Bill Ackman: Investing, Financial Battles, Harvard, DEI, X & Free Speech | Lex Fridman Podcast #413

The only person who could cause you more harm than a thief with a dagger is a journalist with a pen.

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. 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. In your lecture on the basics of finance and investing, you, uh, 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?

Sure. Actually, it was the first investment book I read. And, uh, 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 investing in markets, World War II, and then he writes this book, and 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. Uh, makes you a great offer, you can take it. And that's the stock market. And the key is to figure out what something's worth, and you have to, kind of, weigh it. He talked about the difference between... You know, he said the stock market in the short term is a voting machine. It represents speculative interests, you know, supply and demand of people, uh, in the short term. But in the long term, it's, the stock market's a weighing machine, you know, much more accurate. It's gonna tell you what something is 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.

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

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

Strong words.

(laughs) Well, uh, short-term trading crypto. Maybe in the long run, there's intrinsic value. But, uh, the, you know, it's, uh, many investors, you know, in a bubble going into the, you know, the, the crash, uh, were really just pure speculators. They didn't know what things were worth, they just knew they were going up, right? That's speculation. Um, and investing, uh, is, you know, doing your homework, uh, digging down, understanding a business, understanding the competitive dynamics of an industry, understanding what management's gonna do, understanding what price you're gonna pay. You know, the value of anything, I would say, uh, other than love, let's say, uh, is the present value of the cash you can take out of it over its life. Now, some people think about love that way, (laughs) but it's not, it's not the right way to think about love. But it's, um, yeah, so investing is about basically building a, uh, a model of what this business is gonna produce over its lifetime.