3:27:32Speaker 01

  Yes.

• 3:27:33Lex Fridman?

  For the 2024 US presidential race.

• 3:27:36Speaker 01

  Yes.

• 3:27:36Lex Fridman?

  What do you like about Dean?

• 3:27:37Speaker 01

  I think he's a honest, smart, motivated, capable, proven guy as a business leader. And I think in six, almost, you know, in his three terms in Congress, he ran when Trump was elected, he said, you know, kids cried, his daughters cried, inspired him to run for office, ran in a Republican district in Minnesota for the last 60 years, was elected in a landslide, has been reelected twice, moved up the ranks in the Congress, you know, respected by his fellow members of Congress, advanced some important legislation during COVID, you know,

• 3:28:18Speaker 01

  senior roles on various foreign policy committees, centrist, you know, considered, I think, the second most bipartisan member of the Congress. I'd love to have a bipartisan president. That's the only way to get, kind of, go forward. But we'd enormously benefit if we had a president that chose policies on the basis of what's best for the country as opposed to what his party wanted. What I like about him is he's financially independent, he's not a billionaire, but he doesn't need the job. The party hates him now because he challenged the king. Right? And so, but he's willing to give up his political career because what he thought was best for the country. He tried to get other people to run who were higher profile, had more name recognition. None would. No one wants to challenge Biden.

• 3:29:01Speaker 01

  You know, if they want to be, have a chance to stay in office or run in the future. But he's very principled. I think he'd be a great president. But he needs, his shot is Michigan, but he needs to raise money in order to, he's only got a couple of weeks and he's got to be on TV there. That's expensive. So we'll see.

• 3:29:24Lex Fridman?

  So he has to increase name recognition, all that kind of stuff. Also, as you mentioned, he's young.

• 3:29:28Speaker 01

  Yeah, he's 55, but he's a young 55. You see him play hockey.

• 3:29:31Lex Fridman?

  Yeah, I mean, I guess 55, no matter what, is a pretty young age.

• 3:29:35Speaker 01

  I'm 57. I feel young. I can do more pull-ups today than I could as a kid. So that's a standard.

• 3:29:42Lex Fridman?

  You're at the top of your tennis game.

• 3:29:44Speaker 01

  I'm at the top of my tennis game, for sure.

• 3:29:46Lex Fridman?

  Maybe there's someone that would disagree with that.

• 3:29:48Speaker 01

  And by the way, the other thing to point out here is, and I have been pointing this out as have others, Biden is, I think, is done. I mean, it's embarrassing. It's embarrassing for the country, having him as a presidential candidate, let alone the president of the country. It's crazy. And it's just gonna get worse and worse. And he should, you know, the worst of his legacy is his ego that prevents him from stepping aside. And that's it. It's his ego. And it is so wrong and so bad and so embarrassing. You know, you talk to people, I was in Europe, I was in London a few days ago, and people were like, Bill, how can this guy be a president?

• 3:30:30Speaker 01

  And it's a bit like, again, I go back to my business analogy, being a CEO is like a full contact sport. Being president of the United States is like some combination of wrestling, marathon running, you know, try being a triathlete. I mean, you gotta be a serious, physical shape and at the top of your game to represent this country. And he is a far cry from that. And it's just getting worse. And it's embarrassing. And he's got, he cannot be. And by the way, every day he waits, he's handing the election to Trump, because it's harder and harder for an alternative candidate to surface. Now, Dean is the only candidate left on the Democratic side that can still win delegates. He's on

• 3:31:11Speaker 01

  the ballot in 42 states. And the best way for Biden to step aside is for Dean to show well in Michigan.

• 3:31:19Lex Fridman?

  And so you think there is a path with the delegates and all that kind of stuff?

• 3:31:22Speaker 01

  Hundred percent. So if he, if, what has to happen is, what, New Hampshire, he went from zero to 20% of the vote in 10 weeks with no name recognition. You know, I helped a little bit, Elon helped, we did a spaces for him. We had 350,000 people on the spaces. Some originally 40,000 live or something, and then the best, the rest after. And then he was on the ground in New Hampshire. And New Hampshire is one of the states where you don't need to be registered to a party to vote for the candidate. So it's like jump ball. And he got 20%. And that's with a lot of independents and Democrats voting for Haley.

• 3:32:00Speaker 01

  Haley, who I like and who I've supported, does not look like she's going to make it. You know, Trump is really kind of running the table. And so vote for Haley as an independent in Michigan, maybe throw away your vote. I think it increases the likelihood that Dean can get those independent votes. If he could theoretically, again, he needs, he needs money. He could beat Biden in Michigan. Biden's doing very poorly in Michigan. His polls are terrible. The Muslim community is not happy with him. And he really has spent no time there. And so if he's embarrassed in Michigan, it could be a catalyst for him withdrawing. Then Dean will get funding. If he wins Michigan or shows well in Michigan and people say he's viable, he's the only choice we have.

• 3:32:45Speaker 01

  He'll attract from the center. He'll attract from people, Republicans who won't vote for Trump, in which they're a big percentage, could be 60% or more, it could be 70% won't vote for Trump. And also from the Democrats. So I think he's a really interesting candidate, but we've got to get the word out.

• 3:33:01Lex Fridman?

  Yeah, I got a chance to chat with Dean. I really like him. I really like him. And I think the next president of the United States is going to have to meet and speak regularly with Zelensky, Putin, Netanyahu, with world leaders and have some of the most historic conversations, agreements, negotiations. And I just don't see Biden doing that.

• 3:33:25Speaker 01

  No.

• 3:33:26Lex Fridman?

  And not for any reason but sadly age.

• 3:33:31Speaker 01

  I mean, think about it this way. When Biden's in present now, you saw his recent impromptu press conference, which he did after the special prosecutor, you know, report basically saying the guy was way past his prime. And then he confused the president of Mexico and the president of Egypt. So they're very careful when they roll him out. And he's scripted and he's always reading from a lectern. Imagine the care they have in exposing him. And when they expose him, it's terrible. Okay, imagine how bad it is for real.

• 3:34:02Lex Fridman?

  It's not good.

• 3:34:04Speaker 01

  No, bad, really bad for America. And I'm upset with him and upset with his family. I'm upset with his wife. You know, this is the time where the people closest to you have to put their arms around you and say, you know, dad, you know, honey.

• 3:34:19Speaker 01

  You've done your thing. This is going to be your legacy and it's not going to be a good one.

• 3:34:24Lex Fridman?

  Great leaders should also know when to step down.

• 3:34:27Speaker 01

  Yeah, one of the best tests of a leader is succession planning. This is a massive failure of succession planning.

• 3:34:34Lex Fridman?

  Outside of politics, let me look to the future. First, in terms of the financial world, what are you looking forward to in the next couple of years? You have a new fund. Like, what are you thinking about in terms of investment, your own and the entire economy, and maybe even the economy of the world?

• 3:35:00Speaker 01

  Sure, so the SEC doesn't allow, doesn't like us to talk about new funds that we're launching that we filed with the SEC.

• 3:35:08Lex Fridman?

  Sure.

• 3:35:09Speaker 01

  But I would say I do, and by the way, if anyone's ever interested in a fund, they should always read the prospectus carefully, including the risk factors. That's very, very important. But I like the idea of democratizing access to good investors. And I think that's an interesting trend, so we want to be part of that trend. In terms of financial markets, generally, the economy, you know, a lot is going to depend upon the next leader of the country. So we're kind of right back there. You know, the leadership in the United States is important for the US economy, it's important for the global economy, it's important for global peace. And we've gone through a really difficult period, and it's, we need a break. But, you know, look, I think the United States is an incredibly resilient country.

• 3:35:53Speaker 01

  We have some incredible moats among them. We have the Atlantic and the Pacific, and we have, you know, peaceful neighbors to the north and the south. We're an enormously rich country. Capitalism still works effectively here. I get optimistic about the world when I talk to my friends who are either venture capitalists or my hobby of backing these young entrepreneurs. I talk to a founder of a startup if you want to get optimistic about the world. So I think technology is going to save us. I think AI, of course, has its frightening Terminator-like scenarios, but I'm going to take the opposite view, that this is going to be a huge enabler of productivity, scientific discovery, drug discovery, and it's going to make us healthier, happier, and better.

• 3:36:38Speaker 01

  So I do think, you know, the the Internet revolution was, you know, had a lot of good. Some obviously some bad. I think the AI revolution is going to be similar, but we're at this other really interesting juncture in the world, you know, with technology and we're going to have to use it for our good. On the media front, I'm happy about X and I think Elon's going to be successful here. I think advertisers will realize it's a really good platform. The best way to reach

• 3:37:06Speaker 01

  me, if you want to sell something to me, is post. I've actually bought stuff on some some ads in X. I don't remember the last time I responded to direct response advertising. You know, in terms of my business, I have an incredible team. It's tiny. We're one of the smallest firms relative to the assets we manage. It's a bit like, you know, the Navy SEALs, you know, not the US Army. We have only 40 people at Persian Square, so it's a tight team. I think we'll do great things. I think we're early on. You know, my ambitions, investment wise, I've always wanted to, I've always said I'd like to have a record as good as Warren Buffett's. The problem is each year he adds on another year. He's now in his 93rd year, so I've got 36 more years

• 3:37:51Speaker 01

  to just get where he is, and I think he's going to add a lot, a lot more years. I'm excited about seeing what Neri is going to produce. You know, she's building an incredible company. They're trying to solve a lot of problems with respect to products and buildings and their impact on the environment. Her vision is how do we design products that by virtue of the product's existence, the world is a better place. You know, today you make, you know, her world is a world where the existence of the new car actually is better for the environment than if the new car hadn't existed. And think about that in every product scale. That's what she's working on. I don't want to give away too much, but you're going to see some early examples of what she's working on. So again, I get excited about the future.

• 3:38:36Speaker 01

  And crises are sort of a terrible thing to waste. And we've had a number of these here. I think this disaster in the Middle East, my prediction is the next few months, this war will largely be over in terms of getting rid of Hamas. I think I can envision a world in which Saudi Arabia, some of the other Gulf states come together, take over the governance and reconstruction of. Of Gaza, security guarantees are put in place. The Abraham Accords continue to grow. A deal is made. Terrorists are ostracized. That this October 7th experience on the Harvard, Penn, MIT, Columbia,

• 3:39:18Speaker 01

  unfortunately, other campuses is a wake up call for universities generally. You know, people see the problems with DEI, but understand the importance of diversity and inclusion, but not as a political movement, but as a way that we return to a meritocratic world where someone's background is relevant in understanding their contribution. But it's not, we don't have race quotas and things that were made illegal years ago actually being implemented in organizations on campus. So I think there's, we can go through a corrective phase, and I'm an optimist, and I hope we get there.

• 3:39:55Lex Fridman?

  So you have hope for the entirety of it, even for Harvard?

• 3:39:59Speaker 01

  I have hope even for Harvard. It's generally hard to break 400 year old things.

• 3:40:04Lex Fridman?

  Well, I share your hope and you're a fascinating mind, a brilliant mind, persistent, as you like to say, and fearless. The fearless part is truly inspiring, and this was an incredible conversation. Thank you. Thank you for talking today, Bill.

• 3:40:20Speaker 01

  Thank you, Lex.

• 3:40:22Lex Fridman?

  Thanks for listening to this conversation with Bill Ackman. To support this podcast, please check out our sponsors in the description. And now let me leave you with some words from Jonathan Swift. A wise person should have money in their head, but not in their heart. Thank you for listening and hope to see you next time.