Pod Insights Behind the Bastards Part Two: The Rise of the "Activist" Investor About this episode Robert concludes the story of the rise and fall of an activist investor we can now admit was just Bill Ackman all along.
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Transcript 14,340 words · 7 speakers
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0:05 Robert Evans? Welcome back to Behind the Bastards, the only podcast that this week is talking about Bill Ackman, the patron saint of activist investors with the great Kim Kelly. Kim, welcome back to the show. How are you doing? How are you feeling?
0:21 Speaker 01 I'm good. I'm excited to talk more about this terrible man.
0:25 Speaker 02 Robert, you know what I realized in between part one and part two? You know that very famous movie, Pretty Woman, Richard Gere's character?
0:34 Robert Evans? Yes.
0:35 Speaker 02 That's his job.
0:36 Robert Evans? Oh, yeah, yeah, yeah, yeah, yeah. Like, yeah, that's exactly like Gere is, and that was still when it was like the corporate raider thing.
0:44 Speaker 02 Yeah.
0:45 Robert Evans? Right? Like, that's very much the point of the movie, is that like, he's kind of a scumbag businessman.
0:49 Speaker 02 Yeah.
0:51 Speaker 01 The terminology is so much cooler. Like, they should have just kept doing that.
0:55 Speaker 02 I agree.
0:55 Robert Evans? Corporate raider, pirate, yeah.
0:58 Speaker 01 Yeah, or et cetera. At least just own it. If you're gonna be a bastard, just be a bastard.
1:03 Robert Evans? Well, that was one of the more effective things about Hook is that, like, you know, Robin Williams' character, who's like a grown-up Peter Pan, comes back and like, one of his old, like, friends is like, "Oh, you're just like a pirate now." Like, that's that's all you're doing. There was a really good, one of the Monty Python movies, I think it was Meaning of Life, opens with like a good skit about basically that, about like a high seas accounting firm, like basically being like corporate pirates. It's very funny. Yeah. But then then things, at a certain point, they're not happy being like evil monsters anymore, and they have to pretend to be making the world better. And that's kind of like the Bill Ackman KT boundary here is like corporate raiders to activists. It's funny.
1:52 Speaker 01 You know, like they want to own everything, but they want us to love them for it. And they get so mad when we don't.
1:57 Robert Evans? They don't want to, they don't want us to act like they're doing what they're doing. They want us to act like they're doing us a favor, right? And when we ended last episode, we talked about how Bill's company makes a shitload of money off this Canadian Pacific deal that this guy Paul Halal puts together. And kind of during the same period where Halal was executing this masterful turnaround of Canadian Pacific, which is like often, like a lot of people point out, like this is about like the, the chief perfect example of how well this kind of thing can work, like an activist investing situation can work. This is the best case scenario. While that's all happening, Bill is miserably failing to do the same thing with JCPenney.
2:39 Robert Evans? Like at the same time as Paul is having this huge success story for, for Pershing, Bill is beginning to lead the company into a boondoggle with JCPenney. And this is a very fun story.
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4:01 Robert Evans? So Bill starts acquiring shares of the legendary American retailer in 2010. And he makes a big play with about $900 million of Pershing's money. And this earns him a seat on the board. So he puts a little under a billion dollars into JCPenney's and he gets on the board. Right. And so now he's in a position where he can start dictating and demanding the company make some changes. So let's talk about JCPenney's, right? You, you, you grew up around the same time I did. You, you, you went to like JCPenney's to family photos, right?
4:32 Speaker 01 Oh, my God.
4:33 Robert Evans? Christmas pictures and shit.
4:34 Speaker 01 Christmas shopping with my grandma every year. School shopping before I was like old enough to have opinions about the clothes I wore. Go to Penny's. I was getting winter coats at Penny's with my grandma up until it closed. They got good coats.
4:48 Robert Evans? A book of fucking coupons, right? To get like whatever, like the worst looking both clothing that you could, you could, we could all, we could be dressed in. Like I didn't look good back then. I'm not gonna lie.
4:59 Speaker 01 Dude, the Cherry Hill Mall was the center of the universe. I'm from Jersey.
5:03 Robert Evans? Who gives a shit? You're at JCPenney's.
5:05 Speaker 01 Go to the mall, go to, go to Bertucci's, go to the diner, just fucking Americana out. That was the American dream and they took it from us.
5:14 Robert Evans? Sitting Santa's lap, all that stuff. They being Bill, right?
5:18 Speaker 01 Specifically.
5:19 Robert Evans? So JCPenney's, at the time that Bill gets involved, because 2010 is when he starts buying his way in. One of the biggest names in retail in the US for generations, but by, by the aughts, it's quite a while, 10 or 15 years at least, into a period of significant contraction. In 1989, JCPenney's sales were about $15.3 billion. By the mid 1990s, it was closing in on $19 billion a year. And in 2006, the highest revenue year, it almost crossed into $20 billion. And that sounds good, like that seems like it's making more money every year. But if you adjust for inflation, that means in 1989, the company made the equivalent of $29 billion
6:01 Robert Evans? as opposed to $19.9 billion in 2006, right? So then 20 years, it's gone, it, it's contracted significantly in real terms, right?
6:13 Robert Evans? As Joseph
6:13 Speaker 01 Yeah, we got the internet.
6:15 Robert Evans? Right. It's it's not people. They've got the internet. We got better stores. J C Penney just like didn't didn't handle that transition into the 21st century very well. As Joseph Gento and also, you know, the fact that we have like fucking phone cameras increasingly now and just easily portable digital cameras in 2006. That starts to eat into this part of what brought people in is you get your family photo. We might as well do some shopping while we're here, right? Like, all that stuff eats away at their their their role in society.
6:48 Robert Evans? As Joseph Gento explained in an article for D Magazine, by the time Ackman made his investment in 2010, J C Penney had been effectively stagnant for more than two decades. In inflation adjusted terms, the company had actually lost billions of dollars worth of ground, ground that its competitors now claimed. So they're going bad by the time Bill gets himself involved and Bill has a plan to make J C Penney's great again. And that plan is to rip off Steve Jobs, right? That's Bill's genius plan is I'm gonna do what Steve Jobs just did at Apple, but I'm gonna do it to J C Penney's and I'm gonna hope that shit works, right?
7:23 Speaker 01 How?
7:24 Robert Evans? I'll explain. To be specific, the first big activist change that Ackman pushed through once he was in position is to make the company shit can its current C E O, Mike Olman. And Olman had, he had presided over J C Penney's highest revenue year ever in 2006, but he had also been in charge for a lot of J C Penney's decline. He was not a great C E O, right? So getting Mike out, let's say, let's call it a neutral, probably a neutral good decision for Bill to have made. Unfortunately, his next move is to replace Mike with a ringer C E O. And the C E O that Bill wants to put in there is Ron Johnson. And in 2011, Ron Johnson invented the Apple Store.
8:06 Robert Evans? He is the guy that Steve put in position when they didn't need, when they needed to create the Apple Store. Ron is the guy who like makes it, right? So 2011, he's a pretty hot commodity. Apple Stores have been a huge success. Like, no one can argue the guy was not Good at his job, like the Apple Store worked very well. It did the thing that it was supposed to do for Apple. He was an enormous success. Business writer Bhavneesh Patel describes Ron as having, quote, "Built Apple's retail empire from scratch." And as Patel noted, he thinks differently about retail than anyone else. And that's why Steve Jobs liked him. Bill likes Ron because Steve had liked Ron, right?
8:47 Robert Evans? And I really don't think it went any deeper than that. I think he's like, well, this guy created the Apple Store and the Apple Store's very worth money. JCPenney is doing bad. Apple Store guy, JCPenney's, JCPenney's will be doing good, right? Like, that's, I think that's the limit that, to which Bill is really thinking this through.
9:05 Speaker 01 Yeah, just do the Apple Store for slacks, essentially.
9:09 Robert Evans? What of the Apple Store for pants?
9:13 Robert Evans? That's Bill's business acumen. That's the Harvard MBA at work. What if the Apple Store but for perfume that they spray in the air as you walk by?
9:27 Robert Evans? So, as soon as, yeah, genius, brilliant stuff. So Ron is now the CEO of JCPenney's and he sets to work doing what you'd expect the Apple Store guy to do if given control of a brand like JCPenney's. He remodels everything, all of their stores, to look a lot nicer and to appeal to a high-end clientele. You know how Apple Stores look, right? Big glass storefronts, they have a lot of tables, like very open floor plan, very cold, soulless.
9:57 Speaker 01 Minimalist.
9:57 Robert Evans? But also high-end, like clean, like modern, you know? It's good for, if you're going to be spending a lot of money on a product, like an Apple Store feels like a reliable storefront. Like, I'm about to spend $3,000 and that's a huge amount of money for me on a laptop.
10:16 Speaker 02 But it also has the energy of a place where I want to buy said $3,000 item and leave as fast as possible.
10:22 Robert Evans? Sure, yes, yes. You don't want to stay in the Apple Store, but you do trust that the things that they sell you at an Apple Store will work, right? Um, so he remodels JCPenney's to like have a more high end look. And here's how Patel summarizes Ron's first six months as CEO. He has eliminated coupons and promotions, replacing them with an everyday low price model. He's begun redesigning stores into a town square format with branded mini boutiques. It is a radical, expensive, simultaneous change on multiple fronts. The early data is alarming. Same store sales are dropping, are falling sharply. Not just a blip, but a structural collapse. Customers who had shopped at JCPenney for decades are not returning. The store traffic numbers are deteriorating every week.
11:06 Robert Evans? So six months, not a lot of time. They start turning these JCPenney's into town squares with boutiques and they stop having cook coupons. It's really once they stop having coupons, people stop going to JCPenney's immediately.
11:20 Speaker 01 That's not what Pennies is about.
11:22 Robert Evans? No, no, you fucked it up, you moron.
11:26 Speaker 01 Nobody wants Apple Store for pants.
11:29 Robert Evans? No, no, and that's the gist of the problem, right? Ron was very good at selling premium consumer tech products. And an Apple Store is a good place to sell a premium consumer tech product, right?
11:42 Robert Evans? iPhones are ubiquitous devices, but like most, like most people who own iPhones are not rich. It's not like only people with money have iPhones. It's a very normal thing to own. But for most people who are not rich, a smartphone is going to be the most expensive thing that you have on you on a day to day basis, right? And like your smartphone and your laptop, they're up there with like your car and your house is like the most expensive single things that you own. So if you're going to be making a purchase like that and you're not someone with a lot of money, if you're someone who's making like a thousand or a $2,000 purchase and that's a huge, huge deal, you probably feel better doing that purchase at a place that feels like premium and clean and functional, right? But.
12:25 Robert Evans? That's not what you go to JCPenney's for, right? And JCPenney's knows this from the jump. Their loyal customer base, the people who keep JCPenney's in business at this point in time are women aged 35 to 55 who household, whose households made between $35,000 and $100,000, right? These are not people looking at for a premium experience. These are people looking for a deal because they, they have to cut money. They have a family. They don't have, they have to stretch every dollar. They're not looking for a premium experience, you know?
12:57 Speaker 01 One, solid, reliable, affordable, mom-friendly. That's Penny's.
13:03 Robert Evans? Exactly.
13:03 Speaker 01 That's like, that's what we want. That's what the people want.
13:07 Robert Evans? And what Bron is bragging about.
13:08 Speaker 01 You can't church up Penny's.
13:09 Robert Evans? You, you can't. And that's like Bron's whole thing. His proudest move is that we brought more than 100 different brand name boutiques to sell their wares in these new town squares that we're designing.
13:18 Speaker 01 Ooh.
13:19 Robert Evans? These include brands like Jonathan Adler. They're, he's bragging, we've got these $3,000 couches in JCPenney's now. And it's like, but people don't want to buy a $3,000 couch at JCPenney's for no discount.
13:32 Speaker 01 No.
13:32 Robert Evans? That's not why you go to Penny's. And people are pointing this out at the time, according to D Magazine, quote, "If you said," and this is them interviewing an employee, "if you said, 'Our customer, she can't afford this or that,' you'd probably get fired," says one headquarters employee. "So you didn't say anything, right? Because this is what we're doing." You know, it's the same thing like this AI shit. If you bring in like, "I don't know if this works here. I don't know if this is a good place to be using this. I think this has actually made our workflow worse." You can't say that. You're not allowed to have that opinion, even though it's accurate, because the boss has said, "We're doing this thing," and it has to be a good idea, right?
14:08 Speaker 01 Right. Meanwhile, the customers whose money you want, they go in, they see a nice couch, they look, "Oh, I can't afford that." Now they feel bad.
14:16 Robert Evans? I can't afford this.
14:16 Speaker 01 They don't want to come back.
14:17 Robert Evans? I'm here to get socks. Right? I'm trying to buy like a shirt, like back to school shit. I don't need a $3,000 couch. I've got my couch off a Craigslist.
14:26 Speaker 01 My husband needs some underwear, like we're going to Penny's. Give me a coupon, send me, I'm going to Annie Ann's on the way out.
14:31 Robert Evans? You should know, if JCPenney's, like, JCPenney's, unless it's marked down 80%, people aren't buying furniture at JCPenney's. The people who shop at Penny's get their furniture from Craigslist in 2011, right?
14:45 Speaker 01 I didn't know that they had furniture at Penny's.
14:47 Speaker 02 Neither do I.
14:48 Robert Evans? Certainly not nice stuff.
14:49 Speaker 01 We didn't go to that level.
14:55 Robert Evans? So, uh, the fair and square pricing is also a disaster. That's the biggest catastrophe. The fact that they're, and again, they don't, Bill and don't understand this at all. They're like, whoa, but the prices aren't changing. We're just not pretending, you know, by having these like, oh, now we have a coupon. We're always giving you, no, that's not, that's not how people's brains work, right? And within days of the change, as soon as they stopped taking coupons, customers fucking riot. There's an immediate drop off in traffic. And it says, it says a lot about Bill, how much this surprised him. And here's a quote from Bill. Interestingly, people seem to be happier buying something at 50% off that costs $50 as opposed to it being marked $40 and there being no discount. And that's how
15:39 Robert Evans? Bill interprets this. And you can, you can see he's like, wow, people are dumb, right? That's, that's the lesson he takes is, oh, we failed because people are idiots and they can't do math. And I thought people were smarter. That's not really what's happened. And he's, Joseph Ginto does a good job of like explaining the error in Bill's thinking. Buyers don't just want something that at $50 that's marked half off because they're stupid. They want to buy something at half off because they don't trust that a company's everyday low price is in fact fair and square. This is the American way of haggling. We doubt the price tag, but we don't confront the seller. We simply remain silent about our misgivings until a sale comes around. And at JCPenney's, a sale always came around.
16:21 Robert Evans? In 2011, just 0.2% of all products sold at a JCPenney store were sold at full price. That means Johnson's fair and square was a radical change in strategy, and yet it was never tested with customers before being rolled out nationwide and was not vetted at Advance by the board. So they have internal details that show 0.2% of our sales are full price. 99.8% of our sales are discounted to some extent, and we're getting rid of discounts and they don't even test it. They don't even have like a trial JCPenney's to see if this works and make people happier. They just do it. That's malpractice, right?
17:01 Speaker 01 They just surprise. Oh my God. That's how, the best way to destabilize a working class mother is to change literally anything she's expecting.
17:11 Robert Evans? Yeah, it's like, it's like if your kid turns 16 and you're like, all right, well, it's time for you to learn how to drive. So I am putting you in command of a shipping vessel in the, uh, like, heading through the Strait of Hormuz. Just, just drive her straight through, son. You got this. I'm gonna be, I'm not gonna be on the boat, but you, you, you can handle this. Pilot her through.
17:30 Speaker 01 You're a smart kid.
17:31 Robert Evans? You know, like, it's just, it's malpractice. It's deeply irresponsible.
17:35 Speaker 01 Oh, my God.
17:36 Robert Evans? And it's, it's very funny to me that Ackman's interpretation is, well, people are dumb and they can't do math. And the reality is like, you didn't test this? You didn't check to see how people would respond before you did this everywhere? People, your customers aren't the stupid ones, Bill. You're a dummy. That's dumb.
17:57 Speaker 01 They have focus groups at the mall. It's built in. I've done them for like 20 bucks.
18:03 Robert Evans? My God. Like, we did A/B testing on titles at art of articles for crack, let alone fucking your entire sales strategy. Um, so, anyway, uh, yeah, I think Ackman and the fucking Apple Store guy rushed to make reckless changes and didn't follow any of the best practices for doing that sort of thing. Because, hey, it worked at Apple. How could we lose? We've got the guy from Apple. Have you seen how much money Apple makes, right?
18:28 Speaker 02 Because when I think JCPenney, I think Apple.
18:31 Robert Evans? Yeah, Apple.
18:32 Speaker 01 Absolutely the same thing.
18:34 Robert Evans? It's, it's so, they don't even, I don't think Bill thinks beyond it in any way. And when this completely fails, he is caught so hard by surprise. Now, Ron Johnson, for his part, claims initially, after the first six months when the company's hemorrhaging money, "This is just like the pain inherent to transitioning to a more sustainable business model. Customers are gonna come back in time and it'll be fine. We just gotta stay steady as she goes." And Ackman is like, "We've got all, full faith behind you, Ron. We're backing you up to the hill. Keep going, you know? We'll, we'll, we'll continue plowing forward." So, months more go by, and by the summer of 2012, sales are still down across the board. There's no sign the customers are coming back, and Johnson starts to, uh,
19:18 Robert Evans? backtrack on some of his most controversial moves. He reintroduces clearance racks and sales to JCPenney's, but he keeps these expensive remodelings going without ever testing the plan on customers. He never checks to see, do they like the remodeled stores? He just keeps spending insane amounts of money on it. And now no one's showing up at JCPenney's anymore because he screwed that pooch already. At no point were there any hints that his strategy might have a chance of succeeding. But Ackman protected Johnson from calls to replace him and the work went on. In April of 2012, Johnson cut 15% of the HQ staff in Plano and fired thousands of employees, 19,000 total layoffs.
20:00 Robert Evans? He blamed the company's issues on these people, stating in February of 2013 to the Wall Street Journal that the JCPenney's headquarters staff in Plano had been overstaffed and unproductive. Per D Magazine, as proof, they claimed that employees in Plano had watched 5 million YouTube videos in a single month and that a third of the time headquarters employees spent on the internet was for purposes unrelated to work. And that's really gross vindictive ass covering? The only reason you put something like that out as opposed to doing what like normally you do, which is like, we have to make these layoffs and we're sorry to have to let these talented people go, but that's just the way business works? When you're like, no, they were just watching YouTube videos. You're trying to explain why your strategies aren't still working? And you're trying to blame it on these lazy people at headquarters?
20:43 Robert Evans? It's not their fault. You ruined the company, right?
20:46 Speaker 01 Yeah, like going after people that are probably being paid a salary that makes it so that they often shop at JCPenney's. Like, you probably should have just asked them what they thought in the first place. You wouldn't have to let anybody go.
20:58 Robert Evans? No, if they said what they thought they would have got fired. So they stopped speaking up and just watched YouTube videos while the company circled the drain because you clearly weren't going to listen to them.
21:08 Speaker 01 You know, it's...
21:10 Robert Evans? Yeah, it's a disaster. Ron gets let go not long after this point. He's CEO for like a little less than a year and a half. The board brings Olman back temporarily and Ackman calls for him to be fired again, even as he's trying to like pull Pershing out from its investments because all of its investments in JCPenney's are bleeding money now. Howard Schultz, CEO of Starbucks and member of the Pennies Board.
21:33 Speaker 01 Oh no.
21:34 Robert Evans? He's actually weirdly, this is how bad Bill Ackman is at what he's doing. Howard is like a voice of reason here. So Schultz is on the Pennies Board and he makes the unprecedented almost decision to publicly shit talk another board member. It's really bad for your company's stock price if board members are talking shit about each other while the company's going through crisis. And the fact that Schultz does that says a lot about how desperate the situation is. So this is what Schultz says on CNBC. This is the truth. This is not fiction. Bill Ackman was the primary engineer and architect of recruiting Ron Johnson to the company. He and Ron Johnson co-authored a strategy that has fractured the company and ruined the lives of thousands of JCPenney employees. Bill Ackman has the blood on his hands for being the
22:17 Robert Evans? architect and the recruiter of Ron Johnson and then the co-author of the strategy.
22:22 Speaker 01 Okay, Howard.
22:23 Robert Evans? Wild for Schultz to be the good guy here, but he's not wrong.
22:29 Speaker 01 Where was that Howard Schultz when the fucking workers at Starbucks unionized?
22:32 Robert Evans? Well, well, hey, hey, hey.
22:37 Robert Evans? Hey, he's not gonna eat where he shits.
22:42 Robert Evans? So Johnson's tenure at JCPenney's lasted just 17 months, but in that time, same-store sales fell by 30% and the company lost around a billion dollars in cash, roughly equal to Pershing's investment in the company. Ackman resigned from the board in August of 2013 after selling off his entire position, netting a $500 million loss for his company at the same time as Halal's making billions. Now, at this point, it shouldn't be surprising when I say, Bill Ackman by 2012 is as least as hated as he is respected by his peers in the finance industry, right? Like, not shocked when fucking Howard Schultz is talking shit about you in public like this. And you're on the same board. Yeah, man.
23:27 Robert Evans? One hedge fund manager told Vanity Fair, "There's a saying in this business, often wrong, never in doubt. Ackman personifies it. He is very smart, but he lets you know it. And he combines that with this sort of noblesse oblige that lots of people find offensive. Me, generally not. On top of that, he's pointlessly, needlessly competitive every time he opens his mouth." And then this person immediately asked Cohen, the interviewer, the journalist behind that article, "Do you know about the Ackman cycling trip with Dan Loeb?" And I, I can't wait to tell you this story about Bill Ackman. But first, we should tell, tell the story of the people who sponsor this podcast.
24:06 Speaker 01 I'm so excited.
24:08 Robert Evans? I am too.
24:09 Speaker 01 I love when they fight. Like, rich dudes fighting is the best thing.
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25:58 Robert Evans? And we're back. So as you were saying, Kim, these people, it's very funny, like, because we're about to talk about like a legendary story and a legendary like rich guy beef. Because all of the people in this story are like rich ghouls to some extent. But there's also, there's the, there's the ghouls who you can clearly, you can identify with some extent. It's like, well, this is, this is an intelligent person who's capable of like, looking at the world as it is and like seeing things realistically. And the, there's this person whose narcissism has completely blinded them to reality. And it's, yeah, I, I, I love this tale. So in the summer of 2012, Bill Ackman decided to go on a long cycling journey with a group of very rich guy friends.
26:43 Robert Evans? Or at least he's friends of like one of them. I think these are mostly friends of his buddy Dan Loeb, right? And Dan Loeb is a triathlete who takes cycling very seriously. He's another multimillionaire investor type, you know, finance dude. As are all the guys in this cycling group. But they're also like guys who take cycling seriously, right? These guys are super rich, but they're also like serious athletes. Like Dan Loeb is a competition triathlete. He does marathons. He's in really good shape and he knows how you handle a long bike ride. Right? All of these guys do, but like it's not.
27:14 Speaker 01 Exactly the wilderness going to Montauk.
27:18 Robert Evans? Right, right.
27:18 Speaker 01 Can stop and get soda.
27:20 Robert Evans? But you have to, you have to be reasonable about it. If you ride at a reasonable pace, if you don't go more than your body can handle, if you're like, you know, properly hydrating and fueling yourself, you can get through something like this, okay. You know, even if this isn't something you do regularly. But immediately, as soon as they start cycling, he rides out far in front of everybody, going as fast as he can immediately. As his hyper-competitive instincts, that's how Loeb describes it, drove him forward, right? So like, he's, he just, he can't handle the idea of like, well, these other guys who cycle all the time are better at cycling than me. He has to beat them all. He has to be the best. And so I'm going to quote from Cohen's article here, what comes next?
28:03 Robert Evans? As he and Loeb approached Montauk, Loeb texted his friends, who rode out to meet them from the opposite direction. The etiquette would have been for Ackman and Loeb to slow down and greet the other riders, but Ackman just blew by at top speed. The others fell in behind, at first struggling to keep up with the alpha leader. But soon enough, Ackman faltered at mile 32, Ackman recalls, and fell way behind the others. He was clearly bonking, as they say in the cycling world, which is what happens when a rider is dehydrated and his energy stores are depleted. While everyone else rode back to Loeb's East Hampton mansion, one of Loeb's friends, David Tiger Williams, a respected cyclist and trader, painstakingly guided Ackman, who by then could barely pedal and was letting out primal screams of pain from the cramps in his legs, back to Bridgehampton. "I was in unbelievable
28:45 Robert Evans? pain," Ackman recalls. As one rider notes, "I've never had an experience where someone has gone from being so aggressive on a bike to being so hopelessly unable to even turn the pedals. His mind wrote a check that his body couldn't catch."
28:59 Speaker 01 I love it. I love it.
29:00 Speaker 02 Nice finance joke, snaps for the finance joke. Well done.
29:05 Robert Evans? It's beautiful.
29:06 Speaker 01 Oh my god.
29:08 Speaker 02 Incredible. Jesus Christ.
29:10 Speaker 01 Primal screams. Like...
29:13 Robert Evans? It's such a profound failure of humility, of like, basic humility, of like, well, I can't do that.
29:20 Speaker 02 Weird little guy.
29:21 Robert Evans? He's gotta be everybody. He's gotta be the best. Yeah, I could do that. No, you can't, Bill. You can't. And that's fine. You don't do this normally.
29:29 Speaker 01 Don't you wish you could see a guy like that on like Survivor or Alone?
29:33 Robert Evans? Yes. It's always beaut- you do sometimes, and those are the best episodes.
29:38 Speaker 01 Yeah, I'm.
29:39 Robert Evans? And it's nearly always a cop on Alone. It's always like someone who was like a cop and came and like, oh, I'll be ready to, I'm ready to survive. And then they get scared because it's scary.
29:48 Speaker 01 I'm watching the Arctic Circle one right now, and there is a cop, and I am just waiting.
29:52 Robert Evans? Waiting for him to, his mind to break.
29:55 Speaker 01 Yes. Couple more episodes.
29:58 Robert Evans? So by the time 2012 rolls around, Bill is embroiled in this disaster with JCPenney, and one of his subordinates has a shocking million dollar hit, multi-billion dollar hit with Canadian Pacific, right? And my interpretation is this kind of eats at Bill, right? That his last big success at his company with someone else, and he has this really public failure, embarrassing, embarrassing failure at JCPenney's. Bill's got an ego, and I think he fundamentally just needs the limelight that comes with getting the credit for giant, bold business moves. And he starts casting about for a project to call his own. In 2012, he settles on a whale of one. Herbalife. Herbalife is a multi-level marketing company that sells like drink powders and nutrition
30:41 Robert Evans? shakes, a lot of nutrition products. Like, what is a nutrition shake? Like, what do you mean? You're giving me nutrition? Food does that. Are you saying you're selling food? You know?
30:52 Speaker 01 All my girlfriends from high school, I'll tell you that.
30:54 Robert Evans? Yeah, yeah, right. Yeah, all the Huns out there.
30:57 Speaker 01 Like, before all the MLM, like documentaries and Netflix, Herbalife, man.
31:01 Robert Evans? Herbalife.
31:02 Speaker 02 It was massive.
31:04 Robert Evans? Yeah, it's still, I mean, I think it still is, but yeah.
31:06 Speaker 01 It's still out there.
31:07 Robert Evans? Herbalife's critics will argue, I think accurately, that the real business for Herbalife is convincing people to become Herbalife distributors, which they are told is a great business that will change their lives and make them financially independent. Roughly 90% of distributors either lose money or just barely break even. Many people argue that Herbalife isn't really a business and shouldn't be treated like one. And Bill Ackman is one of these people. He is in the right here, in my opinion, and it's. To his credit, he, this is actually him deciding to do like real activism as an activist investor. So he has his company short Herbalife by a billion dollars, right? Which means that if things get worse for Herbalife's bottom line to a certain extent, his company makes a bunch of money, but the company has to like really flatline for that to happen.
31:50 Robert Evans? And at the same time, he does the Bill Ackman thing where he starts a media blitz. He has this big press release stating out, laying out what he thinks are the fraudulent elements of Herbalife's business and saying like, I'm pushing to have, you know, my contacts and the federal government investigate Herbalife. These are the crimes that I think they're involved in. The company is clearly going to collapse in the near future. And his, the thing that Bill is saying is he's trying to short the company. He's not just saying, I'm going to short the company and I think their stock value will fall by this much. He's saying, I think it's going to fall to zero. I'm betting to short the company, but I want to destroy it. And I think it is going to be destroyed because they're breaking the law and the government is going to come after them like in the near future, right?
32:34 Robert Evans? That's the thing that Bill is putting out in the press and that's what he very much seems to believe. And he comes into this wielding all the tools of his trade, right? He's learned at this point, you can boost or reduce a stock price with strategically applied publicity. And he uses these same skills to put downward pressure on Herbalife's stock value. He publicly brags that his goal is to destroy, is to like, you know, reduce Herbalife's stock price to zero, in effect killing the company. And this is admirable, like Herbalife's bad. I wish this had worked and it doesn't. And ultimately, Bill risks everything here on a belief that an ongoing US government investigation into Herbalife will find the company irredeemably corrupt and criminal, right? Bill is a system loyal guy.
33:18 Robert Evans? The system has always worked out well for him. And he does. It's so sad because of all, for all that I don't like this guy. He clearly sees and recognizes how evil Herbalife is, that it's just hurting people. It's destroying people's lives. It's robbing people. And he, he thinks, he's like, well, the right thing to do is to use my financial power to kill this company and maybe I can. But he also has this belief that, well, if what they're doing is criminal, then as soon as the government finds out about it, they'll stop it. Right? So that makes this a good investment for me. Right? And that's key. He's not just an activist trying to do the right thing. He's trying to make money doing the right thing.
34:02 Robert Evans? And he's betting a billion dollars on the US government doing the right thing.
34:08 Speaker 01 Oh, my gosh.
34:09 Robert Evans? Hmm. How do we think that's gonna work?
34:13 Speaker 01 Bless his heart as they say in the South.
34:15 Robert Evans? Yeah, bless his heart.
34:19 Robert Evans? So what Bill doesn't understand is that Herbalife and its Herbalife friends own the system, or at least large parts of it. In 2013 alone, Herbalife spent about $2 million on federal lobbying, but that only tells a small part of the story. Robert Fitzpatrick, an activist with Pyramid Scheme Alert, calls the association of all of these different MLMs and companies that are on the edge or outright pyramid schemes that put money into US politics, the Pyramid Lobby. This is like this vast assortment of dark money groups and industry organizations that exist, quote, "not just to curry favoritism from lawmakers, but to prevent its extinction."
35:00 Robert Evans? In other words, because everything that these companies are doing ought to be illegal, right? If they're actually being dealt with based on what they're doing to people, they'll be shut down. So in order to keep this industry from being wiped out, you have to lobby to basically keep crime legal, right? Like, that's kind of how the Pyramid Lobby works, right?
35:23 Speaker 01 And now that's a good evil name. The Pyramid Lobby? It just makes me think of the Freemasons, right?
35:30 Robert Evans? Yeah, good work, Fitzpatrick.
35:31 Speaker 01 Up to something spooky.
35:33 Robert Evans? And as Fitzpatrick works, the only way that the Pyramid Lobby can prevent its extinction is to thwart law enforcement and consumer protection, right? Which should be protecting people from pyramid schemes. I'm going to quote next from an article in The Nation about MLM lobbying by Rick Perlstein. The targets for that campaign are almost exclusively Republicans. For MLM fraudsters are a huge part of the conservative infrastructure. Of course, in the case of the mighty DeVos family in Michigan, the conservative infrastructure and the MLM industry almost entirely overlap. Richard DeVos Sr., number 60 on Forbes' 2012 list of wealthiest Americans with an estimated net worth of $5 billion made ripping Americans off, founded Amway, short for American Way, in 1959. In 1979, the company was forced by the Federal Trade Commission to tell distributors that
36:18 Robert Evans? over half its distributors do not make money, and that the average distributor made less than $100 a month, a stricture they promptly violated. None of that kept the DeVos family from rising in Republican and conservative politics. After all, between 1991 and 1997, common cause documented, Amway-affiliated companies gave 4.4 million in soft money to the Republican National Committee, DeVos and his wife giving 1 billion in April of 1997 alone. In 2000, Amway gave 1.385 million in soft money to the RNC, just $500 less than Enron. And DeVos hosted a party starring Colin Powell on his private yacht at the Republican National Convention. In 2004, DeVos and his co-founder Jay Van Andel gave 2 million each to the right with Progress for America 527.
37:01 Robert Evans? And in 2006, his son tried and failed to win the Michigan governorship. So, there's a lot of money in the pyramid scheme lobby, and they put a lot of it into politics, and Ackman is not ready for this. Either he just doesn't know this, or he doesn't think about this, or he doesn't think it should matter, because what they're doing is so obviously a pyramid scheme, but legally it's not. Legally Herbalife is not a pyramid scheme. Legally, an MLM is distinct from that, and Herbalife and their fellow businesses have put a lot of lobbying dollars into making sure that's the case. And so, if you're an actual activist, you would just be like, "Well, but it's still wrong, and I'm gonna fight it because it's wrong," knowing that they have already bought
37:44 Robert Evans? the government, and that this is an uphill struggle, and that it's not a fair fight. Bill is not ready for that, and so he's totally caught off guard when a lot of heavy artillery comes to Herbalife's aid. This swarm of counter activist investors, I guess you'd call them, right? So he and his activist investors short the company by a billion dollars, basically. And then these two billionaires, Daniel Loeb, you know, the guy who had been part of that bike.
38:11 Speaker 01 Bike buddy.
38:12 Robert Evans? Right, his bike buddy and Carl Icahn, who is an incredibly sketchy hedge fund billionaire, right? So these two guys get together on the other side of this deal, right? To fuck Ackman, basically, and they're like, okay, if he's shorting it by a billion dollars, all we have to do is pump a bunch of money buying Herbalife stock to put up the stock value until Ackman, all of his, like, his short basically fails and he loses all of that money, right?
38:41 Speaker 01 I thought they were friends.
38:43 Robert Evans? Absolutely not. Nobody likes this guy. And, yeah.
38:49 Speaker 01 Oh, no.
38:49 Robert Evans? And that's, I know, I'm not a finance guy, but that's all you need to know. If Icahn and his friends can keep Herbalife stock up, Bill loses a shitload of money for Pershing, right? And it becomes immediately, once all of these other guys start putting money into Herbalife, it becomes very obvious to everyone watching that Bill is in trouble, that he might lose this because there's a lot of money arrayed against him. Bill somehow can't see it. Now, there's a documentary about Ackman's crusade against Herbalife called Betting on Zero. It's a good watch because if you really, when you watch it, you really get to see how arrogant Bill is at the start. He's very insistent that this is going to work, Herbalife will die, and the US government will punish them and his short will work, right?
39:32 Robert Evans? You get a good example of his rhetoric and his self-confidence in the clip that Sophie's about to play. This is from an interview that Bloomberg conducted, right? And this is by the point at which he's being interviewed for this, his company has already lost half a billion dollars on this failed short. So this is, this is him being interviewed by Bloomberg.
39:54 Speaker 04 They are able to put together an LBO. What is that going to mean for you?
39:57 Speaker 06 Uh, more opportunity for us to be short the company. I mean, a couple of things. Number one, in order for the company to be taken private, they need to get out of the financial statements. Then they need to be able to borrow money. And if you think about the proposition from a lender or an underwriter of a bond issue, I mean, this would be a big deal, right? So the stock today has, let's say, a $7 billion market cap, an $8 billion, something close to an $8 billion enterprise value. Let's assume they paid nine and a half or 10 billion to offer a premium to shareholders, right? They'd have to borrow $5 billion, $6 billion. It should be a major LBO. They'd have to raise $5 billion of equity capital. Uh, I'm not sure Carl is really a big believer in this business on a very long-term basis. But let's assume they could find the equity capital. It'd be very difficult to borrow the money.
40:38 Speaker 06 Assuming they could issue bonds to do it, and we were forced out of the trade because the company was taken private, we'd replace the position with credit default swaps, and we'd keep it going. And this is not-
40:48 Robert Evans? So, he's, again, it can't go wrong. Like, they can't raise the money. There's no way they could do it. It's impossible for this, right? Like, there's no, not a hint in his mind that all, even half a billion dollars down, after failing at JCPenney's in a major way, not a doubt in his mind that this is going to work out. It's remarkable, that kind of confidence. And again-
41:08 Speaker 01 He's got shark eyes.
41:09 Robert Evans? I hate, my enjoyment of this, of him being like really arrogant and wrong, is ruined by the fact that he is in the right. I wish he'd killed Herbalife. That would have been awesome. Right?
41:20 Speaker 01 Yeah. Using your evil money for good, like-
41:24 Robert Evans? Yeah. But that's the thing, though. It's never quite even that. Cause Bill, Bill had hoped to knock Herbalife out of commission via the strength of his own financial power, but he also wanted to get even richer doing it. And when that, you know, it is, I'll say this, when he, when there's initial difficulties, when it becomes clear this is not going to be easy, he does start getting close with a lot of activists, like long time, and these are mostly activists in the Hispanic community, who have been fighting Herbalife for a long time because Herbalife does a lot of damage to Hispanic families, right? They, a lot of people get conned into Herbalife and they lose everything, right? So these longstanding activists who have been pushing for change, Bill- Starts working with them. He does some joint events and you could really see in the documentary
42:08 Robert Evans? that after this first series of blows and he's down half a billion, he's fucking exhausted and like kind of shell shocked by it. And the, these longtime activists are not at all surprised or concerned because they're, they're activists. They know that you're losing 99% of the time. That's the business, right? That's what activism is, is losing most every time until you win.
42:33 Robert Evans? And Bill isn't really, he doesn't have what it takes to do that. Like he doesn't, he can't, he can't handle it. He can't take those hits. Um, he's just not ready for it. He's got no armor for it. He's got no, he can't, he can't handle the fact that like, yes, it's unfair and yes, you're going to lose. And unfortunately, because this is all tied into like a financial bet, he also can't afford to lose past a certain point, right? Cause it's other people's investment money that he's doing this with, that he's losing. Um, and yeah, Bill does, and Bill did say, cause back when he was planning to make a billion dollars doing this, he did repeatedly talk about donating any of his profits. Cause he didn't want to make, he called it blood money. He was like, I don't want to make
43:17 Robert Evans? money off of this personally. And I believe him. I actually don't doubt that he would have donated any of his personal profits. However, as the New York Times noted, the clients who invest in his hedge fund, however, would still benefit enormously. So there's no point at which he doesn't have a financial angle here, right? And that's part of why he's not going to have much long-term appetite to really keep fighting this. I found a good New York Times article from around that period that discusses how Bill used his influence, particularly with Democratic Representative Linda Sanchez of California. And he lobbies her to send a letter to the FTC demanding an investigation of Herbalife. Per the Times, corporate money is forever finding new ways to influence government, but Mr. Ackman's campaign to take this fight to the end of the earth, using every weapon in the arsenal
43:58 Robert Evans? that Washington offers in an attempt to bring ruin to one company is a novel one, fusing the financial markets with the political system. To pressure state and federal regulators to investigate Herbalife, an act that alone could cause its stock to dive. His team has helped organize protests, news conferences, and letter writing campaigns in California, Nevada, Connecticut, New York, and Illinois, although several of the people who signed the letters to state and federal officials say they do not remember sending them. An investigation by the New York Times is found out. So maybe a little sketch there too.
44:30 Speaker 01 Oh, that real grassroots organizing right there.
44:33 Robert Evans? Real, real grassroots stuff. Now, ultimately, the weight of hedge fund guys wanting to see Bill fail was greater than the weight of money and government scrutiny that Bill could bring to bear on Herbalife. And this is unfortunate that he loses. I, I do wish that he had won here. But it's worth exploring, because the reason he loses is that a lot of other rich assholes are willing to go to war with him and risk their own money, because they feel like they can beat him and take his money, right? And to, to, to look into that a little bit more, I want to quote from that, uh, that article for Vanity Fair that Cohen wrote. "It's Ackman's perceived arrogance that gets to his critics. The story I hear from everybody is that one can't help but be intrigued by the guy, just because he's somewhat larger than life. But then one realizes he's just pompous and arrogant, and seems to have been
45:18 Robert Evans? born without the gene that perceives and measures risk. He seems to look at other members of society, even legends such as Carl Icahn, as some sort of subspecies. The disgusted, annoyed look on his face when confronted by the masses beneath him is like what you'd expect to see from someone confronted by a homeless person who hasn't showered in weeks. You can almost see him puckering his nostrils so he doesn't have to smell these inferior creatures." And that's interesting. That other, like psychopathic, and Carl Icahn, this guy defends Carl as an icon. Carl's a bad person. Um, we'll do an episode on him at some point. The fact that he's, the issue these guys have is that, well, he doesn't like us either. He treats us like we're beneath him too. Not just poor people, but other rich people who he doesn't think are like as good a people as him. He's, he's a real dick too.
46:04 Speaker 01 Man, I mean, there's no solidarity amongst thieves, but they really don't like that one specific guy.
46:10 Robert Evans? No. There's, some of the thieves have solidarity against this specific thief.
46:16 Speaker 01 Or no honor amongst, either way, like, you gotta be a real jagoff to like, to fail out of the rich jagoff club.
46:25 Robert Evans? Yeah, it's fascinating. So this all culminates in a giant fight between Carl Icahn and Bill Ackman on CNBC in 2013. And Sophie's gonna play a very short segment of this very remarkable clip. You don't often get to see two billionaires embarrassing each other like this on live TV. It's very funny. We're just gonna play you a brief little segment of it. This is Bill.
46:47 Speaker 04 Thing called me up, and he literally said, you know, Bill, we can be friends now. I, I never said that I want to be friends with, with.
46:53 Robert Evans? Okay, let's let's move on. I wouldn't do this with you. Let's move on. You're the worst man on earth. Hey, listen, if I'm going to admit it, I'm not going to let that I won't. He called me and said he wanted to be friends, actually, after this. We're going to be up, Bill. That's Bill being like, Carl called me and said I want to be. I didn't say that to you. What? You're the worst man on earth.
47:11 Speaker 02 It's incredible.
47:13 Robert Evans? It's so funny.
47:15 Speaker 02 That's hilarious.
47:16 Robert Evans? Oh, my god. Oh.
47:18 Speaker 02 Oh, man.
47:19 Robert Evans? It would take years for Bill to give up on his crusade against Herbalife, but the short summary is that he did lose badly in the end.
47:26 Speaker 02 Yeah.
47:26 Robert Evans? On November of 2017, Herbalife's stock ended up 51% year over year, which is really bad if you're shorting them. This inspired Ackman to cut his short position and convert it to a put position, but that doesn't really work either. In June of 2019, he dumps all of his remaining positions, effectively acknowledging that his $1 billion bet had been a failure. Herbalife's stock went up 6.3% at the news. Yeah, and we'll talk about what happens next for old Bill. But first, what happens next for you is these ads.
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49:40 Robert Evans? And we're back. I do feel bad that Bill lost against Herbalife. Like, I wanted him to kill him, but...
49:46 Speaker 01 Yeah. It's like, who do you root for? You, like...
49:50 Robert Evans? I would have been happy in this case if he'd made a billion dollars fucking up Herbalife, but he doesn't. He kinda does the opposite.
49:57 Speaker 01 He made it stronger.
49:58 Robert Evans? He makes it stronger, kinda, yeah. Bad news. Again, you can't, in this case, you can't use the master's tools to dismantle the master, right? That's a flaw, not a fully, not a statement I always agree with, but certainly in this case, it's proven true.
50:15 Robert Evans? So, I'm not gonna spend all of the rest of these episodes listing all of Bill's hits and failures, right? Because he does have a lot of other hits. He's not just fuck-ups. He makes a lot of money activist investing in Chipotle. He also loses a bunch of money. He makes like a $200 million investment into Borders, which failure, fails spectacularly. Because, like, they file for bankruptcy not long after. And Bill acknowledges this investment as a big mistake, but right after making the investment in 2010, he got on CNBC's Fast Money and said, "I think the company has stabilized. The stock trades as if it's going bankrupt, but we don't see that as a likely behavior. I think Borders is much more attractive risk reward than Barnes & Noble. Ultimately, I think the industry may consolidate. The two companies may become one." And that, again, very telling of Bill, that he's like,
51:00 Robert Evans? "Well, the stock's acting like the company's going bankrupt. Probably not gonna happen, though. Good place to park $200 million."
51:08 Speaker 01 This man has killed every company my grandmother loved.
51:11 Robert Evans? It's funny, yeah.
51:14 Robert Evans? So
51:15 Speaker 01 What a bastard.
51:16 Robert Evans? And the fact that none of that, because that article is from 2010, when, when Bill's record was much better, but the fact that none of his predictions here are right makes something I found at the end of that CNBC article very funny. For a donation of $1,000, you could be among a small group of 200 people who have the opportunity to gain investment insights directly from Bill Ackman during the Harbor Investment Conference. Oh, boy. Wish I'd gotten some of those, those insights.
51:41 Speaker 01 Damn. What a scam.
51:44 Robert Evans? So by the time we start approaching the Trump years, the bloom is firmly off the rose in terms of Bill's reputation as an investor. Now, he's still a multi-billionaire. He's worth eight or nine billion dollars. His fund is still worth a lot of money. He has a lot of successes. It's not like he always fails. There's always successes alongside the failures, but his big hits are about as numerous as his big failures. Central to each of these is Bill's fundamental unwillingness to acknowledge the possibility that he might ever be wrong. Herbalife was definitely gonna hit zero. Ron Johnson was for sure the right guy to fix JCPenney. Borders can't go bankrupt, you know? In early 2015, Ackman's hedge fund
52:26 Robert Evans? started putting money on Valeant Pharmaceuticals. Their business was acquiring small drug companies, firing people, and then jacking up the price of medication. And Ackman thought this was a great idea. Awesome business to be in. Per an article published on LinkedIn, he believed Valeant represented the future of pharmaceutical efficiency, cutting out traditional research and development expenses in favor of acquisitions and pricing power. Yeah, why actually figure out how to make drugs when we can just cut up companies that are actually doing research and selling them for scrap? The only thing I do. Now, long story short, everything goes wrong with this investment. As soon as Bill puts money down, the SEC starts scrutinizing
53:11 Robert Evans? Valeant for price gouging. And Bill, when people are like, hey, should we pull our money out? This could be an issue. Bill refuses to see it as a problem. He doubles down, increasing his stake in Valeant even as the stock tumbles. It's a classic case. Of overconfidence and just like there's it's this
53:27 Speaker 02 Dude, just take an L.
53:29 Robert Evans? This psychological trap that these guys find themselves in where they're like, no, the market's got to correct, it's got to correct, it's got to correct. And they just never get shit, their shit together.
53:36 Speaker 02 Wow.
53:37 Robert Evans? Um, in the course of a year, Valiant stock goes from 250 bucks a share to $10 a share. Pershing Square loses like $4 billion and Bill's reputation takes a hit from which it has not quite recovered. But by 2019, he was in the black again, posting a 58.1% return that year. So again, another massive fuck up and failure to see things, but overall, in part because he's working at a big fund, he has employees like Halal, who are making good decisions. The company overall is doing really well. That's not unrelated from all of Bill's decisions, but you've seen now he's made a lot of fuck ups too.
54:12 Speaker 02 Right.
54:13 Robert Evans? For Bill, redemption for all of his failures would come during what was for everyone else, a very bad year, 2020. In the spring of that year, not long after the first US cases of COVID-19 were confirmed, Bill began positioning himself to basically short the US economy. Over the course of 10 days, he bought a bunch of credit default swaps on corporate bonds. These are agreements where the seller pays the buyer if a specific debt defaults. They're a bet on things getting worse very quickly. As Ackman later said, there was this massive storm coming. We could see the storm, but everyone else was playing on a beach. It only cost us $27 million. 10 days later, it became worth $2.6 billion. We took that money in March of 2020 with the market down 30% and we bought stocks.
54:59 Robert Evans? So Bill and Pershing make a fortune betting correctly on economic disruption caused by the pandemic. But Bill doesn't just put his money there. He uses his PR savvy to stoke as much fear, uncertainty and doubt as possible on the market. At least that's what some people will argue. On March 18th, which is about a week into him starting to make these investments, he posts this long Twitter thread addressed to President Trump. "Mr. President, the only answer is to shut down the economy for the next, the country for the next 30 days and close the borders. Tell all Americans that you are putting us on an extended spring break." At home with family, keep only essential services open. The government pays wages until we reopen. And shortly thereafter, he gave an interview with CNBC in which he warned hell is coming.
55:43 Robert Evans? As Brian Baker wrote in an article for MSN, Ackman had essentially bet on the US economy undergoing a massive short term shock due to the lockdown. And some believe his messaging induced further panic. And this is kind of morally, nothing Bill said is wrong. Like, that is accurate, right? Both in terms of what Trump should have done, simped kind of what he did. And also true in terms of like, yeah, hell was in fact coming for large segments of the US economy in that period. And it's not wrong to say that or urge a lockdown. But is it wrong to do that? His wallet. You've shorted the economy as part of an investment strategy. Yes. Maybe that's kind of, you know, evil, right? Some people might say.
56:28 Robert Evans? Yeah.
56:29 Speaker 01 You can't, you can't be, saying something that's a little bit right or a little bit helpful doesn't mean all of the evil. It doesn't cancel it out.
56:38 Robert Evans? Or, or the fact that you're doing it to make money, not because like you want the country to do the right thing, right? As Brian Baker wrote in that MSN article, one of Ackman's many critics was Galaxy Digital CEO Mike Novogratz, who reacted to Ackman's CNBC interview with a request for the network. Please get Ackman off CNBC before people start jumping off bridges. Oh, man. Stephanie Ruley, a former banker and MSNBC correspondent, called Ackman's rhetoric wildly irresponsible. In putting on that grand show while he was getting choked up and talking about his father, he caused the markets to puke and he caused the circuit breakers to trigger, she told The Guardian, adding that it was perplexing to see Ackman cause such a scene since he was very well respected. I'm not emotional about investments, Ackman once shared with The New York Times.
57:22 Robert Evans? Investing is something where you just have to be purely rational and not let emotion affect your decision making. Just the facts. And that all makes me think, yeah, Bill kinda was trying to stoke. He was not wrong, but he was also specifically wanted to stir things up because it would be good for these investments he'd made, right?
57:40 Speaker 01 There's this whole pattern that you've laid out of him doing that a lot.
57:44 Robert Evans? He does that a bunch, yeah. It's not, it's not a conspiracy theory, really, when that's how he got rich. Yeah.
57:51 Speaker 01 Like, preferred tactic, one might say.
57:53 Robert Evans? That's how he makes his money. So Bill had previously been someone that you couldn't accuse, at least. One thing we can say about him up to this point, not a right wing hardliner. Going after Herbalife is not a conservative thing to do, right? That's actually arguably a progressive thing to do, not necessarily the way he did it, but we'll give some credit there. But during the Biden years, he goes on a rightward lurch that seems somewhat out of place, given his enmity to a major Republican Party donor. And a lot of his explicable, a lot of his rightward tilt in the latter Biden years is explicable by the fact that on October 7th, 2023, Hamas carries out a massive raid on Israel, right? We all know about what happened there and what happens, what's, what's continued to happen.
58:38 Robert Evans? And Ackman is a huge supporter of Israel, right? He is, he has taken the most Israel hawk approach and, and interpretation of everything that's happened ever since, right? That is the kind of guy that he is here. And when students on college campuses started protesting Israeli atrocities in response to the October 7th attacks, Bill got activated, right? What particularly tips him off, I mean, he's just very, he's obviously horrified at the, the raid itself, and then he supports Israel's response. And when it becomes clear that a lot of Americans don't, and that the kind of media shield that Israel has enjoyed in a lot of its responses and a lot of like the violence that it's carried out over the years is failing, right? Especially as things escalate to outright genocide.
59:22 Speaker 01 Yeah.
59:22 Robert Evans? He does, Ackman cannot take that, right? Like, that, that is not a thing that he likes to see. And it's particularly all of these college student protesters that drive him crazy. He is livid at the fact that there are protests on the Harvard campus. And he demands publicly that Harvard- Harvard name any students who quote blame Israel for the attack so that he and other CEOs wouldn't inadvertently hire any of them. I remember that. Yeah, this is the big news, right? Oh, yeah. And Harvard like does it for one thing, they don't have data on that like, like, right? Like, yeah, how would they know?
59:59 Speaker 01 I mean, this is why you never sign up for protest kits.
1:00:03 Robert Evans? Right, right. So when Harvard refuses, he grows angrier. Per an article in New York Magazine by Kevin Dugan, his attacks against the university started picking up steam following the December 5 congressional hearing with the presidents of Harvard, the University of Pennsylvania, and the Massachusetts Institute of Technology. During questioning from Representative Elise Stefanic of New York, Harvard President Claudine Gay didn't explicitly agree that calling for genocide against Jewish people would violate Harvard's speech standards. She said it was personally abhorrent to her and later apologized. Ackman then amplified Stefanic and conservative activist Christopher Rufo in attacking Gay, as well as Liz McGill of UPenn and Sally Kornbluth of MIT for equivocating about antisemitism on campus. In this, Ackman was not quite a leader in the crusade, but a strong supporting member
1:00:47 Robert Evans? of the team in demanding the resignations of all three presidents. And I'm not going to relitigate the Claudine Gay plagiarism controversy thing here because honestly, I just don't find it that interesting. It should never have really been that big a deal, right? Harvard initially promised to support her, but Ackman stayed on the attack, arguing that she had plagiarized or failed to properly cite sources more than 50 times. And Gay had made some mistakes. She submitted corrections to at least three of her papers. I don't, I don't care to go to bat for her or to condemn her for a bunch of like mild malfeasance to moderate malfeasance in her college years. I just don't care all that much.
1:01:24 Speaker 01 Does that even matter?
1:01:25 Robert Evans? He also, but Bill does. Bill is really obsessive about this. And he also tweets at length about Mark Gorenberg, MIT's chairman, for reasons that are a little less clear because Mark's not really involved in a college, you know, protest controversy thing. But Bill has issues with Mark's wife, per Kevin Dugan writing for Vanity Fair. The connection here is that Gorenberg's wife Catherine Stickney is the founder of parity.org, a nonprofit that advocates for women in business. To Ackman, though, parity.org is part of the larger problem on college campuses, which have taken on diversity, equity, and inclusion management philosophies. "Under DEI, one's degree of oppression is determined based on where one resides in a so-called intersectional pyramid of oppression,
1:02:10 Robert Evans? where whites, Jews, and Asians are deemed oppressors, and a subset of people of color, LGBTQ people and/or women are deemed to be oppressed," Ackman wrote. In Ackman's original tweet about Gorenberg, he insinuated that Gorenberg had improperly used MIT to fund Stickney's organization. He noted that parity.org reported no revenues and received all of its funding through MIT-associated funds. "In short, this does not look like a legitimate nonprofit. Rather, it looks like a sinecure for the wife of the chairman of MIT," he wrote in a follow-up tweet. So he's going hardcore into anti-DEI after, you know, hardcore into protests on campus, antisemitism on campus. He really hates the fact that this guy's wife is working for,
1:02:51 Robert Evans? like, an organization that's trying to improve equity. He's getting into all of these weird right-wing, like-
1:02:58 Speaker 01 Women in business are not really-
1:02:59 Robert Evans? Yeah.
1:03:00 Speaker 01 He doesn't like that.
1:03:01 Robert Evans? Yeah.
1:03:01 Speaker 01 That's like a hard line.
1:03:03 Robert Evans? And it is. This is very, you can draw a line to that. You can draw a line to his earlier issues at Harvard while he's writing his, you know, his thesis there. Now, Ackman ultimately backtracks on some of his allegations against Gorenberg's wife, but he continues accusing Gorenberg of tax fraud. And this doesn't really work out in the long run. But, you know, it does in some of these cases. They do succeed. Bill and his fellow oligarchs succeed in getting several college presidents shit canned, including Gay. Although Bill is really unhappy that she doesn't get fired by the university, she's still employed as a professor. Writing for The Atlantic, Kurt Anderson describes what happened next. "When former President Gay was hired, I knew little about her, but I was instinctually happy
1:03:46 Robert Evans? for Harvard and the black community," Ackman posted while on holiday in the Caribbean, the day after he'd helped force her out over her plagiarism. "But now, given her handling of the Harvard anti-Israel protests, he'd realized that she was not qualified, having been chosen by a board looking for a DEI-approved candidate. And by the way, in light of the amount, nature, and degree of plagiarism that had surfaced in her work, why wasn't she also booted from her tenured Harvard professorship?" The very next day, Business Insider, so this is the day after she's fired. He can't let up on this. He's got to keep stomping on this woman, trying to get her career entirely destroyed because she had the temerity to be like a woman who wasn't mean enough to people he didn't like. And the day after this happens, Business Insider
1:04:28 Robert Evans? publishes an article of their own. And this one was, this is another plagiarism investigation. This one was into plagiarism by an artist slash technologist who was also a former MIT professor named Neri Oxman. Neri Oxman just happened to be Bill Ackman's wife. This is his most recent wife.
1:04:46 Speaker 01 I was gonna say, what happened to Karen?
1:04:48 Robert Evans? Not in the picture anymore. We've got Neri in here now.
1:04:51 Speaker 01 She got out.
1:04:52 Robert Evans? I try to avoid generally talking about people's families here, but this is unavoidable because this is a big part of the Bill Ackman story. Now, the reality is that Neri Oxman's plagiarism was, in my opinion, about as serious as Claudine Gay's and that no one reasonable should care about this all that much on its own. These were all pretty minor examples of people screwing up and being lazy, right? But where Ackman had seen Gay's mistakes as damning, he sees his wife's as defensible. And this is what's funny, right? And I think Business Insider was right to publish this. If none of this had happened, if Ackman hadn't gone after Gay, I would say this article would have been in bad taste. But because Ackman makes himself into this anti plagiarism activist, it's pretty relevant that his wife does the same thing that Gay did, right?
1:05:36 Speaker 01 That's almost cinematic. Like, that's
1:05:38 Robert Evans? Yeah.
1:05:39 Speaker 01 That feels made up. Like, it's too perfect. Except, I'm sure they came with the receipts.
1:05:45 Robert Evans? Yeah. And I gotta continue with a quote from that Vanity Fair article here. "His invented euphemisms include," this is talking about how he defends his wife. "His invented euphemisms include clerical errors. He invents a statistical metric as well. Because only a few of the 2,774 paragraphs in her thesis contained text copied from elsewhere without quotation marks, she had an error rate of .1141%, which is pretty darn good, and her error rate for sentences, even better. And a per-sentence basis, she doesn't plagiarize all that much." And he's writing like 5,000-word essays. Says that he's like publishing, defending his wife and talking thousands of words, talking about his wife's plagiarism, but how it's not bad, but it just looks terrible for her. Cause your husband's
1:06:30 Speaker 01 Streisand effect in the whole thing.
1:06:32 Robert Evans? Exactly. If your husband's putting out a 6,000 word article every day about like how your plagiarism is defensible, doesn't make you look like a good academic, unfortunately.
1:06:46 Speaker 01 The lady don't protest too much, that the lady is your wacky rich husband, whoever and hates.
1:06:50 Robert Evans? A little bit. So defending her 15, oh, sorry, I'm going to continue with that quote. Defending her 15 uncredited cut and paste of passages from Wikipedia of all sources. The pathos and comedy are extreme. I am sure that when Neri wrote her dissertation, she was 33, she thought that there was nothing wrong with using Wikipedia as a dictionary. He writes the day after the story broke. In his later, longer apology, he reveals what he thinks is a gotcha loophole that exonerates her completely. The good news is that their lawyers used the Wayback Machine to discover that MIT's Academic Integrity Handbook did not require citation or even mention Wikipedia until 2013, four years after Neri wrote her dissertation. Yeah, man, that word, that sounds good. That makes your wife sound like a serious thinker. Good work, buddy.
1:07:34 Speaker 01 Ah geez, really just the technicalities are not helping.
1:07:38 Robert Evans? Ouch. And again, do I think this is all the worst stuff in the world worthy of like multiple investigative pieces of journalism? No, but you kind of argued that this was. And so the fact that people are doing this to your wife now, kind of turned about as fair play, Bill. So Bill had been reached out to for comment before the article was published and he blamed weak wifi for being unable to respond in time. The Business Insider journalists had extended their deadline, but Ackman and Oxman couldn't make it because it would have required postponing their flight and their private jet to do so. And he complains this is unfair. Bill takes to Twitter to defend his wife and of course, she is soon the number one trending topic because her husband will not stop tweeting about her plagiarism allegations
1:08:23 Robert Evans? in a very funny way. Wow.
1:08:26 Speaker 01 You know, they have wifi on those private jets. So that's nonsense.
1:08:29 Robert Evans? It's nonsense. In one of his early posts, he bragged that none of Business Insider's reporting would interview with Neri's success because she made the brilliant decision to leave academia, in some part due to her marriage with me. She made the good financial decision to marry a billionaire. So it doesn't really hurt her that she's being dragged through the mud here. Also, she's already raised a lot of money for her own startup. So she's doing fine. Then he turns around after saying, none of this has hurt us at all. He turns around and says, Business Insider's reporting has been catastrophically damaging to my wife. He like threatens legal action. He goes to like the people who own the company that owns, like he's trying to do everything he can to get these articles retracted, to get Business
1:09:13 Robert Evans? Insider to pull the piece, to do damage to these reports. Like, he so wants this to go away and no one's willing to play ball with him. Like even the people who like should be on his side, because like their other Trumpy business people, aren't willing to go to bat with him to purge this article about his wife.
1:09:30 Speaker 01 Because he's too annoying.
1:09:32 Robert Evans? He's too annoying. And he's just like, again, you can't both say this doesn't do any damage to us at all. And also, I want to be able to sue for damages. He claims, Business Insider's campaign to destroy Neri could have literally killed her, and then insists she only survived because of profound love and support from me. My wife would have died because of how mean your article was. If I wasn't such a good husband.
1:09:56 Speaker 01 Your mean tweets were actually bombs lobbed into our family home. You have to give me more money for it.
1:10:03 Robert Evans? So Bill took time in this whole embarrassing episode to lick Elon Musk's boots, posting, we should all be grateful that X is owned by Musk. He insisted that he and Neri would not have been able to respond in such a rapid fashion without Musk's free speech absolutism. And then he drops this chestnut. The code of the road was that you can attack the protagonist as much as you want, but not his wife and his kids. First off, Bill, you're not the protagonist. I'm sorry, man. And second, you attacked fucking that guy at MIT's wife for no reason, man. In the 2024 election, Bill Ackman officially endorsed Donald Trump, completing his transition
1:10:45 Robert Evans? to MAGA guy. And the year and change since, or two years or so since, he has remade himself into a total stooge of the administration.
1:10:52 Speaker 01 Yeah.
1:10:53 Robert Evans? In February of 2026, he made, he was like, "The Epstein files have become a McCarthy-era thing. Like, it's reached its McCarthy stage. Innocent people are being slandered. We gotta stop looking into the Epstein files." Right? More recently, like, literally, just like, in March, like, at the end of March, he made a public statement that, like, "This is the best time ever to buy quality stocks because of how much damage has been done to the global economy because of Trump's new Iran war. Great time to get in the stocks."
1:11:21 Speaker 01 Ah, what is he up to? He's doing something.
1:11:24 Robert Evans? Speaking of that war, immediately after Trump launched his new war with Iran, Bill declared it would be "a very good war," per news break. "Iran has been, I think, a major funder of anti-American protests and kind of otherwise," Ackman told reporter Sarah Eisen. "I think the war is a very good one. The war is a very good one," she repeated. "It's very unpopular, though." Ackman predicted its near conclusion. "I think we're almost done," he said. "I think it's weeks as opposed to many months, a few months as opposed to, it's not years. This is towards the tail end of a war." On whether the war has made Ackman think differently about investment opportunities in the Middle East, he said the Middle East has been "reset in a very positive way. It's not been good to be a terrorist in the last couple of years. The greatest enemies of democracy have been set back in a dramatic way."
1:12:08 Robert Evans? What makes this so funny to me is that on February 11th, not all that long before Trump started the war, Bill had his annual Investor Day, and he told everybody, "I don't foresee any, like, Black Swan-type events on the horizon. They're gonna bring about an opportunity for cheap asymmetric trades." Like, there's not gonna be a sudden massive change to, like, oil futures that we could take advantage of. Nothing like that's gonna happen. And then, two weeks later, oil futures jumped 40%, and Bill totally fails to cash it, right? This is like a COVID-level market disruption, and he completely fails to make a buck off of it because he's now completely been taken over by the ideological stuff. He can't actually look at the world as it is.
1:12:49 Robert Evans? And make good decisions anymore. It all has to fit into this ideological schema that he's gotten trapped in. So he can't actually identify real weaknesses and opportunities anymore. It was why I'm not going through all of this. He tried to launch like a fucking investment fund. That was a catastrophic, like $25 billion failure. And he's trying to relaunch it now at like a lower cap and it's not going to work. Like, I think Bill is still rich and always will be, you know? He's not going to suffer for this. Other than that, I don't think he's capable of really seeing the world in the way that he used to be able to, to make the good business decisions he was. Cause he's become completely caught up in the ideology of it all. Like, he's not actually looking at reality anymore.
1:13:35 Robert Evans? And that's where we'll end the story for now.
1:13:38 Speaker 01 What a guy. Yeah, the business, he lost his business mojo. Now he's just a jagoff.
1:13:43 Robert Evans? Now he's just a jagoff. Yeah. Anyway, that's the tale of the activist investor. How we feeling?
1:13:51 Speaker 01 I learned a lot.
1:13:52 Robert Evans? Good.
1:13:52 Speaker 01 Man, I'm so, because I had seen this, this, you know, Tom Fuller on Twitter, like, who's this guy? Like, who's this jagoff? But just the, the, the decades of buildup to him becoming this specific flavor of jagoff. That really makes it so much sweeter to see him fail and to now know that I should actively be rooting against him.
1:14:12 Robert Evans? You shouldn't be rooting against him. Absolutely. Yes.
1:14:16 Speaker 02 Wow. Kim, you want to plug your books one more time for the audience here before we head out?
1:14:22 Speaker 01 Sure. If you were listening to this and wondering, what were the workers up to? How are they doing? You might enjoy the books I have written about workers. Just the young adult or young readers edition of my book just came out. It's called Fight to Win for ages like eight and up. It's really cute, very diverse, inclusive, all these things that Bill Ackman does not like in book form for your young rebels and radicals. And a few years ago, I wrote a grown up book called Fight Like Hell, The Untold History of American Labor. Just kind of like
1:14:56 Robert Evans? Excellent.
1:14:57 Speaker 01 A people's history of labor in America. And I think it's pretty good. It's still out there. Get it from the library. I don't care.
1:15:04 Robert Evans? Yeah, absolutely. All right, everybody.
1:15:08 Robert Evans? Check out Kim's book and check out, well, don't check out Bill Ackman. Pay very little attention to Bill Ackman, actually. That's the best bet. All right. Bye, everybody.
1:15:18 Speaker 02 Bye.
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