Bill Ackman: Career Lessons from Pershing Square Capital's CEO
[13 mins] If I think I’m right, I can be the most persistent and most relentless person in America.
“If I think I’m right, I can be the most persistent and most relentless person in America.”
— Bill Ackman
Good day, my readers! 🫡
This week marks the 10th episode of Career Spotlight. Thank you for the support so far. 🎉
We will be taking a short break and resume the week after. ✈️
Today, I will be presenting 3 lessons that we can all learn from Bill Ackman.
Enjoy! 🙂
Bill Ackman's journey to the pinnacle of Wall Street is a remarkable tale of resilience and self-confidence.
After suffering a few missteps that led to the closure of his first fund Gotham Partners, Bill refused to be defined by failure.
Instead, he founded Pershing Square Capital and built it into one of the most prominent hedge funds on Wall Street — managing over $16 billion in assets.
His ability to deal with failure, be persistent and relentless during tough periods has established him as a legendary figure in finance.
What to expect 🔎
Early Beginnings — Bill is born into a wealthy family. He attends Harvard. Upon graduation, he starts his own fund.
Gotham Partners — Bill rises as quickly as he falls.
Pershing Square — Bill makes a comeback. He is one of the most resilient and toughest investors on Wall Street.
Lessons you will learn 📚
Self-confidence is the cornerstone of every significant journey. No matter the obstacles you face, always believe in your own potential.
Success is not a straight line; embrace the bumps along the way.
Your ability to deal with failure will define your success.
Early Beginnings
Bill Ackman was born on May 11, 1966, in Chappaqua, New York.
He grew up in a well-to-do family.
His father, Lawrence David Ackman, was a successful real estate developer, who provided young Bill with exposure to the world of investments and finance from an early age.
Tall, athletic, smart, handsome with cerulean eyes, Bill was the arrogant and hyper-ambitious kind that other kids loved to hate.
In 1984, when he was a junior at Horace Greeley High School, in affluent Chappaqua, New York, he wagered his father $2,000 that he would score a perfect 800 on the verbal section of the S.A.T.
The gamble was everything Bill had saved up from his Bar Mitzvah gift money and his allowance for doing household chores.
“I was a little bit of a cocky kid,” he admits, with uncharacteristic understatement.
But on the night before the S.A.T., his father took pity on him and cancelled the bet.
“I would’ve lost it,” Bill concedes. He got a 780 on the verbal and a 750 on the math. “One wrong on the verbal, three wrong on the math,” he muses. “I’m still convinced some of the questions were wrong.”
After graduating from Harvard College and following a stint working for his father at the family’s commercial-mortgage real-estate business, Bill went to Harvard Business School for his MBA.
As he had in college, Bill rowed crew. He was co-captain of the business-school team that wore T-shirts with dollar signs on the backs and painting dollar signs on the oars.
Their choice generated national controversy. Spectators booed the Harvard crew boats, causing Bill to defend the decorations in an opinion column in the Harbus, the business-school newspaper.
“Let’s face up to what Harvard Business School represents,” he wrote. “We spend 90 percent of our studies at HBS pursuing the maximization of the dollar.”
Bill earned his MBA in 1992.
In March 1993, together with his fellow Harvard graduate David Berkowitz, they set up Gotham Partners with $3 million from various investors.
Including $250,000 from Marty Peretz, Bill's college professor who had encouraged him to pursue his own hedge fund instead of taking a more conventional job after graduation.
“He would have been miserable there, having to answer to other people,” Mr. Peretz recalled.
To outsiders, it was a bold leap for a 26-year-old.
To Bill, there was nary a doubt of his own abilities.
He said:
“You don't need to be old to be right… I was always unafraid of asking someone to invest because while capital was a commodity, good investment ideas were rare assets.”
Timeline (so far):
1966 - Bill Ackman is born.
1992 - Bill earns his MBA from Harvard.
1993 - Bill sets up his first fund Gotham Partners with $3 million from various investors.Lesson 📚
Self-confidence is the cornerstone of every significant journey. No matter the obstacles you face, always believe in your own potential.
Gotham Partners
Gotham Partners began with a focus on making small investments in highly liquid public companies.
The fund did well out of the starting gate. It posted a return of 20.7 percent in 1993, dropped 3.4 percent in 1994 and rebounded 38.7 percent in 1995.
In 1995, Bill and Gotham Partners made headlines when they entered the bidding for the iconic Rockefeller Centre.
It was an extremely ambitious move especially by a 29-year-old.
Bill knew he couldn’t go into war alone. He sought out a partnership with Leucadia National Corporation.
The partnership and the bidding process significantly raised Bill's profile on Wall Street. They went up against financial heavyweights such as Sam Zell’s consortium, Donald Trump and Goldman Sachs.
Although they ultimately lost the bid, the attempt generated substantial media attention and interest in Gotham Partners.
Notably, David Rockefeller expressed gratitude to Bill for his fair conduct during the bidding process, which further bolstered Bill's reputation.
The firm continued to experience rapid growth, amassing approximately $500 million in assets under management by 1998.
Despite initial successes, Gotham Partners faced significant challenges as it evolved.
In 2003, the New York Times wrote: "An examination of Gotham's activities in recent years shows a series of ill-timed bets, a surprising lack of diversification and a dangerous concentration in illiquid investments that could not easily be sold when investors wanted their money back."
Back in 1997, Gotham Partners acquired a majority stake in Gotham Golf, intending to capitalize on the growing golf industry.
However, the venture quickly became problematic.
As Bill and his team continued to purchase additional golf courses, they accumulated substantial debt without achieving profitability.
Bill devised a plan to merge Gotham Golf with First Union Real Estate Equity and Mortgage Investments, a cash-rich company that could potentially help alleviate Gotham Golf's financial burdens.
However, this merger was blocked by First Union's minority shareholders, leaving Gotham Golf on the brink of bankruptcy.
What had begun in 1993 as a hedge fund specializing in undervalued public stocks had morphed into a portfolio of illiquid private companies.
The men had described themselves to investors as value-oriented and risk-averse. However, they started to make bets on arcane private investments.
By 2000, they had strayed from their value focus and moved heavily into private companies, investing $2 million in Giftcertificates.com, a Web site that has been unable to go public, and an unspecified investment in the Frontline Capital Group, a technology company incubator.
Their situation grew increasingly dire, they turned to a strategy that could be deemed as unlawful.
They published research papers on their website in support of their large positions in two companies, MBIA and Pre-Paid Legal Services.
That decision to publicly promote two of their biggest holdings – known in Wall Street parlance as talking one's book – could be classified as a classic pump-and-dump scheme. 💸
It started to bring unwelcome scrutiny. Eliot Spitzer, the New York State attorney general, begun investigating into Gotham Partners.
As the troubles at Gotham Golf mounted, redemptions at the hedge fund were escalating.
According to a letter to investors in 2000, Gotham Partners had received $108 million in redemption requests, almost a quarter of its capital. The next year, investors redeemed an additional $72 million, or 20 percent.
The combination of poor investment decisions, particularly in illiquid assets like Gotham Golf, ensuing legal battles and loss of investor confidence forced Bill and Berkowitz to shut down Gotham Partners in 2001.
The closure marked a dramatic fall from grace for Bill, who had once been celebrated as a rising star on Wall Street.
Timeline (so far):
1966 - Bill Ackman is born.
1992 - Bill earns his MBA from Harvard.
1993 - Bill sets up his first fund Gotham Partners with $3 million from various investors.
1995 - Bill makes headlines when he enters the bid for the iconic Rockefeller Center.
1998 - Gotham Partners grows rapidly, amassing $500 million in asset under management.
2000s - Bill finds themselves in deep trouble. A few of their investments have become problematic.
2001 - Bill shuts down Gotham Partners amidst ensuing legal battles and loss of investor's confidence.Lesson 📚
Success is not a straight line; embrace the bumps along the way.
Pershing Square
Most would have packed their bags and never be seen on Wall Street again.
But not Bill Ackman.
In 2004, he made a comeback. He started his current fund, Pershing Square.
Pershing Square was launched with approximately $54 million in initial capital, a significant portion of which came from Bill’s personal funds.
From the outset, Bill adopted an activist approach. He focused on identifying undervalued companies that had the potential for significant improvement.
Bill quickly got off to a winning start.
As one of his first plays, he acquired a substantial stake in Wendy's, approximately 9.9% of the company at around $37 per share.
One of Bill's primary strategies was to advocate for Wendy's to spin off its profitable subsidiary, Tim Hortons, which was a successful coffee and fast-food chain in Canada.
At the time, Wendy's owned 100% of Tim Hortons, but he believed that the market was not recognizing the value of Tim Hortons within Wendy's overall valuation.
Bill was incredibly persistent and steadfast in his belief.
In an interview on "The David Rubenstein Show," he reflected on this experience:
"We could clearly see that business was worth about $5 billion... literally the market was ascribing zero value to the Wendy's franchise... our advice to the CEO was just spin off Tim Horton's and then focus on fixing Wendy's."
To bolster his case, Bill hired Blackstone Group to provide a fairness opinion on the potential value of spinning off Tim Hortons.
This analysis concluded that separating the two entities could unlock significant shareholder value.
In March 2006, after months of pressure from Bill and other shareholders, Wendy's announced the spin-off of Tim Hortons.
The spin-off raised approximately $783 million, allowing Wendy's to focus on its core operations while giving Tim Hortons the freedom to grow independently.
Following the spin-off, Bill sold his shares in Wendy's at a substantial profit.
As he ramped up his public profile, Bill became even more vocal in the press about his investments and his plans to change companies.
Yet several bets, beginning in 2011, became high-profile disasters, including those on the retailer J.C. Penney Company and the pharmaceutical company Valeant.
At J.C. Penney, Bill pushed hard for the company to change its strategy, away from lower-priced merchandise and toward higher-end brands.
He boasted that the changes would make it one of the most important retailers in the United States and handpicked a senior Apple executive as its chief executive.
The pivot nearly ruined the company.
As Valeant Pharmaceuticals and its chief executive, Michael Pearson, were being accused of buying drugs and marking up their prices, Mr. Ackman continued to praise Mr. Pearson, calling him “one of the most shareholder-oriented C.E.O.s I know.”
However, the situation began to unravel in 2015 when Valeant faced intense scrutiny over its pricing practices and allegations of fraud.
By March 2017, Bill had sold his entire position at a loss estimated to be around $4 billion.
Then there was Herbalife, the nutritional supplement company that Bill said was preying on people as a multilevel marketing scheme.
“This is a criminal enterprise,” Mr. Ackman said in 2014. He said he would take the fight “to the ends of the earth” and hosted meetings, conducted research and constantly called on regulators to shut it down.
And although Herbalife was eventually forced by the Federal Trade Commission to pay $200 million to consumers hurt by its practices and make changes to its business, Mr. Ackman didn’t reap the benefits.
By 2018, Mr. Ackman sold his entire position in the company and lost roughly $1 billion.
Despite his failures, the supremely confident and resilient billionaire hedge-fund manager Bill Ackman has never been afraid to make bets when he knows he’s right.
And when he is right, he wins big.
One of his most profitable hedges came during the COVID pandemic.
By the end of February 2020, Ackman had come to believe that the coronavirus pandemic was a massive risk for the United States, its economy, and global financial markets.
He and his traders spent $27 million buying all the portfolio protection they could find.
Ultimately, they focused on credit markets. With spreads that are a gauge of riskiness and fear at record lows, Pershing Square bought far out of the money protection against investment-grade and high-yield bond indexes.
The hedges were designed to protect Pershing Square against an explosion of risk and volatility if the coronavirus spread.
If that happened, they expected spreads to widen enormously, putting their ultra-convex bets into-the-money and protecting their portfolio against a sharp drawdown in equity markets.
The hedges worked brilliantly. The S&P 500 Index has shed about a quarter of its value in a month, but Bill did fine. He earned an estimated $2.7 billion from the hedge, offsetting the temporary loss in the other stocks within his portfolio.
Since inception, his fund has returned close to 16.5% annually – beating the S&P 500. His asset under management has ballooned from a measly $54 million to over $16 billion today.
Bill is not the most popular guy on Wall Street. He is arrogant and it gets to people.
He is born with a silver spoon. He’s got all the good genes. Tall, athletic, smart, eloquent and charming.
He’s the kind that you love to root against. The kind that you would love to see his downfall.
“The story I hear from everybody is that one can’t help but be intrigued by the guy, just because he’s somewhat larger than life, but then one realizes he’s just pompous and arrogant…”, says Chapman Capital’s Robert Chapman.
Despite the critics, one thing is for sure.
Bill is one of the most resilient, toughest and successful investors on Wall Street. Period.
Timeline (complete):
1966 - Bill Ackman is born.
1992 - Bill earns his MBA from Harvard.
1993 - Bill sets up his first fund Gotham Partners with $3 million from various investors.
1995 - Bill makes headlines when he enters the bid for the iconic Rockefeller Center.
1998 - Gotham Partners grows rapidly, amassing $500 million in asset under management.
2000s - Bill finds themselves in deep trouble. A few of their investments have become problematic.
2001 - Bill shuts down Gotham Partners amidst ensuing legal battles and loss of investor's confidence.
2004 - Bill makes a comeback. He starts Pershing Square with $54 million in initial capital - mostly from personal funds.
2006 - Bill earns a substantial amount from his Wendy's deal.
2011 - Bill loses money on J.C. Penney.
2017 - Bill loses $4 billion on Valeant Pharmaceutical.
2018 - Bill loses $1 billion on Herbalife.
2020 - Bill makes one of his most successful hedges in history. He turns $27 million into $2.7 billion.
2024 - Pershing Square Capital manages over $16 billion in assets and has returned close to 16.5% annually - beating the S&P 500.Lesson 📚
Your ability to deal with failure will define your success.
Ladies and gentlemen, there you have it. Bill Ackman.
Thank you so much for reading up to this point. I thoroughly enjoyed learning about Bill’s career.
I hoped you enjoyed reading this too. If you did, please subscribe for more career spotlights.
Take care and till next time! 🫡
Great read! Always thought of Ackman as almost the Thiel of W Street, just with how vocal and public he is, both as an analyst and his political voice. Question is, would you invest in Pershing? Given his track record is worse than the S&P? (Before fees I think as well).