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Bill Ackman: Getting Back Up | The Knowledge Project Podcast #82

发布时间 2022-07-21 23:42:16    来源


Legendary activist investor, Bill Ackman shares new details on the biggest trade of all time, the lessons he learned from Warren Buffett and Charlie Munger, how going through a divorce affected him, coming back from the brink of failure, and for the first time details on his sleep, exercise, and nutrition habits 0:00 Start 02:33 Lessons from parents 04:46 Driven by independence 05:09 Overcoming failure 06:11 Hard earned lessons learned 07:20 Small improvements; Grounding yourself in the moment 07:51 The most important thing 08:35 Admiring Elon Musk 08:55 What Success Means? 09:19 Overcoming setbacks 11:49 On divorce 12:53 His sleep, exercise, and nutrition habits 15:40 What he watches on Netflix 16:03 What he reads 18:02 How he sources investment ideas 27:27 Index Funds and ETFs 33:04 Heroes 41:52 Herbalife in detail 44:28 Dealing with Haters 46:46 The biggest trade in history (26m to 2.6b in weeks) 56:00 Credit Default Swaps 01:00:16 Economic Implications of COVID 01:08:57 Economic bailouts 01:12:00 Are Malls Dead? 01:14:33 Predictions After COVID 01:16:51 Berkshire Hathaway 01:22:13 Lessons from Warren Buffett and Charlie Munger 01:26:16 The future of Pershing Square 01:27:29 How the SEC should operate ✩Hidden Insights✩ Are you the type of person who loves hidden insights? Ones that are timeless? Try my newsletter. It's called "Brain Food." It comes out every Sunday and is packed with insights that never expire. Sign up now https://bit.ly/2xP7tNt OTHER INVESTING RELATED EPISODES: Howard Marks: https://www.youtube.com/watch?v=jZMbKvJqEVo Stephen Schwarzman: https://www.youtube.com/watch?v=7zIhVJ3cEYI Mike Maples: https://www.youtube.com/watch?v=EgYxeca6xbc Jason Calacanis: https://www.youtube.com/watch?v=KL97y2Of3cA -------- #TheKnowledgeProject #ShaneParrish #BillAckman #Investing



So I've always had this view that success is not a straight line up and if you read the stories of successful people, almost every successful person has had to deal with some degree of hardship. And I've always had the view that how successful you are is really a function of how you deal with failure. And if you deal with failure well and you persist, you have a high probability of being successful. So I've always kind of had that view and then I've had to apply it to myself, you know, certainly a few times.

Hello and welcome. I'm Shane Parrish and you're listening to The Knowledge Project, a podcast dedicated to mastering the best of what other people have already figured out. This podcast and our website, FS.blog, help you better understand yourself and the world around you by exploring the methods, ideas and mental models from some of the most incredible people in the world.

Before we get to today's show, a disclaimer. You'll see why the disclaimer is necessary after the disclaimer. Shane Parrish is the CEO of Burnham Street Media. All opinions expressed by me and podcasts guests are solely their own opinions and do not reflect the opinion of Burnham Street Media or its parent company or its affiliates. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions or anything else.
在我们开始今天的节目之前,先声明一下。声明完后你会明白为什么需要声明。Shane Parrish是Burnham Street Media的首席执行官。我和节目嘉宾表达的所有观点仅代表我们个人意见,并不反映Burnham Street Media或其母公司及关联公司的立场。本播客仅用于信息分享,不能作为投资决策或其他任何决策的依据。

Shane, Burnham Street or Friends of Shane may maintain positions and securities discussed in this podcast, neither Burnham Street nor its affiliates and or subsidiaries warrant completeness or accuracy of the opinions expressed herein and they should not be relied upon as such. Okay, so why is all that necessary? Well, today I'm talking with legendary investor, Bill Ackman. Bill is an investor and fund manager as well as the CEO of Burnham Square, Capital Management.
Shane、Burnham Street 或 Friends of Shane 可能持有在本播客中讨论的相关头寸和证券,Burnham Street 及其关联公司或子公司不保证这里表达的观点的完整性或准确性,因此不应依赖这些观点。好的,那么为什么这些声明是必要的呢?今天我将和传奇投资人 Bill Ackman 进行对话。Bill 是一位投资者和基金经理,同时也是 Burnham Square Capital Management 的 CEO。

In this in-depth interview, we're going to talk about what drives him, the lessons he's learned from his parents coming back from failure more than once, information consumption and idea sourcing, the role of ETFs facing criticism, nutrition, COVID, the lessons he tries to teach his kids and of course, stocks. It's time to listen and learn. Bill, I'm so glad to have you on the show.

Well, thanks for having me. What are some of the lessons you learned from your parents? It was interesting to speak about my parents because I've been living with them now for I think about six weeks and haven't done that for a good 30 years. So it is an interesting time to talk about lessons learned from parents. But my father is, I like to describe myself as the most persistent person in America, but actually my father is the most persistent person in America. So I certainly live in a home where you learn never to give up on pretty much anything. And so I think that's a big takeaway. And mom and dad, hardworking, motivated, educated people, high ambitions for their kids, always talked about setting an example.

There are a lot of things from my parents. I've learned about philanthropy. I think of philanthropy as something that is not genetic, it is learned and it's something that my dad reinforced pretty much from the time I was a kid. How do you think about the role of giving back? I think the easiest way to think about it, one of the more influential classes at college, I read John Rawls theory of justice and he talked about how should the world be organized? Well, his argument is you should organize the world, not from your perspective, but from the perspective of not knowing where you end up in the genetic lottery and in the geographic lottery. Are you born in New York City to well-educated parents in an upper middle-class home or are you born in Sub-Saharan Africa? And you don't get to decide where you end up. And in that sort of world, you should design the world from that position, the perspective of not knowing where you're going and I always expected to be successful and I had sort of a business plan.
我从父母那里学到了很多东西,尤其是慈善。我认为慈善并不是天生的,而是后天学到的,这是我爸爸从我小时候就不断强调的。你是怎么考虑回馈社会的呢?要理解这个问题,我觉得最简单的方法是回顾我大学时读的一门影响较大的课程,当时我学习了约翰·罗尔斯的《正义论》。罗尔斯讨论了世界应该如何被组织。他的观点是,我们不应该从自己的角度来组织世界,而是从一个不确定自己在基因和地理位置上会处于什么位置的角度来考虑。 你可能出生在纽约市一个受过良好教育的中上阶层家庭,也可能出生在撒哈拉以南非洲,而你并不能决定你会在哪里。这种情况下,你应该从这种不确定的位置来设计世界。我一直期望自己会取得成功,并且为此制定了一个商业计划。

And I said to myself that if I'm very successful, then I'm going to make sure to return the favor. And that's what I've tried to do. That's Rawls, the veil of ignorance, right? Yes. And you have been incredibly successful. What drives you? So I think one of my biggest drivers from the time I was a kid was independence. As much as I love my parents, I did not want to be reliant upon them. So everything from financial independence to the independence to say what I think, the independence to live the life I wanted to live. And so that's been a huge driver. You've come back from failure or at least the brink of disaster twice in your career. You've had to shut down your first fund and after valuing, you lost a lot of assets.

But it doesn't seem to phase you at all. How does this affect you personally? So I've always had this view that success is not a straight line up. And if you read the stories of successful people, almost every successful person has had to deal with some degree of hardship, whether that hardship is personal hardship, health related hardship, or a business issue. And I've always had the view that how successful you are is really a function of how you deal with failure. And if you deal with failure well and you persist, you have a high probability of being successful. So I've always had that view. And then I've had to apply it to myself certainly a few times.

And I always like to say that experience is making mistakes and learning from them. And I've had the benefit of having made a lot of mistakes. What are some of the lessons that you've drawn from those experiences? You know, it's interesting. In my first fund, I had a partner who remains a very good friend. And the stress of the ending was enough for him that he just didn't want to continue and do it again, where I was excited to kind of rebuild and go forward. And my business plan was just to make a little progress every day. And if you make a little progress every day, eventually that compounded progress will dig you out of the hole.

And what is difficult is you find yourself in a hole, whether it's an investment hole or in your personal life or otherwise. It seems incredibly daunting to get back to, you know, if you will, where you were. And you're looking up at this peak where you were before. And it's just you're never going to get there. But if you don't focus on the peak and just focus on, you know, one step at a time, you know, making progress, eventually, you know, as the weeks go by, just make a series of smart, thoughtful decisions, use good judgment, stay healthy. Eventually you climb your way out of the hole.

Most people look at that peak and then they make, I would say, more emotional or irrational decisions in order to get back. Like how do you ground yourself in the moment of the day to day and just getting incrementally better? I think having good friends, being in a loving relationship, having a supportive family, and staying healthy, you know, huge believer in exercise, good nutrition, sleep, as a way to deal with stress. My first business reversal, if you will, was the most difficult because I hadn't had to experience that before.

I mean, it's sort of the speech I give when I go to speak at, you know, business schools, you go to speak at Harvard Business School, and you're in front of an audience of students and they've done, you know, top of their class in high school and they went to a great college and they've done great summer jobs and they have great recommendations from their teachers and they've never failed. They go to Harvard Business School and then they're about to go out into the real world and the problem with that approach is the single most important thing you need to understand is how to deal with failure and the vast majority of people who got to Harvard Business School or pick your favorite, you know, top business or law school has not had to deal with failure and that is the determined, I think, of success. You know, look at Elon Musk. He's been on the brink of failure however many times and it's, I think, why he's beloved by many, hated perhaps by some, but I really admire the guy in terms of how he's dealt with, you know, near catastrophe and I just think there are many, many examples of people. You know, what does success means? Success means you have a very good ability to deal with inevitable failure mistakes and, you know, life issues that emerge over time.
我想说,这有点像是我在商业学校演讲时常用的发言稿。比如说,当我去哈佛商学院演讲时,面对的是一群学生,他们在高中时都是班里的尖子生,进入了一所很棒的大学,有出色的暑期工作经历,得到了老师们的高度推荐,从未经历过失败。他们进入哈佛商学院,然后准备踏入现实世界。然而,这种方式的最大问题是,你需要理解的最重要的事情是如何应对失败。而绝大多数进入哈佛商学院或者其他顶尖商业或法学院的人,都没有经历过失败。这关系到我认为的成功。你看看Elon Musk,他经历过无数次濒临失败的时刻,但这也是为什么他被许多人喜爱,或许也被一些人讨厌。我非常钦佩他应对几近灾难的能力。我认为有很多类似的例子。成功意味着你具有很强的能力来应对不可避免的失败、错误,以及随着时间出现的人生问题。

What lessons would you give people on how to deal with failure? I mean, it's got to be more complicated than sort of like, how do you learn from it? Like, do you reflect? Is there a process that you go through? How do you reset yourself and go forward? You know, for me, it is literally just a bit of a plotting one step at a time. You know, we had, you know, my sort of life trajectory was, you know, did well in high school, went to, you know, good college from there. Good work experience. Harvard Business School started my own hedge fund with a partner. We had five years of really incredible success and then, you know, some challenges and then success and then challenges and it's just sort of the rhythm of being a concentrated investor certainly and also the rhythm of life. And I just think you just have to stay sane and stay balanced.

People have always told me, Bill, you deal with stress incredibly well. And I think it's really about being, you know, healthy, going to the gym, playing sports, you know, having the perspective that comes from spending time with, you know, people that you love. And, you know, going for a walk during my first most challenging business reversal, I used to go for a walk every night with a good friend, you know, around Manhattan. We'd go walk to the Hudson River. We talk and it was just nice knowing, you know, a supportive friend was looking out for me and wanted me to succeed. And nothing as dramatic happened the second time around because, you know, I'm very fortunate in being in a wonderful marriage and relationship, which I think helps enormously and also surrounded by work colleagues that I, you know, like and respect and, you know, enjoying what I do. And also, the kind of reversal we're talking about here is very, very different than the kind of reversal someone experiences for, you know, may lose their job, lose their job and have no form of economic support, or they have a, you know, a very, very serious illness that threatens their, you know, existence.
人们总是对我说,"比尔,你应对压力的能力非常强。" 我认为这其实归结于保持健康,去健身房,参加体育活动,以及与自己所爱的人共度时光所带来的视角。在我经历第一次艰难的商业挫折时,我每晚都会和一个好朋友在曼哈顿附近散步。我们会走到哈德逊河边聊天。知道有一个支持我的朋友在关心我并希望我成功,这种感觉真是太好了。 第二次经历类似挫折时,没有那么戏剧化,因为我很幸运,有一个美满的婚姻和关系,这对我帮助很大。而且我身边的工作同事都是我喜欢和敬重的人,我也享受我的工作。此外,这种挫折和失去工作、没有经济支持,或患有严重威胁生命的疾病所相比,性质非常不同。不管怎么样,我认为正是这些因素帮助我更好地应对压力。

So in my case, you know, I've done very well, my family is well taken care of, very nice roof over my head, so to speak. So I don't really view this as anything like the kind of challenges that people deal with when they get cancer, for example, or they have, you know, they lose a job that they need for their, you know, to support their family to pay for health care for their kids, you know, that kind of thing. So I just try to keep perspective. You did go through a divorce though, right? Yes, I mean, the most challenging moment from a business standpoint was not the most recent challenges, you know, losing money on a big investment is, you know, disappointing. But it happened, it was co-terminus with challenges in my, and perhaps correlated with challenges in my personal life. It is, it can be very distracting to be contemplating whether one should stay married while running a business that requires, you know, a lot of, you know, judgment and clarity of thinking.

And, you know, I ultimately made some, you know, failures of judgment in my business. And I'm quite sure that the personal challenges I was facing at the same time made things worse. And then I had to deal with the business challenges at the same time I was in the midst of, you know, the normal challenges of divorce and resolving things with the former spouse and kids and, you know, so it was a, it was a challenge period. You mentioned sleep, exercise and nutrition are really important to you. Can you go into a little bit about your routine and sort of like how you view those things? Sure. So on the sleep side, I've always been a good sleeper. So that, that helps. I do think it is related to, you know, taking care of yourself generally. So I, you know, I work out pretty intensely. You know, I really, I play tennis, just in addition to workout, it allows your mind to, it's almost a form of meditation for me. And that, it completely takes me out of whatever work related issues are on my mind.
我在生意上,做出了一些判断失误。同时,我确信自己当时所面临的个人挑战让情况变得更糟。我不得不在经历离婚、处理与前配偶和孩子的关系这些常见挑战的同时,还要应对商业上的问题,那真是一个充满挑战的时期。 你提到睡眠、锻炼和营养对你来说非常重要,能讲讲你的日常安排以及你如何看待这些事情吗? 当然。在睡眠方面,我一直睡得很好,这很有帮助。我确实认为这和总体上照顾好自己有关系。所以,我平时锻炼强度很大。我打网球,除了锻炼之外,它还能让我的大脑得到放松,对我来说,这几乎是一种冥想。这完全让我从所有与工作有关的问题中解脱出来。

And then I've learned a lot about nutrition over the last decade or so that's, I think helped maybe 10 to 15 years. And I had a completely, I thought, wrong idea of nutrition, I would say until more recently. Now walk me through that. What do you, what do you think now? What I think now is one, we start with, I think sugar is poison. So, you know, minimizing your sugar consumption, I think helps tremendously. I also think for me personally, otherwise, I think everyone has different genetic makeup and how they respond to various things. I think, you know, I'm better off with kind of a higher fat, higher protein, lower carbohydrate diet, you know, eating real foods as opposed to foods that come out, you know, anything that comes out of a package or is processed, I generally avoid. So real food, kind of higher fat, you know, avocados, nuts, things like that. But I eat, you know, meat and fish and I've really done my best to cut back on sugar consumption and carbohydrates.

And that served me, you know, sort of well, I feel better. I think better, also able to manage my weight much more effectively. You know, I come from a family where managing your weight has not been an easy thing, you know, for my father's side of the family, let's say. And I feel like I finally, I finally figured out what the issue is and just, you know, at least our genetics, we have a super high sensitivity to sugar intake or carbohydrates. Are you three meals a day kind of guy or you snack all day or? I've become a bit of an interim faster, you know, so I generally don't eat before noon. And I usually finish dinner by around eight. I'll have nuts for snacks occasionally, but not, you know, that's about it. And do you have a normal bedtime routine or is it like you go to bed whenever or are you like you start winding down at a certain time? Like what does that look like? You know, read a lot in the evening, spend a lot of time with Nary in the evenings, you know, occasionally we watch a movie, occasionally we'll stay up and watch something interesting, but you know, no formal routine. What's the last movie you watched that you loved? I watched a series on Netflix, a four part series called unorthodox, just in the last couple of nights. And I don't watch many Netflix series. I thought it was excellent. It was a very sort of in depth look at life in the kind of ultra orthodox Jewish community. But very well acted and very real. I'm curious as to you mentioned reading sort of a lot at night. I'm curious as to what your information intake looks like, like what publications do you read regularly, books, blogs, specific authors, memos, or does that look like? Sure. So, you know, I read a lot of traditional media sources, you know, Wall Street Journal, Financial Times, New York Times, Economist, Fortune Forbes, a grants interest rate observer. And beginning sort of as I got deeper into coronavirus, I started using Twitter actually as a news feed and found it to be very, very helpful and interesting, almost having the experience of reading the news a couple days before you read the news and the rest of the media, Bloomberg, Bloomberg News, of course. And then I just, you know, I go where the, you know, the facts sort of take me. And then, you know, I don't regularly listen to read blogs.
这对我来说,还算不错,我感觉好了很多。我思考的更清晰了,也能够更有效地管理我的体重。你知道,我的家族中,特别是我父亲那边的家族,体重管理一直不是件容易的事。而我觉得,我终于弄清楚问题所在了,我们家族的基因对糖分或碳水化合物极其敏感。 你是一日三餐的人,还是整天不断吃零食?我现在有点像间歇性禁食者,通常在正午前不吃东西,晚餐一般在八点左右吃完。我偶尔会吃坚果作为零食,仅此而已。 你有固定的就寝习惯吗?还是随心所欲什么时候睡?还是你会在某个时间点开始放松?大概是什么样子?晚上我会读很多书,花很多时间和Nary在一起,偶尔我们会看电影,有时我们会熬夜看一些有趣的东西,但没有固定的习惯。 你最后看的一部你很喜欢的电影是什么?最近几晚我在Netflix上看了一部四集的系列剧《异教徒(Unorthodox)》。我通常不怎么看Netflix剧,但我觉得这部剧非常出色。它深入展示了极端正统犹太社区的生活,非常真实,演技也很好。 你提到晚上读很多书,我很好奇你的信息来源有哪些常读的刊物、书籍、博客、特定作者、备忘录等等,是什么样的?当然,我读很多传统媒体,比如《华尔街日报》、《金融时报》、《纽约时报》、《经济学人》、《财富》、《福布斯》,还有《Grant's Interest Rate Observer》。随着我对新冠疫情了解的深入,我开始将推特作为新闻源,发现它非常有用且有趣,几乎可以提前几天获取新闻,还有彭博新闻。当然,然后我会根据事实走向来阅读,但我不经常阅读博客。

And though I'm starting to understand the benefits. So I'm a late, but sort of recent adopter of finding more interesting curated news sources. Is there information you avoid, like information that everybody else has? Not really. I think it's helpful to have kind of the conventional perspective. And, you know, I don't think we have, I'm, you know, have some particular access to, you know, some inside secretive news source that's valuable. You know, there are people that I talk to, that I talk to for perspective on things like the economy and business, just people, and business leader type people that I respect and compare notes with, you know, what's really going on in China, that kind of thing. That can actually be quite, quite helpful. But, you know, I get a lot of, you know, reading basic media, financial times, economists, Atlantic, New Yorker.

How do you source your investment ideas? Like, where do the, where do the ideas come from? Like, how does that process work? Is it you? Is it your team of analysts? Is it? Sure. So I would say the early days of Pershing, I would generate the ideas and the team would help me analyze them. And as the business has matured, and I really think it's a credit to the team and the maturity of the business, many ideas are sourced by members of the team. And my role over time has become one, you know, setting the sort of framework for things that are likely to be interesting, you know, whether, and whether something fits within the framework or not. And then I'm usually the 20% person on every idea. So 80% of the work is work led by a two person subset of the investment team. And 20% of the work, you know, the reading public filings, conference call transcripts, work that I do, the 80% work, a lot of that will involve conversations with experts to understand natures of businesses. And that's work that's largely done by other members of the team.
你们如何寻找投资点子呢?就是说,这些点子从哪里来?这个过程是怎么进行的?是你负责吗?还是你的分析团队? 是这样的,我可以说在 Pershing 早期,我会提出投资点子,然后团队帮我分析。随着业务的成熟,我认为这真的要归功于团队和公司业务的成熟,现在很多点子都是团队成员提出来的。随着时间推移,我的角色更多是制定一个框架,来确定哪些东西可能有趣,以及是否符合这个框架。然后在每个点子上,我通常会投入20%的工作量,余下的80%工作是由投资团队中的两人小组负责。我的20%工作量通常包括阅读公开文件、电话会议记录等,而80%工作则涉及与专家交流,了解业务性质,这部分大多是由团队其他成员完成的。

And then the team overall discusses whether something, merits inclusion in the portfolio. So some combination of a couple of people work very, very hard and voted a lot at the last, you know, perhaps a couple of months looking at an idea. One person myself that's spent not nearly as much time, but knows enough to be dangerous. And then, you know, another call it the four members of the team that have not done real work on the idea, but are economically incentivized to make sure that, you know, we make the right decision. And that's sort of the composition of how we get to an idea that makes sense traditionally. You said that you guys do more work on any investments than anybody else. And you know it better than often the people that are running the company. Is there a point where, or at what point does that become self reinforcing? Like you've done so much work that you it's hard to walk away from this. Like how do you build it that into your process? Yeah, I don't know if I've ever said that I don't know for a certain degree, we don't do more work than anyone else. So I wouldn't say that. But because we manage a very concentrated portfolio, we have the benefit of going very, very deep on something.
接着,整个团队会讨论某个项目是否值得纳入投资组合。一般来说,团队内有几个人会非常非常努力地花费大量时间——也许是过去几个月——对某个想法进行投票研究。像我这样的个别人员虽然没有花费那么多时间,但知道一些关键点。而其他四个团队成员虽然没有实际参与这个想法的工作,但为了经济利益,他们也有动力确保我们做出正确的决定。这就是我们通常如何筛选出有意义的投资想法的过程组成。 你说过你们团队对任何投资都会比其他人做更多的研究,甚至比公司管理层还了解情况。这是否会在某个点形成自我强化?比如说,你们已经投入了太多时间和精力,以至于很难放弃这个项目?你们是如何在流程中处理这种情况的? 我不知道我是否曾说过我们做的工作比任何人都多,我不确定。但由于我们管理的是一个非常集中的投资组合,我们有机会在某个项目上深入研究。

And we don't need to make a decision. There's no time pressure generally to make a decision. So in the benefits of concentration, the benefits of being a long-term company is there isn't, you know, we might add one or two new ideas a year, which means we can have, we have the luxury, if you will, of doing more work than many, many other investors. But we only want to do the work that is necessary to determine that an investment makes sense in the portfolio. We don't have some view that we have to exhaustively spend six months in order to make a decision. In fact, if you have to spend a large amount of time, and it's not obvious, it's probably not a good investment. And we have made investments in some of our most successful investments.

The amount of work that was done was in the hours, as opposed to even in the days or weeks or months. I mean, the just most recently, our heads that we put on to protect the portfolio, I guess, I wasn't specifically doing work on that investment at all. But I was thinking about the ramifications, for example, the coronavirus, and then came to a conclusion, this was something we wanted to hedge, and that it was really an hour discussion among the team before we decided to implement the hedge in that form. In a way, one of our more successful investments, if you look at the risk versus the reward, the amount of time spent was minimal.

Can you take me behind the scenes on an investment decision that you've made and sold? So nothing currently in your portfolio. What does that process look like to Bill Ackman? How do you think about it? How do you walk through it? So it starts with the framework of what we're looking for. So the most important thing for us is that the business quality is extremely high. By business quality, I mean, we've number one, we want it to be both high quality business and one that we can predict with a very high degree of confidence. So it's got to be what we call a simple predictable free cash flow generative business. And the reason for that methodology is the value of a financial asset is the present value of the cash that you can take out of it over its life. And particularly in a low-interest rate environment, you need to be able to predict the cash flows for many, many years in order to figure out approximately what the business is worth. And for many companies, we have no idea because the complexity of the business means we don't know what the cash flows will be three years out, let alone years four through 50, which matter in terms of determining what the business is worth.
你能否讲述一下你曾经做过并已卖出的投资决定的幕后过程?也就是说,不是你目前持有的投资。这个过程在比尔·阿克曼的眼中是怎样的?你是如何思考并一步步完成这个过程的? 首先,我们的框架是确定我们在寻找什么。对我们来说,最重要的是业务质量必须非常高。所谓业务质量高,我的意思是,首先,我们希望这是一个高质量的企业,并且我们能有非常高的信心去预测它的发展。因此,它必须是我们所谓的简单、可预测、能产生自由现金流的企业。 采用这种方法的原因是,一个金融资产的价值是你可以在其生命周期内提取的现金的现值。特别是在低利率环境下,你需要能够预测多年的现金流,以大致估算出企业的价值。而对于许多公司来说,我们根本无法预测,因为业务的复杂性意味着我们不知道三年后的现金流,更不用说未来从第四年到第五十年的现金流了,而这些都是决定企业价值的重要因素。

So we look for sort of simplicity, sort of, and then durability and predictability. So it's got to fit that screen and talk about Starbucks, for example. So we made an investment in Starbucks a couple of years ago, not quite a couple of years ago. And what we saw was a simple predictable free cash flow business, free cash flow generative business that we could understand. And so it met the first screen. You know, we think about coffee, you know, people have their coffee habit. Starbucks has built a, we can argue a very durable franchise. They earn very high returns on every store that they build. And it's a habit that people don't like to break. So we had confidence in the durability and the benefit of the call at the restaurant business is once you understand the economics of one box, and then you have a company that's built thousands of boxes over time, it becomes more predictable and easier to understand what that business will look like over a very long period of time. And so Starbucks met the business quality threshold.

And then the next most relevant consideration is price. And price, what matters here is that there's a wide gap between price and value. And so once we understood the business and we could model the business, we could look at where it was trading and compare those two. And at the time of our investment, there was uncertainty because the recent same-store sales had flattened. And this was a company that had delivered consistent sort of mid-single same-store sales over a very long period of time. And our analysis, the kind of crux the analysis was, is this a blip? Is this an indication of things about to go awry? And that's really where we spent our time.

So you're looking at Starbucks, and then, but there's millions of people looking at Starbucks. Where does that edge come from? I think a big part of the edge comes from, we're not going to do a better job predicting next quarter's earnings than people who focus on that. And we just don't focus on that at all. What we focus on is, what is this business worth over its life? And the markets generally overreact to short-term information and noise, because many stocks are traded on the basis of the marginal buyer and seller is a short-term investor trying to predict where the stocks are going to go up or down on the quarter. And we don't spend any time trying to figure that out. And that kind of activity, whether it's driven by quantitative traders or computers or fast money, so to speak, moves securities around occasionally to crazy prices. And Starbucks was trading as if the business had fundamentally changed. And our view is it hadn't. And that the company was taking all the right steps to address some of the performance related issues that they had, both in the US, and that they had a lot of opportunity for growth.

And they were becoming a more focused, better company. They were actually taking, normally, we look for a great business that had lost its way. We try to figure out what they had done wrong, and then we'd recommend serious changes after buying a stake in the company. That's sort of our core business. But in the case of Starbucks, they were already doing all the things that we would have recommended that they do to fix the problem. And so it was a bit of an activist investment where the management had already become activists in their own company. And so we thought, I think a big part of our advantage is we didn't have to think about next quarter's earnings. A big part of our competitive advantage today comes from the fact that our capital structure compared to a typical investment firm is very different. 85% of our capital comes from a public company. And as a result, we have very, very long duration money. And we don't need to worry about this quarter or this year in making decisions. And that, I think, is a huge advantage.

In a world in which most other investors have, they give their investors either daily or monthly or quarterly liquidity, having permanency to a very large percentage of our capital base allows us to make very long-term decisions. And that time arbitrage is a big part of our advantage. Time arbitrage is a hard one to go away because there's always going to be the short-term pressure. And so I like the structural approach to addressing that problem. How do you see the role of ETFs in index fund investing? And how does it impact our effect investors like yourself? So the impact on investors who care about governance, in particular, sort of activist investors, is over time as index funds effectively come to control corporate America, their vote can be the deciding factor in a contest. And so that's one way that index funds play a major role. The other side of that is index funds are also because of their growing influence under a fair amount of pressure from their shareholders to oversee the businesses that they own.
在一个大多数其他投资者给他们投资者提供每日、每月或季度流动性的世界里,我们的资本基础中有很大一部分是长期性,使我们能够做出非常长期的决策。这种时间套利是我们优势的重要部分。时间套利很难消失,因为总是会有短期压力存在。因此,我喜欢用结构性的方法来解决这个问题。你如何看待ETF在指数基金投资中的角色? 它对像你这样的投资者有何影响? 对于那些关注公司治理,尤其是激进投资者来说,随着指数基金逐渐掌控美国企业,他们的投票在争议中可能成为决定性因素,这是指数基金发挥重要作用的一种方式。另一方面,由于指数基金影响力的增长,它们也面临着来自其股东的一定压力,要求监督它们所持有的企业。

People thought about the index fund investment business as a business almost without governance, where governance was not a focus at all. And then their increasing ownership of corporate America, global securities puts more pressure on them to be thoughtful. Now they don't have the resources to lead an activist campaign. I think that requires a more entrepreneurial type investor. So in a way, there has to be a partnership between activist investors and index funds to make sure that we're governing companies correctly. And seeing a number of the top terms over time take these issues much more seriously. And we've had a good experience working with most of these major owners. The problem with the index fund business is it's really a commodity business. If you run an S&P 500 index fund, the only way that you can compete with other S&P 500 index funds is by lowering your pricing. And the pricing is now in the few basis points. In fact, there are index funds today that charge no fees.

And it's hard for them to scale up to have the governance resources necessary to make thoughtful decisions about running businesses. If you think about it, if you manage ETFs and index funds, you have to vote, call it 10, 15, 20,000 proxies right around the same time most annual meetings are called in the May timeframe. So by February, imagine BlackRock gets tens of thousands of proxies in the mail, and they have to make a decision on each of them, which directors to vote for, which initiative to support, which not to support, it's almost an impossible hurdle for them, particularly as their revenues asymptotically or the fees they charge asymptotically go to zero. So that is a problem that needs to be addressed.

Actually, I made a small investment in a company called Say, which is a business that wants to put the vote back into the hands of the owner. And one of the opportunities for a BlackRock to differentiate themselves from, for example, a fidelity or for Vanguard is to transfer back the right to vote to the underlying holder. And this company says, has a technology that enables that to take place. Now, you wouldn't want a person investing in an investment to 500 index fund, who's got a $1,000 investment broken up in $2 pieces to have to think through 500 different proxies. There you still have a problem. But they may have certain principles that they operate under that they would want BlackRock to vote on for them. And this company would enable that to take place and perhaps there are a few high profile elections, proxy contest, etc. with the underlying shoulder would like to vote. So that's an interesting potential change in governance.
实际上,我对一家名为Say的公司进行了小额投资。这家公司致力于将投票权归还给股东。BlackRock可以通过将投票权转移回给持股人,从而与Fidelity或Vanguard等公司区分开来。而Say公司拥有实现这一目标的技术。 当然,你肯定不愿意让一个投了1000美元进500指数基金的人,处理分成500个部分的不同投票问题,这会很麻烦。不过,他们可能有一些原则想要让BlackRock代表他们投票。Say公司的技术可以实现这个目标,比如一些重要的选举或者代理争议,持股人也许会更愿意亲自投票。 这是公司治理中一个有趣的潜在变化。

Yeah, that sounds like pretty cool technology. Do you think that we end up with bigger swings as a result of more and more people being invested in index funds? Do you think the highs are higher and the lows are lower? Or do you think it really has no impact? Like I imagine a lot of people right now are getting their merch statement in the mail and looking at that going, what just happened to generally ignore the market?

Yeah, I think the premise of your question is correct. I think if you think about index funds and constant inflows of money with each paycheck when people take a portion, I think investing in 401k, that's been a major support for the stock market. And index funds really in a way they take more and more of the float out of a security. So the marginal trader can move a stock more because there's less float, if that makes sense. It's almost like having index funds as major holders of securities in stable market conditions actually reduces the liquidity of companies. And it means that hedge funds and more active investors who are making day-to-day buy and sell decisions actually push securities around more. Some of the volatility that you've seen I think can be, is somewhat due to the fact that there is limited less liquidity in securities today because of the greater percentage of shares that are held by index funds. Now, if that were to reverse, if index fund performance underperforms active management for a meaningful period of time, you could see instead of constant additions to the index fund, you could see constant reductions of capital which would be a big overhang on the securities that are held by index funds. But that trend has continued to be interesting to see what the impact of recent events have on it. Who are some of your investing heroes? Or actually, who are some of your heroes, not investing heroes, but who just generally are some of your heroes?

Sure. So, briefly on the investment side, I got into this business because someone tipped me off about Warren Buffett early on. So, he's certainly, obviously, a hero. Two investors I learned a ton from over the course of my career were supportive of me early on. My name is Joe Steinberg, who likes being out of the headlines. His partner Ian Cumming ran a company called Lucadia National Corporation, a very interesting investment firm. I learned a ton over time. But I admire people like Elon Musk. I admire people who take on unbelievable challenges and succeed. The notion of building a car company to compete with the big car companies is something that, on its own, I think it's fairly remarkable. And if you do that at a time when you're building a company to launch rockets into space, I think it's even more remarkable. So, he's someone I have enormous respect for. The world needs more people like Elon. Do you feel those people are better served in private roles as CEOs or as public company CEOs? I don't know that Elon Musk has been the ideal public company CEO. I think he had a challenging period there with his tweets.

I guess that's why my team worries a little bit as I've used Twitter a little bit more than the last month or two. But I don't know that. Look, I think a lot of companies have stayed private too long. And so, I'm actually a fan of the public markets, and a fan of public company governance versus the kind of governance that you've seen certainly in many of the venture-backed companies we work being, perhaps the most public egregious example. But the governance structures of private companies, venture-backed businesses, their capital structures, all these funky preferreds with liquidation preferences. And I would not rely on the market values of many of these venture-backed companies. And I think the soft thanks of the world that have allowed them to stay private, I don't think have done them a service. Can you elaborate a little longer or a little more on why they've stayed private too long and what effect or impact that has on capital markets or the company itself?

Sure. So, there is a certain discipline that comes from being a public company. Today, public companies have to report on a quarterly basis. The SEC does a pretty good job in various requirements of the disclosures you need to make. Most companies have adopted a quarterly conference call format where you can ask questions of management. And I think there's a lot of just inherent transparency in that process. And whether you own one share or millions of shares, everyone gets the same information.

In the private venture-backed markets, and I'm a relatively small investor in startups, and I do it for fun. I do it because occasionally I make a good investment. And also, it helps me see the future in terms of what potential threats are coming that might disrupt either a business we own or a business we're looking at. So, I do find it to be an interesting thing. But the quality of the information you get, the lack of disclosure, how these boards operate is far from ideal, particularly when you compare them with their public company equivalents.

I mean, we work, I just think, with the first opportunity for people to really see what's been going on. But I don't think we work as atypical of many venture-backed companies where the founders become almost god-like figures who are handed control by the venture partners. And they may be talented entrepreneurs, and they may have been the right person to start and build a company from scratch. But the business may now be at a stage where it needs more professional management, and it can't happen, or it's difficult for that to take place in a private context.

And so, a self-bank injecting $100 billion in marking up the value of companies and giving them capital that they could use to postpone going public. I think it's fundamentally been a disservice to the capital markets and probably to those businesses. You cannot public companies, shareholders, are being too short-term, but there are real benefits that come from the disclosure and the input that shareholders can bring to a public enterprise. Do you think that these mark to investment valuations that seem to translate into some form of a public market are realistic, or do you think it's just a game almost?

Yeah, so the problem with many venture funds is because of the life expectancy of many companies. You won't know whether a venture capital firm does well for a decade. And venture capital funds, particularly startup venture funds, tend to be small. The founder really can't make a living until their first fund starts to generate some realization events, and that can be yours out. And so the incentive on the part of many of these sort of earlier stage funds is to have markups in the portfolio because it's a way of showing to your investors that you're making business progress.

And I think it does encourage certain kinds of behavior that's not ideal. And a lot of this dynamic between the desire for the early venture fund investors to show a markup to their underlying investors and the desire for a new investor to come in at the lowest possible valuation, and the way those issues are generally solved by creating these sort of funky securities that give the later investors preferential rights over the earlier investors. And I think a lot of times those features are not accurately considered and valuing different round A versus round C or D. And so I think there are games that are played that are not ideal. And you can't really short them.

So talk to me about the role of short selling. Is that good for the world? Is it bad for the world? Is there a line where it becomes you've gone too far? Or how do you see that? Sure. So I think short selling is a essential and generally positive function for markets. I give a lot of credit to the folks at Money Waters who have unearthed a meaningful number of fraudulent companies. And I've yet to find an example of a regulator finding a fraudulent company. It's either a journalist often being fed by a short seller or a short seller that is the one to identify fraud because they have a huge economic incentive to define bad companies or certainly fraudulent businesses.
那就来谈谈做空的角色吧。做空对世界是好事还是坏事?是否有个界限,一旦越过就算是过分了呢?还是你怎么看? 当然可以谈一谈。首先,我认为做空是市场中一项必不可少且通常带来积极影响的功能。我要特别赞扬马泥水公司(Money Waters)的人,他们揭露了许多欺诈公司。我还没有发现过一个监管机构能发现欺诈公司的例子。通常是一个记者,往往是得到做空者的消息,或者做空者自己发现了欺诈行为,因为他们有巨大的经济动力去识别不良公司,尤其是欺诈企业。

So I think that function is a great function for the capital markets. And I think if I were running the SEC, I would make sure that my enforcement division was talking closely with the best short sellers hearing their favorite ideas. And that would be the best way for the SEC to uncover fraud. So I think that is a very effective and good thing. Where it's a negative is the problem with being a short seller. If you all you do is short stocks, you want your companies to fail no matter what. And some short sellers will take steps to actually cause harm to a business as a goal in order to make their short successful.
所以我认为这个功能对于资本市场来说是一个很好的功能。如果我是证券交易委员会(SEC)的负责人,我会确保我的执法部门与最优秀的做空者密切交流,听取他们的最佳想法。这会是SEC揭露欺诈行为的最佳方式。所以我认为这是一个非常有效和好的做法。 但是,做空者的负面影响在于,如果你只做空股票,你希望这些公司无论如何都会失败。为了让他们的做空成功,有些做空者会采取措施故意对企业造成伤害。

And that's where it crosses the line. And I sort of followed the whole again, never been in the best during Tesla, longer short. But you do see example, again, companies that complain about short sellers, I usually look at those management teams skeptically. But in the case of Tesla, I do think some of the short sellers went beyond the role of identifying overvaluation in their attempts to actually harm a company. And that's where I think it goes beyond the pale.

I want to come back to the Twitter comment about Elon and you, you're both, I don't think it's a surprise, you're pretty polarizing. When you make comments, they make news. How do you judge that before going on Twitter? You know, I wasn't particularly controversial, I don't think. And the media was generally pretty supportive until I went publicly short Herbalife. And then Herbalife, using their PR machine, has done everything they possibly can or did everything they possibly could to try to discredit me, you know, in the press.
我想回到关于你和埃隆的Twitter评论。我认为毫不奇怪的是,你们俩都非常具有争议性。当你们发表评论时,总会成为新闻。在上Twitter之前,你是如何判断这些事情的? 你知道吗,我以前并不觉得自己有什么特别具有争议性。而且媒体普遍对我也挺支持的,直到我公开做空康宝莱(Herbalife)。然后,康宝莱用他们的公关机器尽其所能地在媒体上尝试抹黑我。

And what's fascinating to me, actually, if you were to Google now, we have not been short Herbalife very long time. Herbalife is still running a negative campaign about me personally, which I find fairly remarkable. The way you can see this is if you Google my name, I don't know if you want to do this right now, what will pop up is an advertisement. And the advertisement is paid for by Herbalife. And it talks about find out how, you know, billionaire, you know, funded this movie called betting on zero. Yeah, it's the first link. Yeah, what does it say? What's the subtext? Paid for by a billionaire hedge fund manager. Okay, that is entirely false. Okay, another way my picture comes up. So you see this paid for by a billionaire hedge fund manager, then you see a picture of me. And any reasonable person would assume that I paid for this movie betting on zero.

The facts are that a documentarian I never heard of called me up one day and said, finding this whole Herbalife thing fascinating, we'd love to follow you around. And I met with them and liked them, decided I would trust him. And I thought it would be helpful on getting the story out of the company. And I participated in the film by agreeing to be interviewed a number of times and he followed me around a number of times. The film was financed by actually a hedge fund manager, not me. His name is escaping me for a moment. But it's if you Google it, you can find out his name. But I played no role whatsoever in financing funding, directing. Literally, all I did was appear in the film because he videotaped me at various presentations.

But the fact that a public company, SEC registered company continues to put out completely false information about me personally tells you tells you something. So the this Herbalife thing was very, very polarizing. People felt that we were way too aggressive in our or some people at least did in our sharing our views. But ever since then, I think I've become even if you will, even more polarizing. But it doesn't affect my thinking in terms of what I say publicly or right publicly or what I say in the letter.

Unfortunately, particularly today, the more visible your profile, the more lovers and haters you're going to have. It's just the nature of the beast. But walk me through that a little bit because you're you know, you seem way more in touch with your emotions than most people. And yet you're putting yourself out there in a way that people love or hate. There doesn't seem to be a lot in the middle. How do you how do you deal with that? Do you just ignore it? Do you even look at it? Do you? Does it affect you at all? You know, I just and myself, you know, recently, I was becoming more and more concerned that our government was not taking the coronavirus seriously. You know, I was gravely concerned a few months ago and you know, took steps both to protect you know, my father who's in compromised my family, the firm, our investors with the hedge, et cetera. And then I, you know, by, you know, call it mid-March, I said, well, there's just this really straightforward, simple answer. We just need to shut down the country. And once we do that, we can reopen carefully and go back to rebuilding an economy and rebuilding a country.

And I kept waiting for the president to go on TV and make me say, okay, guys, we're shutting them a country and it wasn't happening. So I figured, okay, that's when I went back to Twitter for the first time and I wrote a tweet saying, look, here's the simple answer. And it went pretty viral. And I got a call from CNBC and said, would you come on? And I had, I had forced more going on TV, you know, for a couple of years. But I thought this issue was important enough that I should make a public case for a country-wide shutdown, which I did. And unfortunately, I had a whole bunch of people right after I went on, make the case that I was doing this for some market manipulative reason or to benefit me personally. And so it's frustrating, it's disappointing. But I still thought it was important to make my case. And I was very happy the next day when California, you know, the first stage shut down and the following day when New York State shut down. And then here we are, you know, we didn't get there the way I expected. I was expecting the president to basically order a country-wide shutdown. But, you know, living in a federal system where the states make these decisions, you know, I'm happy we finally got there. Although it took longer than I would have liked.

Let's keep going on this COVID theme. You disclosed publicly, I don't know what day it was, but it was like March 4th that you had done this through your website that you had put this hedge on. And yeah, that surprised me because nobody noticed. It seemed like everybody was caught up with all this other media. And then you could see through the weeks, because you release your weekly nav on Wednesdays, right? And you could see through the weeks that your asset value was going up while the market was going down. So clearly they were asymmetric in nature. And then you went on, you had sold them. What was the timing around that? Like, I don't quite know what happened, but you went on CNBC and you sort of like said, we need to do more. And you were, you were, walking me through that.

Sure. Yeah. So basically we put the hedge on in maybe the third week in February. And by March 12th, the hedge had gone from being worth nothing to being worth, you know, $2.7 billion. And the markets had dropped, I don't know, 25% or so at that point in time. And we said, you know what, we've got this massive position on the hedge, which maybe has the potential to double if the credit spreads widened to where they were during the financial crisis. But if they don't and the government takes the right steps, you know, this hedge could be worth zero and the stock market can go right back up to where it was.

So we made a decision to exit the hedge. And so we started selling the hedge and we started aggressively buying stocks on the 12th. I went on CNBC at 1230 on the 18th. And the reason why I know these details is because, you know, I wanted to respond to some of my detractors. We've invested $2 billion, $50 million between March 12th and March 18th at 1230 in the stock market buying, you know, additions adding to our portfolio, buying, repurchasing Starbucks. We had sold half the hedge for a billion, 300, a little more than half the hedge for a billion, 300 million.

And so we were $3 billion, you know, $350 million more long stocks, if you will, than we were on March 11th. And bear in mind, this was a firm with total assets, you know, total equity of about seven, seven and a half billion dollars. So adding $3 billion of risk, you know, we were much longer than we were even before we had the hedge on. So we were, and we had no short positions. That's when I went on TV.

So I went on TV to give a very bullish message, which was, you know, look, I think markets are going to soar. We just need to stop the virus is a really simple solution stopping the virus. It's locked down the country for 30 days. You kill off the virus, you open carefully, continue to practice social distancing. But, you know, the stock market's a discounting machine. It will look forward. And as soon as we do this, the markets will recover. And that's why we're buying stocks. And that's why we're buying stocks. We've been buying stocks over the last, you know, week and we're buying stocks today and hear the stocks I'm buying.

So it's rare that someone goes on TV and makes their case and explains which securities are actually purchasing, which we did. And after I got off, I noticed other commentators coming on. And also on Twitter, people saying, oh, Bill drove down the market. Now, what they forgot was the stock market was already down almost 7% by the time I went on 30. And, you know, an hour later was down more. So simply because the market went down after I spoke didn't mean I caused the market to go down. I mean, if the market had gone up, was I would the cause for the market going up? The answer is, no, but an hour and a half later, I put out a tweet basically saying, look, making sure people understand my message.

Yes, if the government ignores the virus and just allows it to continue to propagate and we don't shut down the country, we're going to end up in a very, very dark place. However, if we shut the country down for 30 days, which is what I expect to happen, we'll kill the virus, mark us, work over. And that's why we're buying securities. So it was a bullish message delivered with there is a fork on the road. I know we're going to take the right fork and that's the bet that we're making. But if we don't, it could be bad. But I believe it strongly enough that we've invested $3 billion in the last week, buying stocks.

So many questions I have here. I just want to, for the context of listeners, date this interview. It's April 13th. Just so whenever it comes out, people have an idea of when we were recording, why didn't you sell everything instead of the hedge? Why the hedge? So we are a long-term investor. We get to know our companies and their management teams well. We often play a role in putting the CEO in the seat. So we're in Chipotle. We put four directors on the board. We were four of eight directors when we joined the company and we helped to recruit Brian Nickel to become CEO of the business. And we've been a supportive shareholder of the company. so we still have a director representative of the firm that sits on that board. So one, it's not a very supportive thing in the midst of a crisis, too, if you will, abandoned companies that you've supported and helped build. And that's really true for many of the companies we own.
我这里有很多问题。为了让听众有个背景概念,我想标注一下这是在4月13日进行的采访。这样无论何时发布,人们都知道这是在什么时候录制的。为什么你们选择对冲而不是卖掉所有资产?为什么选择对冲呢? 我们是长期投资者,与我们的公司及其管理团队非常熟悉。我们经常参与推选公司CEO的过程。例如,我们在Chipotle公司中安插了四位董事,当我们加入公司时,他们是八位董事中的四位,并且我们协助招募了Brian Nickel成为公司的CEO。我们一直是这家公司的支持性股东,现在我们公司仍有一名董事会代表。所以首先,在危机中抛弃你支持和帮助建立的公司是不太支持性的行为。这对我们所拥有的许多公司来说都是如此。

One, I don't love doing that. The second thing is, our view was, if you looked at what was going on in China, there is a straightforward solution to how to deal with a pandemic. China did it. They've been able to manage their cases and deaths. And again, you have to question some of the data out of China, but I don't think the data is materially different from what they've described. Our assumption was, as the virus has made its way to West, Italy, Spain, everyone's adopting a shutdown approach. I'm sure America is going to get there. And if we do, markets are going to recover. And we own big, somewhat of liquid positions in the companies that we are shareholders of because of our degree of concentration.

So, we could sell everything and then wave from the markets to go down, buy everything back. There's a lot of frictional costs associated with that. What if the stock market doesn't decline as much as we think it might? And what if it declines very briefly and we don't have an opportunity to rebuild stakes in these great businesses we own, we incur a huge amount of tax liabilities because we have big, embedded gains in the companies that we own. So there are a number of reasons why we just didn't like the idea of selling. And the hedging is kind of elegant because if nothing happened, we would have lost very little money. But if what we expected to happen happened, the hedge would become very, very valuable. We could cash it in.

The more the market went down, the more valuable the hedge becomes. We could cash it in, hopefully, at the bottom or as close to the bottom and redeploy the money buying companies that we'd like. That's what we chose to do. We would have had better results in the short term. You look at these funds that are dedicated so-called Black Swan funds that all they do is put on these kind of hedges waiting for disaster. And some of them are up 1,000%. Some of the smaller ones are up 1,000% in the last month or so. We would have had extraordinary short-term results, but we would have impaired our relationships with companies and management teams. And I think our results, again, over time, even over the course of the next year or two, may be better than it would have been had we tried the alternative approach. So those were some of the thoughts that we had.

I appreciate you going into such detail. How did your staff react when you put the hedge on? So actually, the way it came down is I had been getting more and more concerned about the coronavirus and the, interestingly, the organization started to think I was losing it. Even some of my friends thought I was overreacting. And that, of course, may be more concerned because when people I really respect and think I'm being extreme and I think I'm not, every day that goes by without an effect shutting down the firm, I felt taking more and more risk, that may be that much more concerned. One Sunday night, I think it was maybe the third week in February, I called an investment team conference call, which I very rarely do.

And I talked through the economic implications of the virus, which I felt very few people were focused on. We fairly quickly, with the conversation, the team agreed that this was a reasonable probability of the case that I laid out for what would happen. And then we spent the time talking about how we would hedge this. And we kind of came to a group decision that it happens to be a really interesting time in which to hedge credit risk, because credit is sort of the tightest or sort of, the pricing of credit is at the lowest it's almost ever been. And so it became a relatively easy decision to put on a large hedge because the inherent asymmetry was about the most attractive it's ever been. And that if we were completely wrong about the economic implications of the virus, it would be of no moment. Very limited downside compared to assets.

I think you only had 21 million or 26 million in total invested. Yes, although that really understates it. Credit default swaps are not like options. So a CDS contract is a commitment to make payments over time. And we at the peak had 70 billion, actually 71 billion of notional insurance that cost about an average of 70 basis points per annum. So about $500 million, we committed to make $500 million a year in payments for five years. So that's two and a half billion dollar commitment. Again, for a seven half billion dollar enterprise, that's not a small number. And that's why it's something that an individual really can't do. Thanks, Will. Do CDS contracts, generally with individuals. But the way we thought about the risk is there are two forms of risk. One form of risk is just the premium you're committing to pay. And the moment you unwind the contract, you stop paying the premium.

And this was one of the few cases in my life where I had a very negative view where the stock market would go. And I also had a very good sense of the timing. I had a very bearish view back in 07 and before of where things were headed in terms of I thought we could be headed for a credit crisis. I just didn't have a good sense of timing. Here, I thought the timing was weeks away. And so that made the commitment to make premium payments a much lower risk commitment. We were going to have this thing on for five years, let alone one year.

I thought it was worst case we'd be taking it off in 90 days. So I thought about that as not a 500 million a year risk, but rather we're going to spend $125 million. Right. Because it would play out, you would know if you were right in the next 90 days. That's right. And so I viewed as $125 million in the context of 7.5 billion. It's not even 2% of assets. So that seemed not to be an unreasonable risk.

The other risk was that credit spreads tightened. Because when you go to unwind, credit spreads go from an average of 70. Again, it was a mix of both investment grade where we paid around 50 basis points and a high yield CDS where we paid about 300 and 30 basis points. But the blended average was around 70 basis points. If it went from 70 to 50, we could lose about 100 basis points times the notional amount of the contracts. We could lose a big number. Theoretically, we could lose, call $700 million, which is almost, you know, call it 9% or show over assets.

But my view was the probability of credit spreads tightening. And again, you have to look at it easiest to look at it by splitting between, by blending the cost of high yield and investment grade, it really is misleading. So the investment grade CDS was trading around 50. The previous all-time tightest levels were just under 40 basis points. So a 10 basis point tightening. And I could not see a scenario in which the coronavirus would lead to a tightening of credit spreads. And the all-time tight levels were achieved at a time that there were artificial subsidies that caused credit to be very tight. There were these things called synthetic CDOs. And bond insurers were writing synthetic CDOs, creating this huge supply of cheap, you know, very inexpensive spreads. And that had really gone away during the credit crisis.

So I just, it was really a one-way bet. And the biggest risk was how long we'd have it on. And we ended up spending 27 million on premium because we built a 70 billion dollar CDS position beginning in the third week of February. You probably had it completely on by the early, you know, first few days of March. And we started taking it off March 12th when it hit, you know, about 2.6 billion dollars in value. And it took us, no call it 10 days to unwind the whole thing, just because of the size of the position. But so the average light of the position is very small.

So we ended up spending very, very little. But it's a little unfair to say we invested 27 to make 2.5 billion to once explode. This is just the headline numbers. I'm glad you explained that behind the scenes. That's really insightful. Thank you. Walk me through some of the economic implications you see today. Like we can't do this for 18 months. Are we going to enter a depression? Like, how do you handicap that? How do you see the risk? Sure.

So my concern about the virus, I was less concerned about the health implications because I thought it would affect relatively small percentages of people. And for the most part, people who were already sick, obviously every life is an important life, particularly to the close friends and family. But the economic implications, I thought, could be much more harmful than even in the health implications.

And that's because the only way to stop a virus is to shut down the economy. And I had never in my lifetime seen what an intended shutdown of an economy looked like. And as that rolls around the globe, what are the implications? But I think the difference between a depression and a intended but short term shutdown, if it's managed correctly, the economic implications are nothing like the Great Depression. So I am not concerned about a Great Depression-like event taking place, really for a couple reasons. One, this is sort of an intended, somewhat artificial temporary shutdown, not driven by economic reasons, but driven by health-related reasons, just to stop the spread of the virus. So that's a very important distinction.

The other thing is that governments around the world have taken this incredibly seriously, not just the health implications, but the economic implications. And the government is basically stepping in to provide economic support to everything from a low-wage or unemployed worker to businesses as a bridge to get us through the crisis. And the bridge doesn't need to last 18 months, because the entire globe is basically in shutdown. So I think we can start reopening this country, beginning June-type timeframe. And the other thing that's going on is you have the entire world working on solutions to the problem. Just yesterday, I read a piece saying there's 70 different vaccine-related and therapeutic trials that are underway as we speak. And so you have the world's best global biotechnology pharma companies looking for solutions.

And so I think that increases the probability that there's a therapeutic that is available sooner and later, in that there's a safe vaccine within a reasonable period of time. So that makes the economic disruption a shorter period of time. The negative, however, is that small businesses that certainly can get destroyed in a several month shutdown, and it takes time for them to rebuild, think the small restaurants, the small corner store. And there is a lot of friction and disruption. But I do think that governments are going to do everything they can and communities are going to do everything they can to help rebuild.

If you think about New York City, I think the moment that people can go out to eat again, going out to eat in New York City is sort of part of what it means to live in New York, restaurants are going to be reopening. I actually had an idea. Maybe we start a venture or private equity fund to back the reopening of restaurants in New York, and you can see that happening in cities around the country. And it could be one, a good investment and two good for the community. And so I think you're going to see a lot of some combination of for-profit and philanthropic related investment to help restart a lot of small businesses.

So I don't think it's a, as I say, a V-shaped recovery. I think it's a little bit slower kind of coming out of this. But there is an end date where we're back to normal, I think, within a reasonable period of time. And back to normal could be a year. It could be 18 months, but there is an end date, whereas a depression, you go back to the 1930s, it's sort of unending. How does this affect real estate? Because a lot of people aren't paying rent right now, commercial property values are probably affected. Walk me through how you think of that.

Sure. So again, it's a very similar kind of analysis. If you own a street retail in New York City, you're probably not getting rent today. But as soon as your tenant's going to be open and operating, they'll start paying rent again. I talked to a friend at one of the major real estate private equity firms. And what they're doing is in cases of hardship, they're giving tenants a, up to a several month holiday, or kind of a rent holiday where it's really, they're deferring the rent. And my guess is they'll end up spreading it out over time to kind of recover what they've what they didn't collect, at least for commercial tenants. And maybe they'll give sort of someone lost their job, for example. Maybe they'll give that person a little bit more of a break. Again, it's a temporary business disruption. And then we grow out of it, as opposed to a permanent impairment for the vast majority of the economy.

What would cause you to change your mind on that view? What's permanent? What's permanent is we're adding a lot of debt to sovereigns, governments. And that's a burden that will exist for a long time. So that's a negative. And that that will hold back somewhat the global economy. I guess what would cause me to change that view would be we can't beat back the virus. And we're constantly shutting down the globe. And I think the way we solve that issue is really just testing. And there are a lot of testing, you know, companies and just yesterday I learned about this pregnancy-like test that's in sort of a emergency authorization mode where you can prick your finger and in five minutes find out whether you have antibodies or not. And I think once you have something like that, we'll be able to see where the virus is and people can start going back to work. So I just think technology is going to help a lot here. You know, the Google Apple sort of app that you have on your phone, you know, that combined with testing, you know, hopefully we can start going back to a more normal life.

The inspiring, I guess, silver lining in this is for the first time ever we're probably all faced with the same problem. It doesn't matter what country you're in or what race you are, what socioeconomic status you are, the best and the brightest people are gravitating towards working on this. Yeah, I mean, just the economic motives to coming up with the solution, but I would say more importantly, the reputational benefits, a neuro to the person who comes up with the person or company who comes up with the drug that saves us all or the vaccine that saves us all. And so I think, you know, I talk a lot to scientists as part of my philanthropic work we're doing and we had a call with 35 heads of major institutions and scientific researchers who normally focus on cancer research.

And basically, all of them have redirected their work to coronavirus. And so you've had this huge migration of talent focused on a global problem. And I'm sure the same thing's true in every country. What industries do you think are going to come out stronger or benefit from this? Amazon. Amazon, we don't own Amazon. But I do think that, you know, obviously they're going to have the greatest several months in their history. But I do think they're going to change a lot of behavior of people who used to shop in a normal fashion. Obviously, you know, some of these video technology companies, cloud based software companies will be beneficiaries of this, you know, long term. Although I will say that pretty much everyone I speak to is completely sick of video conferencing. And really would like to get and actually this whole work from home thing is not so great.
基本上,他们所有人都把工作重心转向了新冠病毒。因此,才华横溢的专业人士纷纷投身于这一全球性问题的解决。不用说,我相信每个国家都是如此。你认为哪些行业会因此变得更强或者受益? 亚马逊。我们没有持有亚马逊的股票。但我确实认为他们将迎来史上最好的几个月。他们还会改变很多以前习惯于正常购物的人的行为。当然,一些视频技术公司、基于云的软件公司会在长期内受益。不过,我必须说,我认识的几乎每个人都对视频会议感到厌倦,实际上,居家办公也没有那么好。

Because, you know, here I'm talking to you from the den, you know, I'm hearing, you know, quite beautiful, but her, my wife and baby in the kitchen, mom and dad are constantly walking in and out of the room. And there is no break. You know, one of the nice things psychologically about going to an office is that you go, you focus. And then when you come home, it's easier to leave it behind. And it's much harder to do that when your office phone is in the TV room. So. I definitely relate to that. How would you handle the bailouts? Like, is there who would get what? And is there a way that you can think of realistically to direct capital, to capable hands and away from just prolonging economic failure? Or is that not the way that you would handle this or walk me through that? Sure.

Look, I think there are businesses that prior the coronavirus were structurally challenged. You know, think department stores. So the notion that you'd want to save these businesses, I don't think makes a huge amount of sense to me that you, it makes sense to take taxpayer money and try to save a otherwise dying business. So think about businesses that are in structural decline. This would, you know, likely put them out of business, but I wouldn't spend any of taxpayer resources on them. You know, the way that, you know, big companies, the only thing that happens when a big company goes through a disruption like this is that the owners, and there isn't quote unquote a government bailout, if you will, is that the owners change, right? If you're an airline and you run out of cash, what happens is, you know, the bondholders end up becoming, you know, converting into equity, you know, through some kind of either prepackaged or other restructuring process, the end of being the owners. And, you know, I am receptive to this notion that you have airlines that have spent billions of dollars buying back stock.
看,我觉得有些企业在新冠病毒疫情爆发前就已经面临结构性挑战。比如说,百货公司。想要拯救这些企业的概念对我来说并不太合理,用纳税人的钱去试图挽救一个已经在走下坡路的企业并不明智。 想想那些处于结构性衰退中的企业,这次危机会很可能让它们倒闭,但我不会花任何纳税人的资源在它们身上。比如大公司,通常当一个大公司经历这种破坏时,如果没有所谓的政府援助,唯一的事情就是所有者的变化。比如说,如果一家航空公司耗尽了现金,这时候债券持有人可能会通过某种预打包或其他重组过程,将债券转换为股权,最终成为公司的所有者。 再者,我能理解这类观点,即有些航空公司花费数十亿美元回购了股票。

You know, why should taxpayers come in and affect support the shareholders that were beneficiaries of buybacks and had they retained that capital for any day, they wouldn't need a government bailout. So that, that concept to me makes a lot of sense. And it, you know, airplanes are not going to stop flying because airlines go bankrupt. What will happen is, you know, the owners of the planes, the less source of the plans and or the bondholders will end up, you know, controlling airlines. So, you know, if I were making these decisions, I wouldn't, we have scarce resources, I would save the money, you know, for, well, let's put it this way, any capital that was injected into an airline or another business, the government should earn an adequate return on that capital and get equity upside the business recovers. You know, I just think that, you know, Boeing needs to be saved. You know, Boeing had issues prior to this. Boeing spent many, many tens of billions of dollars on cherry purchases. I do think, you know, if Buffett doesn't want to, the government shouldn't come in on terms that are more favorable than where Warren Buffett would provide the company with capital. I guess this, I guess is my point. And I respect the CEO, recent CEO of Boeing saying he's not going to take money from the government. And I don't think he should. So, I don't think the government should be bailing out companies unless it's done on our arms length economic terms. It shouldn't be free money by any means. And we shouldn't be afraid to let companies that are over levered pre-crisis, you know, file for a pre-pre-precaged reorganization where the creditors end up owning the equity. That's how the process is supposed to work. I think it was Munger, Charlie Munger, who said capitalism without failure is religion without hell. He's better with words than I, but do you think we'll end up going in just the Amazon comment for a second? Do you think we'll end up going back to malls or malls effectively just dead now?

I actually think that people will be that much more desperate for human connection after this experience than they were before. And the issue with malls, you know, malls are located at the intersection of, you know, very highly trafficked roads. They've got big parking lots. They're big physical pieces of real estate. The problem is that the tenants have not innovated as quickly as the markets have changed. And the result is you have old-line department stores that have been around for 100 years that haven't sufficiently innovated to attract customers. And I do think that malls for many communities are public gathering places. And they just have to have tenants that are interesting enough to inspire people to come together and either shop or be entertained. And I do think that innovation is happening. It's just not happened as quickly as the kind of legacy tenants are dying. And so that's why malls are challenged. But I do think that for every community, having a place where people can come and gather and have fun and bring their kids, I think is important. And so I think the real estate long-term is probably fine. The problem is the capital cost to take an old-line, old-fashioned shopping mall with, you know, Sears and a JC Penney and a Macy's and make it into something that's going to be exciting for the next generation is, you know, wasn't contemplated when they put a mortgage on it. And that was equal to 80% of its value, you know, five years ago. And so again, you'll see restructurings where the lender to the mall ends up with the asset. Someone entrepreneurial decides, you know what, we don't need this much retail. We'll make half of it a hospital medical facility, office apartments. And then they'll do this great, you know, food court, restaurant, entertainment, movie theater, you know, type of thing. But I do think people will desperately want to go out to have a drink, go to a cafe, go to a restaurant, go to a movie, be entertained. And they'll be desperate to do it as soon as it's safe to do so. I think one of the byproducts of this is like we feel less like we're part of something that we used to before, right? We're less attached. We're more attached to our family, but less attached to our community, less attached to our sort of city, less attached to our state or country.
其实,我认为人们在经历这段疫情之后,会比以前更加渴望人际交往。但购物中心的问题在于,它们虽然坐落在交通便利的路口,拥有大型停车场和广阔的实体地产,但其租户的创新速度远远跟不上市场的变化。结果就是一些百年老字号的百货商店未能足够创新以吸引顾客。我确实认为,对于许多社区来说,购物中心是公共聚集地。它们需要有足够有趣的租户来吸引人们前来购物或娱乐。我相信创新正在发生,但速度不及老一代租户的衰落。正因如此,购物中心面临挑战。但对于每个社区来说,拥有一个让人们可以聚集、娱乐和带孩子去玩的地方是很重要的。所以我认为从长远来看,购物中心的地产还是有前途的。问题在于,将过去以西尔斯、JC Penney和梅西百货为主打的老式购物中心转变为能吸引下一代的场所,需要大量的资本投入。而这些资本成本在它们五年前以80%资产价值抵押贷款时并未被考虑到。所以,你会看到一些商场的贷款方最终接手了资产,然后一些有创业精神的人会决定减少零售面积,把一部分改造为医疗设施、办公室或公寓,再配上一个很棒的美食广场、餐厅、娱乐设施和电影院等。我真的相信,只要安全,人们会迫不及待地出去喝一杯、去咖啡馆、餐厅或看电影,享受娱乐活动。这次疫情的一个副产品是,我们感到自己比以前更缺乏归属感。我们对家庭的依赖更多,但对社区、城市、州或国家的归属感却减少了。

And some ways, even though we're all going through this, we're feeling very isolated. Do you think we come out of this on the other side, being more prudent financially with leverage? Yes, I do think this is a depression era moment, in the sense, psychologically, the same way that the generation of people that went through the depression thought very differently about financial leverage than the generations that came after them. I think the same thing would be true here. And I think it would be true for corporate America. You know, because shareholders are diversified, they generally put pressure on companies to quote unquote optimize their balance sheets. But optimization is generally designed for the short term shareholder who has a diversified portfolio of other such companies. It's not designed for the portfolio of one, i.e. the board and the management that oversee that company for the benefit of the employees and the other stakeholders. And I think it does lead to an over leveraging of corporate America. And I think every business has to have capital put aside, if you will, for the rainy day. And the companies that live on edge to kind of maximize their return on equity and then die. The businesses that will be shareholders, we heard the most from this period, will be the companies that just were too aggressive in a way they financed themselves going into the crisis. And I think that will cause boards to rethink, you know, super aggressive capital structures. This is like a dream-like opportunity for them in some ways, you could say with all that cash and print leverage and sort of the ability to take on multiple big elephants, if you will. Exactly. Yeah.

So I think I think Berkshire, I'm surprised they haven't done anything yet that's visible. But my guess is they've been buying stocks a lot. And actually, the big opportunity for Berkshire is Berkshire itself prior to the coronavirus crisis was a cheap stock in the low 200s. In the 180s, it's a real bargain. And so I would expect Buffett to have, I hope, that he's purchased a lot of his own shares. And I hope he's deployed capital in other companies as well. Walk me through how you see Berkshire out the way. Like without hitting price targets or anything, just walk me through how you see the structure of the company, like how you view it. Sure.

Berkshire is really principally insurance company. But half of the, call it, the intrinsic value of the business is an insurance company that was built beginning with a company called National Endemining many, many years ago. I don't know if that was the first, I think it was the first insurance company he bought for whatever, $18 million or something like that in the 1960s. And then over time, you know, we built the most profitable, best capitalized, unique business. And if, you know, for certain kinds of insurance, Berkshire is the only place you can call. And so it's a, you know, I don't like to use the word monopoly, but it's a very unique, very profitable business. And he structured it in a way, both legislatively, you know, being a Omaha based insurer, where he has the flux and lighted the diversified nature of the overall company that unlike many insurance companies that have to keep their assets in something very close to risk free or, you know, very highly rated corporate bonds, he deploys kind of the flow from the insurance business and he's allowed to invest in equities.
伯克希尔实际上主要是一家保险公司。业务的内在价值有一半来自保险公司,而这家保险公司是从很多年前的一家公司名为National Indemity开始建立的。我不确定这是不是第一家,但我认为这是他在1960年代以大约1800万美元购买的第一家保险公司。随着时间推移,我们建立了一家盈利最丰厚、资本最充足、独一无二的业务。对于某些类型的保险,伯克希尔是唯一可以联系的地方。因此,我不喜欢用“垄断”这个词,但它确实是一个非常特殊、非常盈利的业务。他还通过立法架构了这个公司,作为一个总部在奥马哈的保险公司,他灵活地利用了整个公司多样化的性质,不像许多必须将资产保存在近乎无风险或高度评级企业债券中的保险公司,他可以利用保险业务的现金流来投资股票。

And that's a, you know, generally an enormous advantage, but in this interest rate environment, an even greater advantage. So you have the, obviously the most advantaged insurance company in the world that has grown its insurance float over time at a nice, you know, higher single digit, nothing, something like an 8% compounded rate over time. And the cost of that insurance float has been, has been negative, meaning the most insurance companies lose money on insurance and make money in float in this interest rate environment. They, you know, they lose money on insurance and they can't earn any money on the investing. Right. And Buffett is really making money on both sides. So that's where someone should really spend a lot of their time if they want to understand the company. And then in the asset side of the insurance company, really the, you know, the equities that you read about, you know, Apple and so on.

The rest of Berkshire is a collection of sort of wholly owned or 80% on subsidiaries, you know, like the Burlington or the railroad precision cast parts, businesses that Buffett has collected over time for their, you know, durability and quality. And it's a mixed bag. The biggest ones generally are the highest quality businesses offering a lot of stability. You have to think the utility energy utility part of his operation, the railroad, very durable, big profitable businesses. And then businesses he's just collected and held on to over many, many years, some of which have have been great and remain great businesses like C's, Kennedy.

Others, you know, to go back and read the Berkshire, half of annual reports, you know, he was glowing about the world book in Cyclopedia and, you know, other such businesses that have disappeared. You know, Dexter shoe, he was, you know, skipping into work thinking about, you know, the Dexter shoe company, the worst investment probably he ever made. So even Mr. Buffett makes mistakes, which is instructive in of itself. The good news is when you buy things as opposed to short things, your mistakes become smaller.

It's really some part, you know, decent chunk of the businesses, industrial company, you know, small pieces in retail and other, you know, smaller manufacturing and other diversified businesses. And the large majority is kind of unique and extremely profitable insurance business. And do you see this as like a long term holding or is it proxy for cash or how do you think about that? Yeah, you know, I don't, I think it's a really cheap, interesting stock, you know, run by the best investor in the world.

We think, you know, Buffett's taken an approach toward really all of his businesses that's extremely hands off. And that's worked very well for many of those companies, but other parts of the portfolio, you know, in our view, underperform the competition in terms of their profitability or growth, etc. And I think the as the generational change happens at Berkshire, it appears to us the next generation is going to be much more focused on, you know, extracting the term from the businesses, Berkshire owns, I mean, just looking at the Burlington Northern Railroad, you know, a lot about railroads by virtue of our experience at Canadian Pacific.

It's the largest, you know, it should be the most profitable, highest margin railroad in the world. It's not. And I think a bit of that is, it's Warren's very, you know, kind of his reluctance to get too actively involved with businesses that he owns. But I do think that over time that gets up. So you have this very well-capitalized company controlled by, you know, great investor CEO and a portfolio of businesses, many of which have opportunities for improvement. And, you know, I think that's interesting. I don't know how long we're going to own it.

You know, we always retain the right if we find something better to do with our money to sell something we own. But in the meantime, we think we bought more at lower prices in the last few weeks. What are some of the lessons that you've learned over the years from Warren Buffett and Charlie Munger? So a big part of my education as an investor came from reading everything Buffett's written, you know, watching, watching from speak, it came to Harvard Business School. And I was a student there. One of the most influential things he said to me, and I say to me, because it was me and the other 300 people in the audience, was, you know, if you want to be successful, all you need to do is look around the room and think about the classmate or classmates you most admire and what qualities they have and just decide to adopt those qualities.

And if you do that, your chances of being successful go up enormously. And it was incredible advice. And his basic point was, you know, if you want to play the violin, you know, and you're not yo-yo-ma and you haven't practiced your entire life, it's going to be hard to pick up the violin tomorrow or in the cello tomorrow and be a virtuoso. But character and the qualities that enable you to be successful in business, you know, hard work, discipline, returning phone calls promptly after you receive them, showing up at meetings on time, being, you know, honest and straightforward, fair-mindedness. These are all things you can have to, if you don't already have them, you can have them tomorrow, but just deciding that you're going to adopt these characteristics.

I thought that was a very powerful thing to say. That was one. And then, you know, just how to think about investing in the stock market and, you know, all of the Ben Graham-isms that he's reinterpreted and presented, all that stuff super helpful.

And just thinking, you know, even the way he built his business over time, you know, Buffett started out in the mid-1950s as an activist hedge fund manager, right? He had a partnership, he charged a 25 percent incentive fee over a 6 percent return, and he was quite active. He would buy stakes in businesses, he would push for liquidations of companies that had large security portfolios relative to the market value of their business. He was really an activist investor.

And then, 15 years in, he had a hundred million under management. I think 25 million of it was his. And he wrote his investors a letter and said, okay, you can have all your money back, or you can have stock in this crappy textile company. And I'm going to take stock in the textile company, but I'm going to be a little less motivated than what's in the past.

I made a lot of money. Markets aren't that attractive. I can't promise anything, but happy to have you if you want to go along, take your money if you want your money back. And, you know, as I like to say, some number of people, he Larry Tish apparently withdrew $400,000 back then from the partnership, which today would be oh man, you know, $400 million, probably more, probably $4 billion. And some people, you know, rolled their capital.
我赚了很多钱。市场没有那么吸引人了。我不能保证什么,但如果你想加入,我很乐意接受你。如果你想取回你的钱,可以随时拿回。你知道的,就像我常说的,有些人,比如Larry Tish,曾经从合作伙伴中提取了40万美元,放到今天可能价值4亿美元,甚至可能更多,可能达到40亿美元。同时,也有一些人选择继续投资。

And what's interesting is Buffett gave up the 25 percent share of the profits for the right to run what he called a crappy textile company with a $40 million market cap for $100,000 salary. But what he got was stability, permanency of capital. That was not lost on me. And so, you know, we've basically, you know, our business plan was basically to do the same thing over time. And we're, you know, largely there today.

So I mean, you're going to wave your face? I'm not going to wave the face. No current plans to do that. You know, unlike Buffett who, you know, runs Reddit, really a one person operation and, you know, has an accountant and a couple of assistants, you know, the way we've built our business is, you know, I've hired a lot of super talented, highly compensated people.

So, you know, what actually charging fees enables me to incentivize and pay the people I work with. But yes, Buffett is a better bargain than we are because we do charge shoes. Oh, wait. I want to get to that in a second. But where do you think Pershing Square will be in 10 years? I think in 10 years, you know, we now have a pretty clear path, right? The vast majority of our capital today is 85% in overtime.

That will be 90 or 95 or eventually 100% of our capital will be in a public enterprise that we're the largest shareholder of. We own 22% of our, our public company, Pershing Square Holdings today. And our goal is to compound Pershing Square Holdings at a high rate over a long period of time by investing in, you know, the kind of businesses we invest in today and overtime will become bigger shareholders of these kinds of companies will be a very long duration holder.
这意味着,最终我们90%、95%甚至100%的资本将会投入到一个我们是最大股东的上市企业中。我们目前持有我们的上市公司Pershing Square Holdings 22%的股份。我们的目标是通过投资于我们目前在投的那类企业,以高回报率在长时间内增长Pershing Square Holdings的价值。随着时间的推移,我们会成为这些类型公司更大的股东,并且会长期持有这些股份。

I think we'll do similar things to the things that we do now and hopefully we'll do them better. But I think, you know, I'd love to have, you know, in terms of ambition, you know, the goal is to have one of the best investment records ever, you know, Buffett's got a 55 year or 16 year advantage. And, you know, Pershing's been in business for 16 years. So we've got a lot of work to do.

How do you, do you think you'll ever get into buying complete companies? Yes, I think that's possible. Or at least controlling interests in companies. Bill, what would you do differently if you were running the SEC in detail? I would lean on short sellers to be sources to help me determine where my, I think the SEC's generally got a very, very good job and they have a very difficult job and they have limited resources.

So let's start there. My one area of disappointment with the SEC having been on very rare occasion, a short seller, is that how slow it takes the SEC to you know, come to conclusions about companies operating illegally or responsibly or fraudulently. I'd like to fix that.

You know, getting back to my Herbalife example before, we went public and said among other things about Herbalife that they were operating in China illegally because China does not allow multi-level marketing companies to operate and they were using, but they were using the same compensation schemes, the same methodology, but they were doing it in a sort of hidden misguided way and they inaccurately described how they were doing this in their public funds.

And we made a two-hour public presentation about this, I don't know, four years ago, something like that. The company comes out and says, you know, Pershing again is materially misleading investors, accuses us of all kinds of market manipulation, etc. In the last six months, and you can Google it, Herbalife paid settled with the SEC for $20 million for misleadingly describing their China business and their public violence because it actually the compensation scheme is precisely the same as, and the business models the same as their core business in the United States. Exactly what we said years ago about the company. And my disappointments are one, it took the SEC however many years to come to the same conclusion that we had identified and they slapped them on the risk of the $20 million fine that investors could ignore. And so I have been disappointed by, you know, Herbalife by the way is a pyramid scheme, okay, it's continuing to operate and cause enormous harm.

The stock's actually not that much from the price we shorted it, we shorted it at a split adjusted $23 a share and today it's probably 30 or something like that. So it's not been a great investment for anyone if they had bought the stock and we made our presentation. But I do think it's a company that's causing enormous harm and the government, the FTC launched an investigation shortly after our presentation, it took them a couple years and they settled with the company with two for $200 million and let them continue to operate. And now the SEC has slapped them on the risk again and it does seem like if you're a well capitalized company backed by a very large shareholder and you got a lot of good lawyers, you can out with the SEC and cause harm. And so that is my biggest frustration with the SEC. What would I do differently? I would pay much more careful attention to short sellers and I would work more quickly and be more aggressive companies that are causing harm. I like that there's people in you in the world that do this, but I also simultaneously question why you do it.

Like the return on brain power or energy expended for you is so small. Yeah, so I'm short selling, I've foresworn short selling for the reason you describe it. The calculus, I think I invented this phrase that you seem to be adopting, but I called it return on invested brain damage. There you go. The return on invested brain damage for short selling is quite challenging and public short selling is the worst because unfortunately if you go public and say a company is violating the law, everyone hates you. The shareholders hate you, the management hates you, the employees hate you, you have no friends. And that's why I view it as a kind of a noble pursuit and I admire the muddy waters and the gym chainuses when they come out with detailed work about problematic businesses.
就像你说的,投入的脑力或精力回报非常小。所以我不再做空头交易了,你说的理由正是我放弃的原因。我称之为“投入脑力损耗的回报”,我认为这个说法是我发明的,看来你也在使用它。做空头交易的投入脑力损耗回报非常具有挑战性,公开做空更是糟糕。因为不幸的是,如果你公开指出某家公司违法行为,大家都会讨厌你。股东讨厌你,管理层讨厌你,员工也讨厌你,你没有任何朋友。这也是为什么我认为这是一种高尚的追求,我很钦佩像浑水(Muddy Waters)和Jim Chanos这样的人,当他们发布详细分析有问题企业的报告时,我很佩服他们。

I'm less interested in companies that are overvalued. That I don't think does so much service to the world to point out whether you believe a company is overvalued or not. It's just systemically like this shouldn't exist. Yeah, but identifying fraud is a very important thing for markets and short sellers provide a very valuable service. And generally when there are markets that you can't short, prices get to extremes and investors lose lots of money. The housing market was a market that you could not short until the invention of synthetic CDOs. And it was really the John Paul Sintrain if you will, was he was just going short, the housing market.
我对那些估值过高的公司不太感兴趣。我认为指出一个公司是否被高估对社会帮助不大。这种系统性的问题不应该存在。不过,识别欺诈对市场来说非常重要,做空者提供了非常宝贵的服务。通常在无法做空的市场中,价格会走向极端,投资者会损失大量资金。房市就是这样一个市场,在合成CDO(债务担保证券)发明之前,你是没法做空的。而John Paulson的“著名之举”就是做空房市。

Housing market was allowed to get to extremes because there were no short sellers and there were no one had any incentive to blow the whistle on overvaluation. The market you can't short today is basically, or difficult to short today is the venture back market. And that's why you're going to see that's why the we works in the world are allowed to happen and billions of dollars money is wasted. So I do think short sellers perform a very valuable service now that I'm I don't know 53 and I just had a baby and in the life's too short kind of point of view, we're done with public short selling. It's just not our thing anymore. But I'm pleased to see other people doing it. I do think it is a public good.

Do you think that there's a problem with just large institutions? Like did the CDC and the WHO fail us in this current pandemic? And then the problem is the institutions and not the people or how do you think about that? You know, the what's interesting about this period is it's really been an education in in the what's good about living in a, you know, democracy and what's bad.

So you look at how China, now the negatives of China is they, you know, the government officials, the local government officials were too afraid to go public with what was going on or when they did they got, you know, whether you were a doctor or a public official, you got, you know, shut down by the the system. You know, that that allowed the virus to propagate to have became a serious issue in China. The good news is the dictatorship allowed them to very aggressively, you know, shut down the virus.

You've watched, you know, I made my public case for a country-wide shutdown and the president instead sort of allowed the states to take the lead in governor by governor one by one. We got to almost to the place where we should have and it took instead of 24 hours, it's taken, you know, 30 days or 45 days, you know, had we entered shut down, you know, March one for 30 days, the outcome would have been, you know, meaningfully different than, you know, starting on March 19th and rolling out over, you know, 30 days and we're not even, you know, we're still not in a country wide shutdown and the degrees are shut down in different different places. So I do think it's, it shows that, you know, the wonderful things about a democracy and that, you know, people are generally not afraid to come public with issues and we have a very well functioning media that's not afraid to surface problems.

You know, the downside is we could not, we did not take the extreme measures that China took as quickly as they did and I wish we had. So, you know, that's sort of the up-down of it. But, you know, the CDC, I think, you know, I would have thought they would have taken a much more forward-leaning public approach here and it's just not clear what role the CDC has played. You know, you see the coronavirus team led by the vice president, Dr. Fauci, Dr. Birx, etc., you know, they seem like capable people. But, you know, the CDC has not been these particularly visible as far as I've seen in making recommendations. You know, where was the CDC in terms of recommending a national shutdown, etc. I didn't, unless I missed it, I didn't see it. Yeah, I think like the post hoc on this is going to be super interesting in terms of how they look at it.

You mentioned you have four kids, I think, right? And you're you're 53. What are the lessons that you and you have quite the age range, right? So, you go from one to how old's the oldest? Twenty-two. Twenty-two. What lessons do you try to teach your kids or instill in your kids? So, you know, it's a lot of the obvious ones. You know, hard work pays off. Education is really important. Treat other people the way you want to be treated yourself. You know, basic, perhaps somewhat biblical type type things. You know, persistence, you know, that we started the interview asking what I learned from my parents and both mom and dad are super persistent.

And you recognize the wonderful qualities of persistence. And then when you live with your parents for six weeks, you there are sometimes negative associated with those qualities. But you try to teach your kids about that. Try to teach your kids about the value of money and, you know, saving and, you know, minimizing waste. And then also, you know, what more difficult topic is, you know, trying to teach kids about nutrition. That's a very high risk subject to talk.

What's your guilty pleasure? Do you have chocolate in the house? Yeah, I am a big dark chocolate fan. I like this one. It's called endangered species 88%. And it's amazing. 88% just seems too good to be true of this. It's sort of very, very good. So I, that's definitely on my list. It was my weakness to you.
你的罪恶快乐是什么?你家里有巧克力吗?有啊,我特别喜欢黑巧克力。我喜欢一种叫“濒危物种 88%”的黑巧克力,它非常棒。88%听起来简直好得不真实。这种巧克力真的非常非常好,所以它绝对在我的必备清单上。这也是我的软肋。

I'm going to run out and get some of that. Bill, thank you so much for your time. This has been amazing. Yeah, enjoyed it. I really appreciate it. You can find show notes on this episode, as well as every other episode at fs.blog slash podcast. If you find this episode valuable, share it on social media and leave a review to support the podcast, go to fs.blog slash membership and join our learning community. You'll get hand edited transcripts of all the podcasts and so much more. Thank you for listening.
我要出去买一些那个东西。比尔,非常感谢你的时间。这真是太棒了。我很享受,真的很感激。你可以在 fs.blog/podcast 找到本集以及所有其他集的节目笔记。如果你觉得这集有价值,请在社交媒体上分享并留下评论以支持这个播客。你也可以访问 fs.blog/membership 并加入我们的学习社区。你将获得所有播客的手工编辑版文本和更多内容。谢谢收听。