We can't have another bank closure, one more, and it's going to get messy. If it's Biden. Trump, I think Trump wins. I think it's a very interesting opportunity for someone who's not inside the political system to run for office. My favorite version of events is Jamie dimon. They've got a, the Biden wealth tax. It's going to bankrupt every startup. No one will ever start a business in America.
This 20 VC is one of the most hotly anticipated shows we have ever done. I'm so excited to welcome Bill, Ackman 220v see today in one of his most revealing interviews, yet we discuss the current banking
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Bill, I am so excited for this. I've had so many great things I just told you, I was messing with Jackie Reese's, but had so many wonderful things. So, thank you so much for joining me. Stay, I'm delighted to be here. I would love to start. I've listened to many of your interviews before and bluntly, I want to ask different questions and so I want to start with you and to HBS and then he found a Gotham. How is raising the first
fund was fun. It was a bit like blind dating while blind dates not much success. I think we
actually saw well over 100 people and we had six people ultimately say yes, and give us money and the six people total 3.1 million dollars, actually three million and my partner and I put a bond
together. What what what didn't work? 100 meetings. There must have been some lessons. What
was interesting is anyone who knew me as a kid wouldn't give us money and the same with true for my partner because they thought of me, the perspective was me as a high school kid or a elementary school kid or whatever. So I had no success with anyone. I knew but oddly original 64, the
Were in the Forbes 400 wealthiest people in America. So we went to people who were worth four hundred million dollars, we asked them for half million bucks and that was a good strategy actually. And what's interesting is we the people who were entrepreneurs really like the idea of backing a couple of young guys who are entrepreneurs and I think that was a big part of the connection and the pitch we made she's look we're not doing Venture Capital, we're investing in public companies, what we're doing detailed due diligence, we have no track record but we have a strategy that has an excellent track record. We were Warren Buffett devotees.
He's and we should look for putting all of our Collective networks in. We're missing out on the opportunity to go work at McKinsey or Goldman Sachs to do this. We've been successful up to date and everything. We've done whatever I did. Well, in high school went to a good college did well, they're gone to Harvard Business School, had success in my job, prior to Business Schools. We sold them on track record of Life, success, no experience, a lot of moxie and you know what, if we fail, you're not going to lose all your money cuz we don't use leverage. We're buying real companies at a discount to what they're worth reasonably.
Often traded. One of the interesting things that happened is my partner. David Berkowitz said Bill, unless we raised three million, I'm not going forward with you. And so, we are stubbornly stuck at 26 and it's like February. And we're like, look, we don't launch by March 1. We're done. When we went to see people, we actually wrote up a number of investment ideas, and we were out of four companies. And one of the guys we went to see was the error of a famous, New York City, real estate family, and he turns doubt, but he invested in all the ideas. One of them was up 90% between the time we saw.
Saw him when was a 51 like doubled and like the short we recommended. Implode it was like an incredible thing and he calls his up sheepishly. And he says, look, I invested in your ideas and I felt it was morally wrong for me, not to invest with you guys. And he gave us a half a million bucks and that was the increment that God is over the three million dollar Mark and he
started and we made it to 3.1 with that. Check you mentioned David there. What did you learn about great Partnerships from that first partnership with
David, David was a great partner and
Remain really great friends. We don't see each other as much as I would like, we actually the very beginning, we live together, but funny story, I had worked for a company called General Atlantic real estate. The real estate private Equity, subsidiary of the well-known Venture firm, it's something they disbanded over time. I worked there for the summer and I got an apartment. They give me a good deal on an apartment in a building at address with 360 East 88th Street and we share the apartment but keeping costs down at the very beginning of time. And kind of funny story is you know many, many years later. My daughter my youngest
Daughter was in the building with the nanny on our way to a play date. And she said, she was here to see with cell. We zachman here to see some other child in the building. And the doorman said, were the concierge, whatever they called. It said, oh, Ackman used to be someone named Ahmed. Who lived in this building? They me eight or nine years ago. Would it be Bill?
Ackman. She said, yeah, Bill Ackman
and the guy laughed and laughed, is he married? And she said, yes, he said to a woman. She said, yes. So the two of us living together. They thought we were a couple and it would
Because the building didn't allow singles to share Apartments, but because I had worked for the landlord they made the exception. I don't know if it's relevant for your particular podcast, but I thought it was so funny story. My point is we spent a lot of time to get up originally office out of that little apartment while we were raising money and then we eventually got a real office. And the key thing is picking someone that you totally trust and David is one of the executives, of trust cetera. And I do the same for his kids. So if you can work together succeed together, go.
Oh, through some challenging times together and still want rely on the other. For the most trusted things. That's a pretty good-sized choose your partner's carefully but choose someone you totally
trust. Can I ask you, do you start from Full trust and it's there to be lost or do you start from none and it's there to be gained probably neither I
form a view of a person's character pretty quickly. The vast majority of the time I've been right with only a few disappointments I would say and the disappointments have been cases in most cases and there have been many where my spy
I sense a little bit of concern, but I chose to ignore the gut instinct gut is actually part of your brain through come to learn. I think, over time and I think it's important to listen to it. And I've learned to listen to it a little more carefully, but it's surrounded. By the way, it depends on what you're trusting. Someone with degree of trust required for someone to take care of a child or a parent versus someone to invest with a small sum a bank CEO of different kinds of fiduciaries where it depends on, what kind of trust you need, someone you're going to work with. So it depends what David is saying.
Um when I was in the classroom with at HBS, for basically a full year and then spent a lot of time with them the second year I had a pretty good understanding of who he was by the time he went into business together and I wasn't surprised by
anything we manage in Jurassic when you think about what you're running from. What do you think you're running from? I don't know, think I'm running from anything, you know, I'm running toward things, what are you running towards greater
happiness, self-actualization great relationships friendships and what am I running work way from maybe death disease. What I want to minimize the risk of something.
Bad happening. What do I want to maximize happiness? And where does it come from? Fulfillment relationship? Self-actualization achievements? Things like
this, can I be blunt you? Appreciate happiness. When you have it, it's very hard. When you're on a treadmill, you look back to sharing that apartment with David, having a three million fund. Now, if you could see yourself back, then you'd say you have everything I could have dreamed of a more, do you appreciate that happiness when you have it, of course and I'm by the way, I've been
consistently happy pretty much since birth. I've had volatility in
My career, I've had volatility in my marriage. I'm now married again. I've gone through challenging times and I've experienced sadness and loss of all those things. But I think the undergirding support here is happiness, I'm an optimist and I'm happy guy.
You mentioned on your interview Shane Parish I was just listening to it on the run. You said about nothing ever being a straight line up when you think about you all line so to speak in terms of the distractor e, what was the biggest dip and what did you learn from that specific moment? So I would
have
Dips. One of the biggest tips which seems far away and nothing now but it was very significant one was in the Gotham Partners days. That was when we wrote or I wrote it. In this case a white paper on was called is mbia AAA where I questioned the AAA credit rating of a bond insurer. This is about five years in advance of the credit crisis. Never before had, I taken on a politically powerful influential big company and I found myself under the gun ultimately under investigation by Eliot Spitzer than the SEC Falls suit. And then all the
- headlines. And then we were forced to wind down. Gotham. It was certainly the headlines at the time, called The Fall From Grace. And so that was a big challenge. Number one, I would say big Challenge. Number two business-wise was certainly the period beginning late 2015, through late 2017 and then in the midst of ending a marriage. So I've got a few like that. But I've been very fortunate and none of these things are really catastrophic versus a serious health challenge, which I've not had in, hope to defer forever. I
can you said before, that success, is defined by how you deal.
The failure when you look back to say that fall from grace, so to speak with Gotham in that time and 2015 to 2017, and that patch when the wars in process, what do you tell yourself?
I tell myself to make progress every day. The advice I give to go through similarly challenging moments and I guarantee you that in life, it's the rare person that doesn't go through a very dark period. Number one, adequate sleep. Proper nutrition exercise, has a huge help, during the build muscle during those periods. I'm and get in really good shape because that I
Psychologically is a boost surround yourself with people who love you and then make sure each day, you make progress toward, digging yourself out of the mess. And that kind of progress, physical and mental business compounds, and a compounds at a pretty high rate, and it's not long before you look back, 60, 90 120 180 days. And you've made massive progress. And one of the great things about America is, I know you with lots of startups and Venture capitalists, is that failure is something that's can be a lot of talented when the most successful
Of the world ones that the first one didn't work is plenty of capital available for people who are second time. Founders in the first one was not a successful. I'd said they quote, unquote, sold their company, could mean they sold the furniture. It doesn't mean that the Google bought them out at a 50 x bill. You know, how
about tennis players, your sat down your breakdown. What do you tell yourself in that
moment? Don't let the past disrupt the future. It don't be upset. The double fault, 30, 40, and 45. In the set. When you were up with three set points, if you just focus on that kind of stuff,
If it will distract you start with a blank sheet of paper, it's a new set, new opportunity, and rebuild from here.
So that's when the match is in progress, when the match is over and say, Gotham's wound down, I've beaten you and tennis game which is very unlikely, but take a hypothetical scenario, which you do a post-mortem process. How do you learn from that process? And what does that look like?
I don't know if I do a formal post-mortem, but I certainly, there were a lot of lessons learned about the structure of Gotham partners of our first fund. And I learned some pretty valuable lessons that were
Probably were learned by others. So Gotham, we started out investing in liquid public Securities, and we went back to investors and we got the mandate to invest up to a third of our portfolio in privates Venture Capital, real estate, Etc. A structure side pocket type structure, that enabled that approach and then inevitably the asset liability mismatch is what caused us to wind down because we had a problem where the blame and Bia for intervening in a court case. But ultimately, a merger, that was critical to Our Success ended up getting held up on appeal or held up by a
Judge ultimately reversed on appeal but that was too late. The lesson from the Gotham experience was of the importance of liquidity that you shouldn't have an open-ended fund. Like a hedge fund, people can redeem capital in order to liquid assets. And so we build Pershing Square to invest only in liquid large-cap, public companies, and it's served its really well, I mean, while I've watched the rest of the industry or many people are in the street, particularly the last couple of years suffer from precisely the same asset liability mismatch issues that we had back then. So we did learn some pretty important and valuable lessons but that those lessons were
Exported to the rest of the industry because people had to make the same mistakes. I guess for me, I always like to say, experience is making mistakes and learning from them. I spent a lot of time learning from mistakes and we talked a lot at the firm, not just about things where we bought something and went down and we lost money. We talk as much about missed opportunity, a situation that in light of our knowledge experience expertise excetera that we should have exploited and made a fortune on. And perhaps we meet only a small fortune or made nothing because we didn't do the work, those kinds of mistakes.
Takes our can be certainly in our business as important missing, Google can be as important, a mistake maybe even a bigger mistake, if you will, then making a bad investment. That doesn't work against
Jason on your team told me about coupons. So at least you hit someone this.
That's had some good times. We've had some very good
one, they've had some very good ones. What was the most recent mess that you've debated? As a team
that produce were Netflix. So we took about a billion dollar position in Netflix after the stock fell about 50% and then we're a long-term investor. But we learned information Within
Two months of the initial investment, IE the next quarter's results at called, cause us to question our entire thesis from the company and we exited and promptly lost four hundred million dollars or something along those lines. So that was a more recent one. But I think what's not written about in our letter with respect to covid I had a very early view what the economic implications of covid-19.
That we made 2.8 billion because we were a little timid, some of the mistakes we've made. We had a pretty variant view that we were quite confident in but we didn't put enough Capital behind our
confidence. How do you think my position sizing? You always want more'n your winners. You always want nothing in your losers, cleaning up position sizing.
So the way we think about it is willing to risk. A certain amount of capital on any one investment if you're investing in the world's most dominant Music Company, Universal Music. It's has very little debt, it has a great Market position, you can predict business.
Very high degree of confidence and you're buying it at a fair price you can assess. What's the chance of are losing 25% of our investment over a several year holding period. And if the answer is very close to 0 which is our assessment, we can make an investment like that quite large or let's say the most, we could lose in our view on that not daily mark-to-market loss, but a permanent impairment. What would have to happen for us to be permanently impaired to lose 25% of our capital in that investment. Something pretty extraordinary that kind of investment could be 25% of our assets because it's something where the
Gov loss is very diminished by virtue of the capital structure of the company or as you're buying an interest rate derivative, we bought effect way to think about is what a call option that paid off. When to your interest rates, what above 93 basis points and we had about an 18 month term. And at the time we bought that instrument to your rates where 12 basis points. So it's a bit like, buying a call option on a stock. The stock is 12 and the strike price of the call. Option is 93. It looks massively out of the money and there's a fixed timeframe so on something like that, the risk of loss is high because
Just to break, even the yield if you will has to go up to 9 X or something, to get into the break-even territory. And so, something like that, we make quite small. It was less than it was about a point and a half of our little under two percent of our Capital but could have been three percent could have been four percent for sure. And so when I look back at something like that, I would have been willing to lose more but we had not been an active participant in the interest rate derivatives market. So we're a little timid. Timidity is held back our results for sure. What's interesting about those kind of bets is when you find a hedge that will protect you if raids right.
Rise. But it's also a really interesting investment on a standalone basis. You'd make it even if you didn't own portfolio because you said look on a standalone basis. The payoff here is massive, if our views on rates kind of hold, you can make those larger than just a pure hedge. You don't want to spend too much money on insurance or otherwise. It's too expensive live in your home, right? You don't want to the payoff on your insurance policy. If you the storm comes, you collect 10 million for your two million dollar home? You can't even do that today, but let's assume you can do you knew that there was a storm coming insurance companies, still willing to sell you that homeowners policy of the
Prices that we do storm. You should over ensure. And so, I think our only mistake there, if we could have over-insured bit more because we knew a storm is coming, you mentioned that face that
my question. She was actually on a persistent mind you said before in the show was Shane again that you're one of the most persistent people and American. Maybe your father might beat you to that, but you're one of the most persistent people. How do you know, when to change your mind and when you are
wrong, if new facts emerge which are inconsistent with the original thesis and I think that's basically what happened with us with Netflix.
So that happen often.
No, fortunately not.
Not we get so much shit if you will when we make a mistake because they're always bigger concentrated were managing fifteen billion dollars, we're putting ten fifteen percent of our capital and anyone investment. So if we lose 25% on something where we have a billion half dollars, it's a 400 million dollar loss that will make the headlines. So we're going to get pummeled for it. So we do every article. I read recently about us is some Investments. We win big some Investments, we lose big, the reality is 90% of the Investments. We've made in the last 20 years have been profitable, in fact, meaningfully profitable.
A handful gay big blunders, big headlines, but they've been a small fraction of what we've done. Otherwise the compounding doesn't work. If we make a ton on this one because it's out of that one. But the headlines implied. Like no one writes a story. When we've owned a stock, we pay 12 for it. It's now 60, we've never sold it. So there's no visible gain or loss, that's restaurant brand. But no one writes story that we billions of dollars rest investing in a company because there's nothing exciting about it. But if we lose 400 million in three months and Netflix, it's Front
Page News. One thing that was very apparent when I tweet
About you coming on the show bill, I had some of the most powerful people in finance privately, message me and say ask him why he's so public and you said there about people wanting to bring you down when there is an occasional loss, I would say that. It's because you are very public where maybe there are others in your case, your honors public, why do you choose to be so public?
So I would say, originally it was a very important part of the strategy. We were a tiny fund trying to influence these really big companies and we were using the power of persuasion to influence them and
Can influence them with the fact that we own 1% of company, ABC. But we could, if we Corral the other substantial majority of other shareholders to our views and therefore having the platform if you will, or the mouthpiece, was it how we effectuate change? So, it was a very important powerful part of the strategy. I always had this kind of free speech thing. I'm not a copy, a lawn or anything but big believer, in free speech. And if I think about the most important drivers of my life, I would say Independence was always one of the I did not like the fact that my parents could control me. Yeah, that
Motivated me to have lots of summer job. So I had my own spending money and that also motivated me to be financially independent as promptly as possible. But one of the sad things about our country right now, I think Free Speech has been crushed to a great extent. If you can say something, if you could express a political view and get fired today, which is definitely a very real possibility. Only, if you are financially independent or an entrepreneur of some kind, we've got enough money in the bank. Can you take the risk of speaking freely? So I take advantage of the ability to speak freely.
Let him that is
Don't you worry though, because even then his dangerous people, like JK Rowling the billionaire and her and Rise who has bricks thrown through her window for free
speech. Yeah. That's a bad thing. And look, I just, I've speaking very freely this weekend on the whole dang thing. You know, I've become fascinated by Twitter in the last, I would say three years. I really was not active on Twitter before that. And what I like about it is it's a way to have your views heard and debated. And I'm very meaningful. Number of people that matter in finance, media, Central Banking, whatever,
Ever follow me Jake. I'll probably wouldn't take my call if I called him for giving advice because last thing he wants to do is talk to someone who's actively buying and selling securities in a Marketplace. Not that we are that act of buying and selling. But I think he would certainly think of me or something like that. I can share my view with Jay Powell directly. I'm quite sure he actually follows me not under the day, but Jay, Powell sure did yes, I'm a student at my point is it's an effective way to reach the people that matter in DC and otherwise about important policy things. And during the financial crisis, I did the same.
Thing with the occasional PowerPoint presentation or segment on CNBC. But here I can from the comfort of my couch share a point of view on something that I think is important. And, you know, woke up Saturday morning after the events of the week, pretty convinced that if the government didn't at a minimum guarantee deposit, set, Silicon Valley Bank, we'd have a massive run at pretty much every Regional Bank on Monday. And my advice was, we need to guarantee all deposits. Not just those and I think, unfortunately, Iran is continuing. If you look at the posit in Flows, at the big Banks, the
You talk to anyone at JP Morgan, who works at opening accounts, they're working literally around the clock to take in all the capital is flowing in, that's not good for our banking system in our country. And that was what I was afraid of over the weekend, which is why I was so public. If you
will, we're gonna get to that. Each of us how much have you a short? Some Regional Banks were driven by Logic of social media viral contagion versus fundamental analysis. On the assets themselves.
So be super, super clear. We have never been short Regional Banks. We've never been long Regional Banks and we were starting to look.
A possible investment opportunities and then I decided on Saturday morning and I sent an email the team. I said look we're not going to invest in any of these Banks because I want to be able to talk about this publicly without being accused of talking. My book, the unfortunate thing is if you go on Twitter, how many people say oh he's doing this because he's long this you short, this they have no exposure, certainly no direct exposure. But I said well, we have one big conflict, which is were very long America, right? If the financial system blows up. That's bad for markets. It's bad for the economy. That's bad for Real Estate. That's bad for all kinds of things were exposed.
So, my conflict, if you will or long America, but I didn't want to be conflicted in terms of being short, these stocks are not. So I have no respect for clear to your listeners 5. So you think no exposure whatsoever to any of these Banks or any of the big Banks. The only financial institutions we own our Fannie Mae and Freddie Mac, would you go on for years, which are kind of, if you will options on a potential restructuring of those institutions years from
now bill, then you can help me. If you're completely unconvicted, you came out saying that was real asymmetry and Regional Banks. My question was, don't they?
The same risk. If interest rates, go up further on the mark, to market value of their assets,
Silicon Valley Bank was over 2 is unique in the disproportion amount of exposure. They had to long duration, fixed income assets versus other backs and we've looked at First Republic Bank, which has been under performer if you will, but its balance sheet its loan portfolio. Its business model looks very different from Silicon Valley Bank but it's still getting shot if in the market. And that's because the government has still not given people assurance that everything
Every deposit is safe. I overarching point is we need to get everyone. Calm. It's a bit. Like there were runs on mutual funds. I don't remember during the financial crisis, one of the mutual funds, broke the buck. If you will, like a money market, mutual fund. People were redeeming and they couldn't give people the dollar par and that was causing a run and every mutual fund. Basically the treasury fed came in and said look we're going to guarantee principle that mutual funds which is a pretty extraordinary thing to do, but it stopped people from withdrawing their money. Oh, so they could be comfortable and then they put a new regulations about what money market mutual funds. Could hold to the same.
Occur. I think basically the same thing has to happen with Beck's. First, you have to get everyone calm. So first thing to do is you guarantee deposits, okay? On a temporary basis with that temporary guarantee stays in place until the update. The FDIC insurance program to have greater than 250 thousand dollar guarantees per account for business accounts and people want to keep those kind of balances in Banks. And then they develop update the regime. They charge for this insurance and then they can get rid of this temporary guarantee at all banks. But if they don't do,
Ooh, that my expectation is but people are still going to be concerned and people like yourself are going to move from Silicon Valley Bank to to the j.p. Morgan
squirreled, more Silicon Valley, buying all the safest button to be out right now.
Actually, the irony is and tweet about this morning, there's sort of two banks that now have an explicit guarantee regardless of how much money you put in those bags that's signature and Silicon Valley Bank. They have an explicit guarantee of newest government, then there's JP Morgan there's City, there's be of a maybe Wells Fargo, if you will, that are systemically important institutions because they've got whatever 20 50 billion plus more like a truly in place.
It in capital. Those have the implicit backing of the US government because we said look we're going to bail out those institutions if we need to and we're going to monitor the more carefully. So those are probably pretty safe to. That's why people putting their money there. And by the way, they tend to be run better. And there I would argue probably over capitalized. Today, we're certainly where they were before. Then there's the rest of the banks, which have 250,000 per account. And so we've created this now three-tier guarantee system which is very confusing to Consumers and the people who've been arguing that, oh, moral hazard, capitalism is over problem with people losing
Confidence and deposits is the details get lost in the headlights, right? Once you hear you can lose money with a deposit at the bank, affects everyone. If you were lining up to take money out of the ATM machine, go into the branch and get a check to move their money someplace else. This is embarrassing for our can, I was, I supposed videos on Twitter, people outside certain Banks and news
really are not am never seen this living in London. Otis banking like it in five years time. Did we just see the centralization of power to the full Key Banks and the big four become more and more powerful?
Hopefully not, there's a reason why a lot of people,
These sort of smaller Banks and I'm in a venture capital fund and the GP asked for my advice on what to do. And he opened an account at one of the big Banks and he was saying, they don't know how to bank a venture fund. So that makes a capital call and takes in 100 wires and then needs to send wires here and there and it's just, he found it, very cumbersome already. So that's one important reason why we need these other Banks. The service level could be a lot higher at a smaller bank, but I would say, as if not more importantly, a lot of the construction lending, and real estate,
lending and small business lending is done, by these smaller Banks. The Big Money Center banks are not good at real estate, lending, they've gotten out of that business. But commercial real estate is a major part of our economy. And you have these big banks that don't have a core competency, making those kind of loans to developers, Etc. And that will cause a meaningful slow down. If these Banks them solve their capital and
deposits Cuban eval. Pisa wrong, that name pressurizing manages to move to the big for the way
you can manage this risk. Firstly, I don't think you should keep few hundred million dollars sitting in a bank account ever. I don't care what Beckett
The discipline involved from beginning of time. If you remember, we were betting against the credit worthiness of AAA rated institutions beginning in 2002. So I've been bearish on the rating agencies ability to assess the credit worthiness for a long time. So the approach we take here, other than cash, we need for daily needs. We keep that number pretty small. Everything else is a US Treasury money, market account, or we on us treasury bills directly. So we're not taking Bank risk, we're just facing the u.s. Sovereign in the cache. We keep on hand, we do keep at a JP Morgan or at our Prime broker Goldman
Jackson UBS and we monitor those institutions, very carefully. Actually there's a case to be made for going back to Silicon Valley bank now, okay, because they're get a full faith in credit guarantee on deposits. And they're actually trying to but they're only, they're saying they're open for business and making lungs. They're doing whatever that's now, a quasi governmental institution. I think the right thing to do there is just to recap that institution. Again, we need a system-wide deposit guarantee and then we need FDIC insurance with appropriate premiums so that these smaller Banks can operate. That network of banks is important for the
Farmer in Iowa, as much as it is, for the Venture capitalists in Silicon, Valley,
does wall-to-wall guarantees on deposits. Not just allow for constraints to be removed and bad performance or behavior to be
allowed. We need a temporary government guarantee, because we don't have a non-governmental Insurance system to support it. The FDIC system is not a government guarantee of deposits to government guarantee. In exchange for program, premiums FDIC has 125 billion of premiums, it's collected sitting in
Account that to backstop, no insurance on deposits, it's a good system. The problem is that the amount of insurance available per accounts is very small. Not small for your average Americans, checking account, for sure, takes care of that. But it doesn't take care of any kind of decent sized business that has to have money on hand, for payroll working capital or otherwise. And you can't have a millions of small businesses trying to assess the credit worthiness of bangs on a regular basis. And by the way, the credit worthiness can change dramatically Silicon Valley Bank was a very solvent bank until rates moved a lot in 12 months.
Bill, if you were sitting in charge of the FED, what
would you do today? I would call my colleagues at the FDIC and the treasury. I would say, let's put in place, let's announce the world. A temporary deposit guarantee at all deposits. Let's Get Busy quickly to create greater Insurance levels. And let's get that system announced and launched, quickly shouldn't take a lot of time. We already have a regime for 200,000 all deposits. We just need to increase the amount of deposit guarantees that are available. We got it, first stabilize, the banking system, and the federal reserve's principal job is fascist ability without Financial stability. We don't any kind
stability, let alone US dollar US interest rate stability. So once you just solve that problem now, mr. Powell is an upcoming meeting where he's got to make a decision on interest rates, each move of the lever. If you will, each crank of the cranking up rates puts pressure on the system and cracks emerge, and we've seen more of that crack we've seen glass breaking, I think he's got to be very thoughtful about whether we raise rates here or whether we pause. And so, I think there's a decent chance pal says, you know, we're not raising rates but here's an unusual thing. Sheila Bair is, it was an FDIC Sharon
Bush Administration were what. Actually, while ago, even Obama Publican, she's an effect criticizing the FDIC for not having selective deposit guarantees instead of putting a temporary guaranteeing redoing the system she's making my argument in today's f
t. We need that to happen because if that
doesn't happen, all these deposits drain out of these Regional Banks, they're going to stop lending. And they stopped lending that the company going to come to a halt. It's going to slow the combi very aggressively. So I'd be very worried about raising rates until we've solved, this Regional Bank problem and that just Regional Banks. Its people going to start thinking about their small community.
See Banks and house all, but they are. We can't have another bank closure. If one more and it's going to get messy. What happens
if interest rates, go up to 6%, acquire inflation? Why do we invest then? I don't
think the FED has to raise rates that much more, you're at a level. Today, we're certainly short rates are up just above underlying inflation. So we're getting close to to the financial policy. Slowing slowing the economy. The big problem we have is we've got in that Palace focused on is hate this call you, no problem is we have full employment, very full employment and we have Rising wages are those are starting to
Temper, the best way to solve a problem is to open up immigration, why force people out of work to slow the economy, to get rid of inflation, Rye, not increase the supply of workers. So that we temper the increases Mages. I just think it's a better answer add our from Uber
on the show the other day. And he said his biggest concern is that actually the realization that Trump might actually get back into Power. Speaking of immigration, do you think that's
likely if it's Biden? Trump, I think Trump wins, but I think if Biden runs again, which sounds like it's approaching a certainty.
Yeah, I think it's a very interesting opportunity for someone who's not inside the political system to run for office on the Democratic side. My favorite version of events is, is Jamie dimon. Actually believe not a banker. I'd like a globally recognized respected, talented business Builder that understands the economy, that understands geopolitics, that has relationships with Business Leaders globally and also has a track record for caring about broad ranges of our citizens.
I think that kind of person make for an excellent candidate. We're not going to see someone some Senator or Governor compete with President Biden. I'd like a better version of trump, A Better Business leader to run for office and I think they could absolutely get the Democratic nominee and against Trump they'll get the center and center. Right? Part of the Republican party and went, but would you have a deep hole
sakes? You're very outspoken. People, respect and follow you. Would you have any guns
politics Someday? I'm hoping to put my day job, gets boring.
Boring, boring symbol. I'm going to be honest, I do want to move a little bit more porosity. We certain about some of the great successes and also challenges in terms of money. I also laid on my relationship to money. It's a weird one for me. How do you analyze your relationship to money today? I don't really think about it. I used to think it was everything and, like, when I had whatever it was, that would be good enough. And then I would feel happy with that and then I would be free, I wouldn't have to do any of this shit because I'd have enough money to not worry, and then,
Didn't happen, I equated money to self worth money to power conversation. People listen to you because you have money to see what I mean. Okay. How do you think about yours today? Do you time money to power to freedom of speech to presents and or sure? So,
what I would say is getting back to my free speech, it is important to me. I like the fact that I don't have to worry about keeping my job, and I can say what I think, although my compliance person, every once in a while that I appreciate if you for you too,
Tweet it, please say something to me. So compliance is a little Restraint of Free Speech, but you look I feel incredibly fortunate my ambition. When I was 18. I was like, okay, I've been to be really good at this business thing. I make a pile of money and I'm going to reality it. The way I think makes sense. I spent a fair bit of time and I do on philanthropic stuff. But I learned who probably given away over six hundred million dollars in the last decade. And what I've learned from that is that philanthropy is often not the solution to many problems and that business and for-profit business models are much more effective solutions to problems.
Problems and I think you get happiness I think I've learned this over time happiness comes from helping other people and respect good part of my life, finding people, spouses, and jobs and introducing people to each other and what money has given me is the ability to have sometimes Global impact on problems. My day job of making hopefully good Investments and compounding the assets of Pershing Square for the benefit of our kind of shareholders and investors, which hopefully improves their lives. And then for the profits that come from that I see.
Only have a more than enough to live my daily lives. I think about, how do I reload allocate those funds Often by Investments, whether it's for profit, or nonprofit Investments that my favorite Investments are ones that are solve an important problem and the profitable. The Persians were foundations, actually made Venture Capital Investments. We made like 15 x. And the guy came to see us was trying to solve a societal problem in Mexico, things like this. I feel really fortunate Independence again, Big Driver. And I think Financial Resources, give you Independence. And I think if you have interesting things to
Interesting ideas, you have a voice. I don't know that it's driven by just having about
money. Well, I spoke to many of our mutual friends and they said what a wonderful marriage that you have. Today, I wanted to ask open your biggest lessons on what it takes to make a marriage work so,
well, sure. So it starts with finding the right person, that's that's about 98%. You can choose the wrong person and you could do all the right things and it's not going to make for a great marriage. So I would say it's a lot in the selection, the mutual selection, the comes from finding the right person. All these Notions of opposites attract,
I'm not a believer in that, you know, nari, I have a lot of commonality on everything from Drive ambition, what makes us happy values thoughts on kids parents. What's important in the world? Physical traction is obviously key. So we're just like, super, physically intellectually compatible. If you met her, you would say, okay? She's very different from you Bill but in very fundamental ways, we're pretty similar. So I think getting the match right? Is really important, finding a authentic super high quality.
All of the high integrity, interesting, attractive person, and then beyond that, it's making sure that your daily life doesn't distract you so much. You don't have time for each other and that's a risk. When you have to motivated, people, trying to accomplish a lot.
And you always doesn't it seems from the
outside that yours would know. I was his biggest risk and so we are constantly make time for each other and find those quiet T.
Due date night, do you do Sunday, evening walks once your thing? I
think date night is really important thing, and we need two more of official.
Station of it. We got married and then we had covid and covid is pretty amazing for marriage. We lived in the same house. She worked upstairs and office. I worked down. We met for lunch. We play with the baby. And at night, we would go on these four or five mile walks down the beach, even in the winter. And, but a flashlight, and it was a really cool way to get through covid. And hopefully the summer, we'll go back to that. We've not been doing that in the city. So I missed those late night walks and there was not much socialization, which is good and that if you spend an enormous a time with each other, but when you get back to city life and you want to be supportive,
Vote of the people and want to see friends and everything else. I think it's a massive time management problem and an area is building a, she'd be quite an interesting person for you to talk to. She's building an incredible company.
I think we should do like an all star mr.
& mrs. I think that be a really fun stylish. Oh
cool. But she said, that's a
pretty involved thing. And we've got when almost four year old child, who means everything to worse both of us but it's Nares. Only child that stuff you just have to find time.
You can't how to hook up your life. No, can I be a really tough one? How do you bring up children in a world of financial privilege?
But also teach them to have the same Drive hunger ambition. That one were born any child to have growing
up. I think it's a very good question. A lot of people would say I grew up in a very privileged background call relative but I grew up in a town called Chappaqua with a very good school system. My dad was a successful mortgage broker who a nice vacations nice house, I don't know that it matters so much. Whether you live in a three hundred thousand dollar house or two million dollar house for 20 million dollar house or whether your parents drive a Toyota.
I think the major differences are you have access to a good education, your food on the table, you have Financial Security. I don't know that it has to matter was interesting. Is I remember growing up and I felt very fortunate with my upbringing. My parents told me they would be paying for my college education but no more. So my my dad's always told me so I think it's all on the parents and kind of the lessons. They teach about money, I never got an allowance, I had to work. If I wanted to have money to buy Sony Walkman, I wax cars. That's what I did my dad. So you want to make some money, okay? Dig that
At ditch my first job. I got paid per hour and so this is dumb. Next time I said, okay, how much do you want for me to dig the ditch? I'll do it. Probably struck took a bullet. I want to get paid by the hour. So you weren't some pretty interesting lessons about money, but I would say it's in the parents. If the parents are spoiled and wasteful and obnoxious, the kids will be to Sony
Walkman. I have I'm getting a joke proof on the height of luxury but listen, we're going to do a quick fire on. So I say short statement you give me your immediate thoughts does that sound okay. Sure. What's the trend that most investors are not
seeing or ignoring?
It's on a one word answer but the world is a structurally different place than it was for the last 20, odd years and you're going to see persistent levels of inflation three to four percent inflation for the foreseeable future. That's certainly being missed based on the pricing of long-term bonds, you can get it. Only about a three point six percent yield I haven't checked by spree and probably so so Vault I don't know what it is today. A 3.6 percent yield for committing to the government governs borrow money for 30 years. Of 3.6% that can't make sense in a world where inflation is three and a half
hours. What's the hardest out? A man of your word.
Old stable time management, what business models do not work in a zero interest rate world, everything
works in his room, she's real
world. Who do you look up to? Who do you
admire in my industry? And I've been a Warren Buffett fan from the beginning. There's a guy who likes to remain private, but I'll mention his name, Joe Steinberg, who is Chairman of Jeffrey's but built a company called Leucadia who's had a lot of influence over me and over my career. I have a lot of admiration for my parents to. My father was a very important Mentor that someone I learned a lot from and not always because he did the right thing, sometimes you may
X, and it's a big moment when you realize that that Dad can make a mistake to my mom was with a real activist in the family actually, she ran a campaign collected signatures and ultimately convinced the governor to give hundreds of millions of dollars to redo the rail system to our hometown. I learned activism for Mom, I would say those are a bunch of key people. I looked up to
it. What's your favorite 10 year
long? If I can own a business for a
decade, you're saying, yeah. I would say in an uncertain
world, you got to own Universal Music Group. Because the one thing I'm confident about this more people,
We'll have music subscriptions or be streaming music from whatever device and lots of different devices. Different use cases on a global basis. A decade from now, I think that's a certainty. And so very Capital light business. I think that's a good place to put money for decking. What's your favorite NES shores of shit mentioned in the company? I probably wouldn't want to out a public company but there are businesses that are guaranteed to be disrupted by blockchain that are old-fashioned old businesses that everyone hates because they're monopolists and you can disrupt them with blockchain technology. So I would be short those
companies. This
From Jackie Reese's she said, what was the biggest takeaway from this back? That didn't
happen. So we did a transaction with probably the best company that about any of them that merged with this back. Universal Music, super predictable, high quality business. We buy at a very attractive valuation. We gave up our warrants, which were the sponsor economics. We received, do the transaction with committed a billion, six hundred million dollars, alongside the public shareholders. And the transaction had some complexity because we had to accommodate tax and other issues of the counterparty who is selling
during their interest in the company and despite it being great for the shareholders, despite are having exactly the same alignment with other shoulders. Every others back, there was founder stock and all kinds of other instruments, the SEC turned down the transaction for highly technical reasons when substantively should be precisely the kind of transaction. They're going to prove and I think I guess the takeaway from that is sometimes government. Regulators focus on the technical details as opposed to high level principles and I think they could be look at Silicon Valley bank just to close the circle. They made one of the most basic
Mistakes. A bank could make, we had something called the SNL prices in the 80s because Banks had a bunch of fixed-rate mortgages and they had floating-rate liabilities and rates went up and the whole bunch of banks became insolvent. And so, since that time, thanks, have learned have match funding and here you had a bank that violated all the basic rules and they're regulated by. How many different troll of the currency FDIC make your list of government regulators. And this is the one of the simplest high-level things that you should check about a bank and somehow that was ignored by The Regulators and they had to be focused on a bunch of technical.
I'll stop the long answer. The story is, if we had principle based regulation where people focused on the big picture will be way more efficient and I think we'd have way fewer bad
accidents. Penultimate one, I'm worried about wealth Terrors. And we hear about like climate terrorism even climate Terrace. I'm worried
that she people saw shooting down, private
jets style and the inequality of wealth will be violent. Do you share that
concern? I think wealth inequalities a big problem. I think there are ways to address it. Now Jay, I would make is one of the things. The US has done very well.
Homeownership fact, they did a little too well coming into the crisis, but in general, it's been a good thing. And our system of 30-year fixed-rate mortgages as enabled homeownership for a lot of people. And that's also created a lot of wealth and the middle classes and homeowners up through the financial crisis, while their wages weren't keeping Pace, you know, it's upper income strata, they were making a lot of money in their homes and then the financial crisis and over leveraging, wiped out, people's home equity. I view that as the fulcrum moment when the wealth inequality issues, really started to build and I think the key is
Is people need to own a piece and that started to rebuild in the last since the financial crisis, a lot of people bought homes recapitalized and they build wealth in their homes. But the piece that a lot of people are missing out on is, they're missing out on participating in the growth. That's the Tom Piketty thing which is that wages have not compounded at the same rate as assets. Ask of compounding as fastly. If you're someone who has assets that you can you have beyond what you need for your daily needs and you can invest Capital, you can build wealth. We need to give that to every American compound.
Very powerful things. My New York Times did a piece on, like, favorite ideas to help solve problems. My idea was you give every baby that's born in America or whatever seven thousand dollar account. I just making up a number of 6501 the board. And the cat remove money from that account and its tax exempt and it compounds and it gets invested in like an index fund. That earns historic raise returns in markets by the time you're 65, it's a million dollars, but it gives someone a minimum stake in the success of the country of capitalism and makes them an owner. By the way,
That would cost 20 billion a year to do that. I was like the math that we which is seems like a tiny little number today. Just take the number of babies times whatever separate thousand dollars. It's like a nothing thing. So I think we need these sort of savings accounts and we can't wait until people start creating an IRA when they're or 401K by the time they're 25 or 30 or 35 you want to start when they're a baby, just because the laws of compounding that extra 25 years is very material. So I think that's a key device to help address the problem. And I think we need smart tax policy and
There are lots of things we can do and it's small tax policy bill. So there are a lot of things that make no sense to me. So for example, if you own real estate or certain other kinds of assets, you can do what are called like-kind exchanges, where you can sell an asset and you pay taxes or you can exchange it for another asset and you don't pay any taxes. It's a total joke, it's like a gimmick and so complete, give away to people in real estate. If you're dedicated real estate investor, you can pass through like mr. Trump President, Trump. You could pass through the depreciation on those real estate assets and I'll set your other income.
Which is why Donald Trump didn't pay taxes. Pretty much his entire life or things like that are easily. Fixable here's another one. So if you're Elan musk, I'm not a believer in wealth taxes. But if you're borrowing five billion dollars against your Tesla stock and you've borrowed, more than your basis that Tesla stock, I think the distribution from that kind of borrowing should be taxable because it's really tantamount to a sale. You're getting back more than the money that you invested. When you refinance a piece of real estate, commercial real estate. If you buy apartment complex 400 million, it goes in value, 200 million.
Refinance, the mortgage and you take out 50 million in proceeds. I think those proceeds and excess should be treated as a taxable
abilities. They say it's highly logical and very much in Vogue of kind of leftist regime's, which are empowered. Why do they not do it? I think the Elan musk to the world
I think would support this kind of tax makes sense. The problem with a wealth tax have you got to the Biden wealth tax which is like 25% of the appreciation of things that you owned privately. It's going to bankrupt every startup. No one will ever start a business in America anymore, right? Because you, what do you do?
Do you sell God forbid, someone puts money in your company at a billion-dollar valuation. All of a sudden, if you own half the company over 100 million dollars in taxes that year, you know, those kinds of taxes. I think are destructive. You don't have a tax policy that destroys the economy, right? One of the tax policy that makes sense. But there's certain things are just wrong and unfair and they just persist by we carried interest, which I've said my piece on for a long time. Giving someone a disproportionate share of gain is a very powerful thing to drive economic behavior, but I think differently about
The real estate entrepreneur, the oil and gas entrepreneur, building a business, then us folks in the asset management industry. I don't think we need that extra tax advantage. I carried interest when you're managing assets to motivate our economic
behavior and you scared of on the any Economist a
sure. I don't use the word scared but I would say, there are many reasons to have concern, right? We've got the North Korean situation, we have Ukraine Russia, we have China brokering, a Saudi Arabian, fresh mole, that stuff. The United States used to do, right?
Right? We have Russia crashing their planes into our drones. We have China with its eyes on Taiwan, we have the United States draining, its strategic, petroleum reserve and draining its weapon resources. When it's doing the right thing and supporting Ukraine. Our defense department should be giving orders to all of our defense companies to rebuild our weapons stocks that were not out of inventory in a highly uncertain world, we have chairman Powell. Mr. Powell is job has become a lot more complicated in the last four days, we have real serious inflation.
In our country and we have a financial instability and he's got to work with his colleagues at Treasury and the FDIC to realize the banking system. And I have a really simple solution. I've laid it out a bunch of times and hopefully my laying it out, won't discourage them from doing it. And then we have for the political divisiveness and then social media companies that can generate more attention by driving us to the left and to the right, it's what we need is we need a Facebook that motivates us to love each other instead of hitting each other. Someone should build that
company. I've invested in that it's a
Is it one of your losers are winners? We don't know yet. We dine and the joy of being a preseason seed investor. My friend
is America stronger or weaker in 10 years
time, I have to say stronger because I'm an optimist, everything good will come from it. Good will come from this war with Russia, for sure. It's already some good has come good. Will come from the wake-up call. We've had with Silicon Valley Bank and hopefully someone's motivated to run against Biden and Trump. We need some more white swans. We've had too many black swans and a good Black Swan would be resolved to Ukraine Russia in some form. Russia just backs off.
Off or there is a peace resolution there and we elect an outstanding leader that there's common appreciation. For that kind of brings us together. I'd love to see that
app final Wombo. We do this again in 2028 stay five years time. Well then,
hopefully you better more improved version, he's learned from his whatever mistakes I made in the previous five
years has been in politics. Then
who knows where the world takes this, I had no idea, that's and I've loved doing
this. Thank you so much for putting up with my prying
questions. You've been amazing and they really appreciate it.
That was such a special show for me to do. I want to say a huge thank you to bill for giving up the times day, if you want to see more from us, you can find us on 20V, c.com where you can get the transcript for the show. You can also head over to YouTube where you can watch the full video of the show by searching for 20 VC. But before we leave each day, a secure frame is the leading all-in-one platform for automated security and privacy compliance secure frame, simplifies and streamlines the process of getting and staying compliant to the most rigorous Global privacy and security standards, like salt, too.
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