Bill Ackman: People are Going to Lose a Lot of Money

KEYPOINTS

• 01

  AI is the most transformational technology of our lifetimes, with bubble-like pockets—especially private venture.

  Ackman saw a company that wasn’t raising get preempted with $50M at a $400M valuation, then raise another $50M at $1B two weeks later, and a Series A at $5B pre-money. Bubbles form when money is being made, FOMO pulls more capital into the same trade, and overvaluation follows. He expects ‘some form of a blow-up, a pretty high-profile one’ that forces a reset.

• 02

  Founders should raise while capital is cheap but spend it as if it were their own.

  He recalls a Barron’s piece late in the dot-com bubble listing how many months of cash each internet company had left—published roughly a week before the crash. Companies that take $50–100M often abandon bootstrapping discipline and assume markets will always reopen. Those with years of runway survive; those needing money in three months die.

• 03

  The core investing task is judging disruption risk, and AI has massively raised it.

  A business is worth the present value of its lifetime cash, so you must predict it 10–30 years out; Pershing tests holdings by asking whether they’d be happy owning them if the market shut for a decade. Even Buffett failed to foresee internet disruption (Wikipedia vs World Book). With AI ‘all of us are guaranteed to look foolish’ on some company. Software updates of consequence now arrive in days, not years.

• 04

  AI efficiency gains don’t automatically become profit—pricing power decides who keeps them.

  Cognition can rewrite banks’ legacy COBOL in days instead of months, cutting the cost of running big institutions. But if every competitor adopts the same tools, savings may pass to customers; money is a commodity, so banks may not keep the margin. Infrastructure players like Brookfield (power, data centres) look like clear winners given ‘effectively infinite demand for compute.’

• 05

  AI is a research aid, not an edge—Pershing’s best returns came from things nobody had done before.

  When everyone has the same AI, it’s hard to differentiate; AI largely reviews what already happened. His biggest wins—credit default swaps before COVID, buying a bankrupt company’s stock, shorting AAA-rated credit before the financial crisis—couldn’t have come from a model. What remains human is outside-the-box thinking and insight from the facts.

• 06

  The investment process: a ‘library’ of great companies, then wait for price.

  They follow the best businesses for years and shelve them when a 35x multiple can’t deliver their 20%+ target, then strike on dislocations—COVID, or the ‘SaaS-apocalypse’ that let them buy Microsoft. Two analysts read filings and call transcripts, use expert networks, former employees and competitors, build a model and present; Ackman and the CIO do an independent lighter pass; five team members who haven’t done the work stress-test it.

• 07

  After a large loss around 2015–16, principles were literally engraved on a stone tablet.

  The checklist: simple, predictable, free-cash-flow-generative, large-cap, liquid companies with wide moats and top management—or a replacement CEO in mind. Plus asymmetric macro bets where a contrarian view can be expressed with a large payoff relative to capital. And an aversion to short-selling: ‘asymmetry in reverse,’ with infinite loss and finite gain.

• 08

  Permanent capital is the underrated Berkshire advantage Pershing has copied.

  Charlie Munger told him Berkshire’s most underrated edge was almost never being forced into decisions by circumstances. Hedge funds lose money when they do well (allocators trim) and when they do badly. Ackman blames his biggest mistake on being on the road fundraising. Pershing now runs only listed, permanent vehicles with large employee stakes; compounding near historic rates, he says, implies about $1 trillion in 20 years.

• 09

  Howard Hughes is being turned into a ‘modern-day Berkshire Hathaway.’

  Pershing owns 47%. Its master-planned communities—like The Woodlands, a Houston city of ~150,000—self-liquidate by selling land to homebuilders, plus Hawaii condos ($4B under contract) and ~$300M of net operating income. Rather than reinvest in more real estate, cash will go into Vantage, a specialty insurer with a newly recruited team. Float sits in short-term Treasuries; surplus goes into common stocks. Profitable underwriting plus strong asset returns can yield 20%+; the mix could shift from ~70% real estate to 70–75% insurance in five years.

• 10

  In venture you bet on the person; in public markets on the business.

  Dominant public companies can survive a CEO swap; a startup without its founder is probably a write-off. The original idea often fails, so what matters is the founder’s ability to navigate roadblocks. He judges CEOs on passion, capability, energy and character and believes he can assess that in about an hour.