1 00:00:00,000 --> 00:00:00,000 S1 2 00:00:00,000 --> 00:00:03,734 Bill Ackman is here. 3 00:00:03,734 --> 00:00:06,501 He's CEO of Pershing Square Capital Management. 4 00:00:06,501 --> 00:00:10,367 The $11 billion-plus investment fund has been instrumental in 5 00:00:10,367 --> 00:00:13,100 turning around some of the world's most powerful brands. 6 00:00:13,100 --> 00:00:16,133 Among them are Procter & Gamble and Burger King but Ackman has 7 00:00:16,133 --> 00:00:18,467 also made some more controversial investments that 8 00:00:18,467 --> 00:00:19,734 have not turned out as well. 9 00:00:19,734 --> 00:00:22,701 He placed a $1 billion bet against Herbalife. 10 00:00:22,701 --> 00:00:25,200 He claims the nutritional supplements company is a 11 00:00:25,200 --> 00:00:27,934 pyramid scheme and wants the government to shut it down. 12 00:00:27,934 --> 00:00:31,234 He is currently involved in the struggle over the fate of J.C. 13 00:00:31,234 --> 00:00:32,234 Penney. 14 00:00:32,234 --> 00:00:34,234 As the company's largest stock holder he has been vocal about 15 00:00:34,234 --> 00:00:36,267 management changes he wants to see at the top. 16 00:00:36,267 --> 00:00:38,267 Today he announced he is resigning from J.C. 17 00:00:38,267 --> 00:00:39,267 Penney's board of directors. 18 00:00:39,267 --> 00:00:41,267 I am pleased to have him here back at this table. 19 00:00:41,267 --> 00:00:42,267 Welcome. 20 00:00:42,267 --> 00:00:43,267 Thank you. 21 00:00:43,267 --> 00:00:45,267 Let's just talk about J.C. 22 00:00:45,267 --> 00:00:46,267 Penney. 23 00:00:46,267 --> 00:00:47,267 Sure. 24 00:00:47,267 --> 00:00:50,234 So first of all, why did you become the biggest 25 00:00:50,234 --> 00:00:51,534 stockholder in J.C. 26 00:00:51,534 --> 00:00:52,534 Penney? 27 00:00:52,534 --> 00:00:55,100 What did you think you could do which you have not yet been 28 00:00:55,100 --> 00:00:56,100 able to do? 29 00:00:56,100 --> 00:00:57,234 Sure. 30 00:00:57,234 --> 00:00:58,234 So J.C. 31 00:00:58,234 --> 00:01:00,234 Penney is one of the great companies of -- part of the 32 00:01:00,234 --> 00:01:01,234 history of America. 33 00:01:01,234 --> 00:01:04,200 It's been a struggle, really, for the -- it peaked, perhaps, 34 00:01:04,200 --> 00:01:07,534 in the late 80s, early 90s and it's been in decline since then 35 00:01:07,534 --> 00:01:10,601 but because of its history it has incredible assets. 36 00:01:10,601 --> 00:01:12,601 What are those assets? 37 00:01:12,601 --> 00:01:14,601 Its assets are real estate. 38 00:01:14,601 --> 00:01:15,601 Yes. 39 00:01:15,601 --> 00:01:17,601 It's got 1,100 stores in a lot of very good 40 00:01:17,601 --> 00:01:18,601 locations around the country. 41 00:01:18,601 --> 00:01:20,601 It's got a great brand that's known by every American. 42 00:01:20,601 --> 00:01:22,601 You know, these are assets that are very difficult to replicate 43 00:01:22,601 --> 00:01:26,100 and it has a revenue base of customers that come to J.C. 44 00:01:26,100 --> 00:01:27,100 Penney. 45 00:01:27,100 --> 00:01:29,400 The problem is that profits have declined and revenues have 46 00:01:29,400 --> 00:01:32,667 declined as, you know, some combination of Wal-Mart, Target, 47 00:01:32,667 --> 00:01:33,834 others have taken the share. 48 00:01:33,834 --> 00:01:35,834 How about management? 49 00:01:35,834 --> 00:01:37,000 I mean here is what you did. 50 00:01:37,000 --> 00:01:40,868 I mean you hired Ron Johnson, who was in charge of the Apple 51 00:01:40,868 --> 00:01:43,968 retail stores and had been instrumental in creating that 52 00:01:43,968 --> 00:01:46,701 whole very successful operation. 53 00:01:46,701 --> 00:01:50,300 And the judgment seems to be he did not only turn the company 54 00:01:50,300 --> 00:01:51,567 around, he made it worse. 55 00:01:51,567 --> 00:01:53,167 Understood. 56 00:01:53,167 --> 00:01:55,167 So the history here is actually -- 57 00:01:55,167 --> 00:01:56,267 You're guy. 58 00:01:56,267 --> 00:01:58,934 He's the guy that we believed in, that we thought 59 00:01:58,934 --> 00:01:59,934 had a lot of great ideas. 60 00:01:59,934 --> 00:02:01,934 And frankly I'm not the only guy on the board who believed in 61 00:02:01,934 --> 00:02:02,934 Ron Johnson. 62 00:02:02,934 --> 00:02:05,200 The board was very supportive of bringing in Ron as CEO of the 63 00:02:05,200 --> 00:02:06,200 company. 64 00:02:06,200 --> 00:02:07,200 So what happened? 65 00:02:07,200 --> 00:02:09,601 What happened is we took a brilliant guy with a lot 66 00:02:09,601 --> 00:02:11,701 of creative ideas who have a lot of terrific experience -- I 67 00:02:11,701 --> 00:02:14,467 mean Ron didn't just do a great job at -- at Apple. 68 00:02:14,467 --> 00:02:16,767 He did a fabulous job at Target before that at Mervyns. 69 00:02:16,767 --> 00:02:18,033 Right. 70 00:02:18,033 --> 00:02:20,033 So he knew something about retailing. 71 00:02:20,033 --> 00:02:22,033 And he tried to make a lot of very dramatic 72 00:02:22,033 --> 00:02:23,033 changes to the company. 73 00:02:23,033 --> 00:02:25,033 Too fast, too quick? 74 00:02:25,033 --> 00:02:27,033 Probably too fast, too quick. 75 00:02:27,033 --> 00:02:29,033 I think that you know retail is a difficult business to begin 76 00:02:29,033 --> 00:02:30,033 with. 77 00:02:30,033 --> 00:02:32,000 I think that the customer takes time to understand how a 78 00:02:32,000 --> 00:02:33,000 business has changed. 79 00:02:33,000 --> 00:02:35,534 And we also did it in the public eye, which draws 80 00:02:35,534 --> 00:02:38,200 tremendous scrutiny and I think it made it more difficult. 81 00:02:38,200 --> 00:02:40,968 Do you believe that he could have made it if he 82 00:02:40,968 --> 00:02:41,968 had more time? 83 00:02:41,968 --> 00:02:43,968 I think his ideas are actually fundamentally 84 00:02:43,968 --> 00:02:45,968 correct, not all of them, but the big ideas. 85 00:02:45,968 --> 00:02:48,434 I mean he's left us with the best-looking stores we've had 86 00:02:48,434 --> 00:02:49,434 in many, many years. 87 00:02:49,434 --> 00:02:51,434 So he changed the look of the stores. 88 00:02:51,434 --> 00:02:53,434 The look of the store, the shopping experience I 89 00:02:53,434 --> 00:02:54,434 think is a better experience. 90 00:02:54,434 --> 00:02:55,400 Yes. 91 00:02:55,400 --> 00:02:57,400 I think there are some very good new brands that 92 00:02:57,400 --> 00:02:59,400 have come in -- so a lot of positive change. 93 00:02:59,400 --> 00:03:01,834 I think the most negative change he made in the short-term, 94 00:03:01,834 --> 00:03:04,267 which I think is right perhaps in the long-term, is he took 95 00:03:04,267 --> 00:03:06,267 away the coupons, the discounting and kind of the 96 00:03:06,267 --> 00:03:07,267 gaming -- 97 00:03:07,267 --> 00:03:08,267 Right. 98 00:03:08,267 --> 00:03:10,267 -- that people had become accustomed to. 99 00:03:10,267 --> 00:03:12,267 Basically trying to make the argument that we're 100 00:03:12,267 --> 00:03:14,267 going to give you good value all the time and don't be fooled 101 00:03:14,267 --> 00:03:16,267 by all the sales talk that exists in so many stores. 102 00:03:16,267 --> 00:03:18,267 Interestingly, people seem to be happier buying 103 00:03:18,267 --> 00:03:20,267 something at 50 percent off for $50 as opposed to having it 104 00:03:20,267 --> 00:03:22,534 marked at $40 and there being no discount, which is sort of an 105 00:03:22,534 --> 00:03:24,601 interesting psychological phenomenon. 106 00:03:24,601 --> 00:03:25,601 But it's real. 107 00:03:25,601 --> 00:03:27,601 The second thing, yes the second thing. 108 00:03:27,601 --> 00:03:29,968 So -- so he's fired and you replaced him, he is replaced by 109 00:03:29,968 --> 00:03:30,968 -- 110 00:03:30,968 --> 00:03:32,968 I want to be clear. 111 00:03:32,968 --> 00:03:34,968 So I don't -- we don't -- I don't control J.C. 112 00:03:34,968 --> 00:03:35,968 Penney. 113 00:03:35,968 --> 00:03:36,968 I'm a large shareholder. 114 00:03:36,968 --> 00:03:37,968 I'm one member of the board. 115 00:03:37,968 --> 00:03:39,968 You're the largest stockholder. 116 00:03:39,968 --> 00:03:41,968 The largest stockholder. 117 00:03:41,968 --> 00:03:42,968 Right. 118 00:03:42,968 --> 00:03:44,968 But that doesn't give me -- 119 00:03:44,968 --> 00:03:45,968 (CROSSTALK) 120 00:03:45,968 --> 00:03:48,801 At 17 percent of the company. 121 00:03:48,801 --> 00:03:50,801 That's correct, but it doesn't give me the right to 122 00:03:50,801 --> 00:03:51,801 control the company. 123 00:03:51,801 --> 00:03:53,834 I'm just one board member on a board of today 11 directors up 124 00:03:53,834 --> 00:03:55,834 until this morning when I stepped off the board. 125 00:03:55,834 --> 00:03:57,834 We'll get to that. 126 00:03:57,834 --> 00:03:59,834 All right but before you did that -- 127 00:03:59,834 --> 00:04:01,834 So I -- so the answer is we've -- we had to 128 00:04:01,834 --> 00:04:02,834 make a change. 129 00:04:02,834 --> 00:04:04,834 We brought back Mike Ullman, the previous CEO. 130 00:04:04,834 --> 00:04:05,834 Mike had retired. 131 00:04:05,834 --> 00:04:07,834 Mike is in his mid-60s and we knew we had to bring in a 132 00:04:07,834 --> 00:04:09,801 long-term CEO and Mike was brought in as an interim, to 133 00:04:09,801 --> 00:04:10,901 stabilize the company and get a financing done and I thought 134 00:04:10,901 --> 00:04:14,000 recruit a new CEO to help fix the business over the long 135 00:04:14,000 --> 00:04:16,000 term. 136 00:04:16,000 --> 00:04:18,000 Was that his understanding of what he was 137 00:04:18,000 --> 00:04:20,000 going to do? 138 00:04:20,000 --> 00:04:21,000 Yes, yes. 139 00:04:21,000 --> 00:04:22,000 OK. 140 00:04:22,000 --> 00:04:24,000 And so then you write a letter to him -- or you write a letter 141 00:04:24,000 --> 00:04:25,000 to the board. 142 00:04:25,000 --> 00:04:26,000 Sure. 143 00:04:26,000 --> 00:04:28,300 That you release or it gets out saying that he 144 00:04:28,300 --> 00:04:29,734 should be replaced. 145 00:04:29,734 --> 00:04:34,033 I mean people -- this is Howard Schultz. 146 00:04:34,033 --> 00:04:36,667 "Mike is working tirelessly to save the company and it is 147 00:04:36,667 --> 00:04:40,400 despicable of Ackman to leak a letter asking for his removal. 148 00:04:40,400 --> 00:04:43,701 The irony is that Ackman himself has every step of the way 149 00:04:43,701 --> 00:04:45,968 severely damaged the company. 150 00:04:45,968 --> 00:04:48,567 I thought it was disgusting when I saw what happened on 151 00:04:48,567 --> 00:04:49,567 Thursday. 152 00:04:49,567 --> 00:04:50,567 I'm distraught." 153 00:04:50,567 --> 00:04:51,567 Sure. 154 00:04:51,567 --> 00:04:53,567 "Bill Ackman has blood on his hands for being the 155 00:04:53,567 --> 00:04:56,133 one who brought Ron Johnson in. 156 00:04:56,133 --> 00:04:58,133 As someone who runs a public company and I'm speaking on 157 00:04:58,133 --> 00:05:01,701 behalf of people whose livelihoods can be destroyed by 158 00:05:01,701 --> 00:05:02,701 people like this." 159 00:05:02,701 --> 00:05:03,734 That's a pretty tough language. 160 00:05:03,734 --> 00:05:06,100 Tough language I mean it's unfortunate. 161 00:05:06,100 --> 00:05:08,100 I've never spoken to Howard Schultz. 162 00:05:08,100 --> 00:05:10,100 I think he doesn't really understand the facts. 163 00:05:10,100 --> 00:05:12,534 He's a good friend of Mike Ullman, who sits on his board. 164 00:05:12,534 --> 00:05:14,667 You know the reality is Howard Schultz, when he brought in the 165 00:05:14,667 --> 00:05:16,868 new CEO -- the board brought in Jim Donald to be the CEO of 166 00:05:16,868 --> 00:05:19,234 Starbucks a number of years ago and things were going poorly. 167 00:05:19,234 --> 00:05:22,000 Howard Schultz wrote a memo to the board that was leaked to 168 00:05:22,000 --> 00:05:25,400 the press and it's not clear who leaked that memo to the press. 169 00:05:25,400 --> 00:05:26,400 Yes. 170 00:05:26,400 --> 00:05:30,501 But ultimately it led to the replacement of Jim 171 00:05:30,501 --> 00:05:31,501 Donald with Howard Schultz. 172 00:05:31,501 --> 00:05:32,501 And Howard Schultz -- 173 00:05:32,501 --> 00:05:34,501 Or just returned to the company but he turned it 174 00:05:34,501 --> 00:05:35,501 around when he came back. 175 00:05:35,501 --> 00:05:37,501 He did an absolutely fabulous job. 176 00:05:37,501 --> 00:05:39,501 And -- but why did that memo end up being leaked to the 177 00:05:39,501 --> 00:05:40,501 press? 178 00:05:40,501 --> 00:05:41,501 Yes. 179 00:05:41,501 --> 00:05:43,501 The answer is what my strategy is -- what my -- 180 00:05:43,501 --> 00:05:45,501 what we do is use the public spotlight to ultimately put 181 00:05:45,501 --> 00:05:47,501 pressure on companies to do the right thing. 182 00:05:47,501 --> 00:05:49,501 And as a director I've never before released a public letter 183 00:05:49,501 --> 00:05:50,501 to the press. 184 00:05:50,501 --> 00:05:52,501 I've been a very -- in the board room I'm active. 185 00:05:52,501 --> 00:05:54,501 Outside the board room I'm very quiet about what happens in 186 00:05:54,501 --> 00:05:55,501 companies. 187 00:05:55,501 --> 00:05:56,501 But J.C. 188 00:05:56,501 --> 00:05:58,501 Penney over the last few months made a number of decisions or 189 00:05:58,501 --> 00:06:00,501 didn't make certain decisions that we thought were important 190 00:06:00,501 --> 00:06:01,501 and critical. 191 00:06:01,501 --> 00:06:03,501 I worked within the confines of the board room to try to address 192 00:06:03,501 --> 00:06:05,501 those concerns about the change in leadership. 193 00:06:05,501 --> 00:06:07,501 And when it was unsuccessful I felt the right thing to do was 194 00:06:07,501 --> 00:06:09,501 to air my -- my thoughts publicly, not by leaking a 195 00:06:09,501 --> 00:06:11,534 letter to the press but writing an open letter to the board. 196 00:06:11,534 --> 00:06:12,534 Right, right. 197 00:06:12,534 --> 00:06:14,501 What that does is it highlights the issues for the 198 00:06:14,501 --> 00:06:15,501 owners of the business. 199 00:06:15,501 --> 00:06:17,501 I'm a representative on the board of the owners of the 200 00:06:17,501 --> 00:06:18,501 business. 201 00:06:18,501 --> 00:06:20,501 The owners of the business don't actually know everything that's 202 00:06:20,501 --> 00:06:22,501 going on inside the company and I wanted their feedback on what 203 00:06:22,501 --> 00:06:24,501 was necessary in order to fix the business. 204 00:06:24,501 --> 00:06:26,501 And by releasing a letter to the press that talked about concerns 205 00:06:26,501 --> 00:06:28,901 about succession issues, concerns about inventory 206 00:06:28,901 --> 00:06:32,667 management, concerns about cost controls, what I've achieved is 207 00:06:32,667 --> 00:06:34,667 I focused the owners of the business and frankly the 208 00:06:34,667 --> 00:06:36,968 management and the board on these very, very important 209 00:06:36,968 --> 00:06:37,968 issues. 210 00:06:37,968 --> 00:06:41,400 And I think the message has been heard you know loud and clear 211 00:06:41,400 --> 00:06:45,334 and then I negotiated a resolution so that we -- you 212 00:06:45,334 --> 00:06:47,334 know the only negative of doing that, of course, is you get a 213 00:06:47,334 --> 00:06:48,334 bit of a media circus. 214 00:06:48,334 --> 00:06:49,334 Yes. 215 00:06:49,334 --> 00:06:52,834 That's not good for the company long term. 216 00:06:52,834 --> 00:06:55,601 And so within you know 48 hours we are able to come to a 217 00:06:55,601 --> 00:06:57,601 resolution that works which is we're bringing on two new 218 00:06:57,601 --> 00:06:58,601 directors to the board -- 219 00:06:58,601 --> 00:06:59,601 (CROSSTALK) 220 00:06:59,601 --> 00:07:01,601 And you're getting off the board. 221 00:07:01,601 --> 00:07:03,601 And I'm getting off the board. 222 00:07:03,601 --> 00:07:05,601 I've achieved all that I can achieve on the board. 223 00:07:05,601 --> 00:07:07,567 And I think we can restore some peace in the board room. 224 00:07:07,567 --> 00:07:09,567 But you know if you think about -- 225 00:07:09,567 --> 00:07:10,567 But Mike stays. 226 00:07:10,567 --> 00:07:12,567 Mike is in as interim CEO. 227 00:07:12,567 --> 00:07:14,567 There is a search process under way. 228 00:07:14,567 --> 00:07:16,567 Hopefully that search process will identify a good long-term 229 00:07:16,567 --> 00:07:17,567 CEO for the business. 230 00:07:17,567 --> 00:07:19,601 If I may, if you think about boards of directors and how they 231 00:07:19,601 --> 00:07:21,601 normally operate, very often when there's a board member on 232 00:07:21,601 --> 00:07:23,601 the board that's not happy with decisions that are being made by 233 00:07:23,601 --> 00:07:26,300 the company, he or she might voice those concerns inside the 234 00:07:26,300 --> 00:07:28,701 board room, but if they're voted down what they normally do is 235 00:07:28,701 --> 00:07:29,901 just step off very quietly. 236 00:07:29,901 --> 00:07:32,534 So if you think about the financial crisis. 237 00:07:32,534 --> 00:07:34,534 Let's say you're on the board of Lehman Brothers and you were 238 00:07:34,534 --> 00:07:36,534 unhappy with, you know, the amount of leverage that was 239 00:07:36,534 --> 00:07:38,534 being used or the risks that are being taken. 240 00:07:38,534 --> 00:07:39,534 Right. 241 00:07:39,534 --> 00:07:41,534 None of those board members went public with those 242 00:07:41,534 --> 00:07:43,534 concerns they simply probably just resigned from the board. 243 00:07:43,534 --> 00:07:46,667 And I think the markets ar better if directors are willing 244 00:07:46,667 --> 00:07:49,734 to take a stand and say, "Look, I'm concerned about steps the 245 00:07:49,734 --> 00:07:51,901 company is taking in its business." And that's what I 246 00:07:51,901 --> 00:07:52,901 did here. 247 00:07:52,901 --> 00:07:54,901 You want to be the champion of transparency? 248 00:07:54,901 --> 00:07:56,868 I want to be the champion of shareholder -- you 249 00:07:56,868 --> 00:07:58,868 know I'm a representative of the shareholders. 250 00:07:58,868 --> 00:08:01,634 I want to be a champion of the company and the shareholders. 251 00:08:01,634 --> 00:08:04,100 And when I'm concerned about the direction of the business I'm 252 00:08:04,100 --> 00:08:06,100 not afraid to air those concerns. 253 00:08:06,100 --> 00:08:08,100 I'm a very straightforward person. 254 00:08:08,100 --> 00:08:09,100 I say precisely what I think. 255 00:08:09,100 --> 00:08:11,100 Sometimes it rubs people the wrong way. 256 00:08:11,100 --> 00:08:13,100 OK well more than that though. 257 00:08:13,100 --> 00:08:15,267 I mean you are a lightning ro and you get engaged in all of 258 00:08:15,267 --> 00:08:18,567 these, you know, public disputes with people. 259 00:08:18,567 --> 00:08:21,000 Dan Loeb for example of Herbalife, we'll talk about 260 00:08:21,000 --> 00:08:22,000 that. 261 00:08:22,000 --> 00:08:26,400 Carl Icahn says, "I'm telling you he's like a cry baby in the 262 00:08:26,400 --> 00:08:27,400 school yard. 263 00:08:27,400 --> 00:08:29,434 I went to a tough school in Queens, you know, and they're 264 00:08:29,434 --> 00:08:31,734 used to beating up the little Jewish boys. 265 00:08:31,734 --> 00:08:34,234 He was like one of the little Jewish boys crying." 266 00:08:34,234 --> 00:08:35,567 This kind of language? 267 00:08:35,567 --> 00:08:37,567 Look I don't control Carl Icahn. 268 00:08:37,567 --> 00:08:39,567 The only thing I would say is if you look at our history over 269 00:08:39,567 --> 00:08:41,567 10 years, I'm not used to getting into disputes with 270 00:08:41,567 --> 00:08:42,567 people. 271 00:08:42,567 --> 00:08:44,567 Actually, you know, we have been a very constructive shareholder 272 00:08:44,567 --> 00:08:46,701 of, you know, a meaningful number of companies over the 273 00:08:46,701 --> 00:08:47,667 last 10 years. 274 00:08:47,667 --> 00:08:50,934 Most of this comes from a battle I'm having with Herbalife. 275 00:08:50,934 --> 00:08:54,501 In the case of Herbalife I'm not a shareholder pushing to 276 00:08:54,501 --> 00:08:55,701 make a business more valuable. 277 00:08:55,701 --> 00:08:58,534 I'm an investor who has made a bet that the business will fail. 278 00:08:58,534 --> 00:09:01,100 So you are short on Herbalife? 279 00:09:01,100 --> 00:09:04,601 We short the stock and what we are doing is we 280 00:09:04,601 --> 00:09:06,734 believe that Herbalife is operating a pyramid scheme. 281 00:09:06,734 --> 00:09:07,734 Yes. 282 00:09:07,734 --> 00:09:09,901 We believe that they are transferring wealth 283 00:09:09,901 --> 00:09:12,300 from a very large number of low-income, principally Hispanic 284 00:09:12,300 --> 00:09:15,501 individuals in this country and around the globe to a handful of 285 00:09:15,501 --> 00:09:16,501 wealthy people. 286 00:09:16,501 --> 00:09:18,701 It is dishonest (ph) and moral outrage, don't 287 00:09:18,701 --> 00:09:19,667 you? 288 00:09:19,667 --> 00:09:21,667 It's certainly moral outrage. 289 00:09:21,667 --> 00:09:25,100 And what we are doing is catalyzing again spotlighting 290 00:09:25,100 --> 00:09:27,834 the company, so that the regulatory community, you know, 291 00:09:27,834 --> 00:09:32,334 the SEC, the New York Attorney General, the Federal Trade 292 00:09:32,334 --> 00:09:35,234 Commission and FDA, apparently, now there's a story today in 293 00:09:35,234 --> 00:09:38,701 today's "Times" online about a subpoena that had been received. 294 00:09:38,701 --> 00:09:40,701 But the bottom line is what we are doing here is we're 295 00:09:40,701 --> 00:09:42,701 highlighting problems at the company. 296 00:09:42,701 --> 00:09:46,033 Now Carl Icahn is someone that years ago -- 10 years ago I've 297 00:09:46,033 --> 00:09:49,400 made a deal with that he ended up breaching a contract I had to 298 00:09:49,400 --> 00:09:52,267 sue him to perform, ultimately collecting after eight years. 299 00:09:52,267 --> 00:09:55,667 And so he's not happy with me making him pay money he owed and 300 00:09:55,667 --> 00:09:58,367 he's used this Herbalife investment as really a platform 301 00:09:58,367 --> 00:10:00,868 to quote, unquote "get back at me" and he's had some other 302 00:10:00,868 --> 00:10:03,067 powerful allies that have joined in. 303 00:10:03,067 --> 00:10:04,067 Like? 304 00:10:04,067 --> 00:10:07,067 You know Dan Loeb took a -- made an investment 305 00:10:07,067 --> 00:10:09,067 briefly and then sold the stock. 306 00:10:09,067 --> 00:10:11,067 Yes he thought the stock wouldn't go up. 307 00:10:11,067 --> 00:10:12,067 Correct. 308 00:10:12,067 --> 00:10:14,067 And we just thought it was a good trade -- 309 00:10:14,067 --> 00:10:15,067 (CROSSTALK) 310 00:10:15,067 --> 00:10:16,067 And it did. 311 00:10:16,067 --> 00:10:18,067 It did, absolutely. 312 00:10:18,067 --> 00:10:20,033 So he made a good investment. 313 00:10:20,033 --> 00:10:21,033 Sure, sure. 314 00:10:21,033 --> 00:10:23,033 See I'm longer term -- I'm not a trader. 315 00:10:23,033 --> 00:10:24,033 No. 316 00:10:24,033 --> 00:10:26,033 What we do is we take large, concentrated 317 00:10:26,033 --> 00:10:28,033 positions, generally very well-known companies and we work 318 00:10:28,033 --> 00:10:29,033 with them for years. 319 00:10:29,033 --> 00:10:31,033 We took a stake in general growth in the middle of the 320 00:10:31,033 --> 00:10:32,033 financial crisis. 321 00:10:32,033 --> 00:10:33,033 Right. 322 00:10:33,033 --> 00:10:35,033 The stock at the time was 34 cents. 323 00:10:35,033 --> 00:10:37,033 We actually have worked with the board and convinced them to 324 00:10:37,033 --> 00:10:39,033 put the company into bankruptcy, which is kind of an unusual 325 00:10:39,033 --> 00:10:40,033 thing. 326 00:10:40,033 --> 00:10:42,067 We helped the company restructure its debts, we 327 00:10:42,067 --> 00:10:44,067 brought in new management, we recruited the new board of 328 00:10:44,067 --> 00:10:46,067 members, I stepped off the board, we span off the 329 00:10:46,067 --> 00:10:48,067 subsidiary called the Howard Hughes Corporation. 330 00:10:48,067 --> 00:10:50,067 That little 34-cents stock today is worth $34 about five years 331 00:10:50,067 --> 00:10:52,067 after we made the investment and the shareholders have made 100 332 00:10:52,067 --> 00:10:53,033 times their money. 333 00:10:53,033 --> 00:10:55,067 Now there aren't a lot of people upset with me about that 334 00:10:55,067 --> 00:10:57,067 particular situation because everyone wins. 335 00:10:57,067 --> 00:11:00,501 The problem with shorting stocks is that there are going to be 336 00:11:00,501 --> 00:11:02,834 some large number of people who own the stock who are not going 337 00:11:02,834 --> 00:11:05,734 to be happy and that the CEO of the company is not going to be 338 00:11:05,734 --> 00:11:06,734 happy with you. 339 00:11:06,734 --> 00:11:08,734 Well, you know that there are people also who 340 00:11:08,734 --> 00:11:12,234 accuse you -- I mean some people make smart investments in 341 00:11:12,234 --> 00:11:14,834 which they short a company because they believe the company 342 00:11:14,834 --> 00:11:18,400 intrinsically, it has -- is going to have earnings problems 343 00:11:18,400 --> 00:11:21,300 and stocks can go down and they'll look like, you know, 344 00:11:21,300 --> 00:11:24,000 they'll look like the wisest of investors. 345 00:11:24,000 --> 00:11:27,367 There are others who believe that people invest and short and 346 00:11:27,367 --> 00:11:30,400 then go out to destroy the company themselves. 347 00:11:30,400 --> 00:11:31,601 Where do you fit on this? 348 00:11:31,601 --> 00:11:33,601 We don't go out to destroy companies. 349 00:11:33,601 --> 00:11:35,601 What we do -- we short very few stocks. 350 00:11:35,601 --> 00:11:37,667 This is the second large short I've made in 10 years. 351 00:11:37,667 --> 00:11:41,167 The last one probably have been some time -- last time I was on 352 00:11:41,167 --> 00:11:43,167 your show, perhaps, we talked about it. 353 00:11:43,167 --> 00:11:44,167 Right. 354 00:11:44,167 --> 00:11:46,434 We shorted a company called MBIA. 355 00:11:46,434 --> 00:11:47,467 Right. 356 00:11:47,467 --> 00:11:50,300 MBIA had a AAA rating from the credit rating. 357 00:11:50,300 --> 00:11:52,300 This mortgage what I mean -- 358 00:11:52,300 --> 00:11:54,300 It guaranteed mortgages and other kinds of 359 00:11:54,300 --> 00:11:56,300 financial obligations and was creating a lot of risk in the 360 00:11:56,300 --> 00:11:57,300 financial system. 361 00:11:57,300 --> 00:11:59,300 And we shorted the stock and we disclosed publicly our concerns 362 00:11:59,300 --> 00:12:01,267 about the company's balance sheet and the risk it was 363 00:12:01,267 --> 00:12:03,267 creating for the capital markets. 364 00:12:03,267 --> 00:12:04,934 So the benefit of short sellers to the markets is they're sort 365 00:12:04,934 --> 00:12:06,234 of the canary in the coal mine. 366 00:12:06,234 --> 00:12:08,234 You know, they are the early warning signal about a problem 367 00:12:08,234 --> 00:12:10,234 in the business, a problem in the capital markets. 368 00:12:10,234 --> 00:12:12,234 You know we've done -- you know we probably spent millions of 369 00:12:12,234 --> 00:12:15,133 dollars doing research on Herbalife, research that you 370 00:12:15,133 --> 00:12:17,734 know the government, frankly, on a speculative basis probably 371 00:12:17,734 --> 00:12:19,701 wouldn't do on a company like this. 372 00:12:19,701 --> 00:12:22,100 We've then provided all of our information to the SEC, the 373 00:12:22,100 --> 00:12:24,801 Federal Trade Commission and various states attorneys general 374 00:12:24,801 --> 00:12:26,801 helping them do their work, right? 375 00:12:26,801 --> 00:12:29,567 If Madoff had been a public company we probably would have 376 00:12:29,567 --> 00:12:32,167 shorted it, if we had done the work included with the problem 377 00:12:32,167 --> 00:12:34,434 and the benefit of that to the markets is that we can steer 378 00:12:34,434 --> 00:12:36,534 people away from financial frauds and businesses which 379 00:12:36,534 --> 00:12:37,534 harm people. 380 00:12:37,534 --> 00:12:39,534 Yes but do you respect Dan Loeb? 381 00:12:39,534 --> 00:12:41,501 The answer is I think he's had a good track 382 00:12:41,501 --> 00:12:42,501 record. 383 00:12:42,501 --> 00:12:43,501 As an investor. 384 00:12:43,501 --> 00:12:44,501 Yes. 385 00:12:44,501 --> 00:12:46,501 But you respect him? 386 00:12:46,501 --> 00:12:47,501 I mean you respect -- 387 00:12:47,501 --> 00:12:49,501 I'm disappointed with the way he handled the 388 00:12:49,501 --> 00:12:50,501 Herbalife situation? 389 00:12:50,501 --> 00:12:52,501 Why are you disappointed? 390 00:12:52,501 --> 00:12:54,501 Because he bought a stake in the company. 391 00:12:54,501 --> 00:12:56,501 He put out a letter saying how great the business was. 392 00:12:56,501 --> 00:12:58,501 He set a target price in the -- in the 70s. 393 00:12:58,501 --> 00:13:00,501 And do you believe he believed in that or not? 394 00:13:00,501 --> 00:13:02,534 Well, he sold the stock a few weeks later. 395 00:13:02,534 --> 00:13:04,801 So I think -- I think if you're going to go out publicly -- 396 00:13:04,801 --> 00:13:07,601 look, in Herbalife we've gone out publicly saying the business 397 00:13:07,601 --> 00:13:09,601 is operating an illegal pyramid scheme. 398 00:13:09,601 --> 00:13:12,300 We believe they're violating the law and here is our way of 399 00:13:12,300 --> 00:13:13,300 research -- 400 00:13:13,300 --> 00:13:14,300 (CROSSTALK) 401 00:13:14,300 --> 00:13:16,300 Where is the government in all this? 402 00:13:16,300 --> 00:13:18,300 That's a very good question. 403 00:13:18,300 --> 00:13:20,300 Now in the story that came out in "The New York Times" today, 404 00:13:20,300 --> 00:13:22,300 it sounds like the government is looking into product quality 405 00:13:22,300 --> 00:13:23,300 issues at Herbalife. 406 00:13:23,300 --> 00:13:25,734 Our focus on Herbalife has been actually the money transfer 407 00:13:25,734 --> 00:13:27,067 elements of the pyramid scheme. 408 00:13:27,067 --> 00:13:29,934 But you know unfortunately, pyramid schemes don't care 409 00:13:29,934 --> 00:13:31,934 particularly much about the quality of the product they're 410 00:13:31,934 --> 00:13:33,901 selling to people and the product they sell is a product [00:16:39:29-] that people consume. [-00:16:43:09] And there's a story on "The New York Times" online -- I think it 411 00:13:37,234 --> 00:13:39,234 will be in tomorrow's paper, in the physical paper -- which 412 00:13:39,234 --> 00:13:42,067 talks about problems of metal contamination in the products 413 00:13:42,067 --> 00:13:44,434 which can threaten people's health. 414 00:13:44,434 --> 00:13:46,934 And so again I think you know short sellers are often viewed 415 00:13:46,934 --> 00:13:49,634 as the villains of the -- of the capital markets but I think 416 00:13:49,634 --> 00:13:51,734 that if actually the SEC followed around the Jim Chanoses 417 00:13:51,734 --> 00:13:52,734 (ph) of the world. 418 00:13:52,734 --> 00:13:53,734 Right, right. 419 00:13:53,734 --> 00:13:55,734 One of the very well-known short sellers. 420 00:13:55,734 --> 00:13:56,734 Right. 421 00:13:56,734 --> 00:13:58,734 Focused on what Jim was the problem, that would be a 422 00:13:58,734 --> 00:13:59,901 much more efficient way to -- 423 00:13:59,901 --> 00:14:00,901 Yes. 424 00:14:00,901 --> 00:14:02,901 -- get rid of fraud -- 425 00:14:02,901 --> 00:14:03,901 (CROSSTALK) [00:17:09:29-] CHARLIE ROSE: He's a big investor in China now. [-00:17:13:00] BILL ACKMAN: I don't know. 426 00:14:06,934 --> 00:14:07,934 But yes. 427 00:14:07,934 --> 00:14:09,934 Why is the stock going up? 428 00:14:09,934 --> 00:14:11,934 Simply because Carl Icahn and others have been 429 00:14:11,934 --> 00:14:12,934 promoting it. 430 00:14:12,934 --> 00:14:13,934 That's why. 431 00:14:13,934 --> 00:14:14,934 Ultimately -- 432 00:14:14,934 --> 00:14:15,934 (CROSSTALK) 433 00:14:15,934 --> 00:14:17,934 Meaning that the people in the investment 434 00:14:17,934 --> 00:14:19,934 communities believe in Carl Icahn more than they believe in 435 00:14:19,934 --> 00:14:20,901 you. 436 00:14:20,901 --> 00:14:22,901 Certainly on this investment that's the case. 437 00:14:22,901 --> 00:14:23,901 But simply because -- 438 00:14:23,901 --> 00:14:24,901 (CROSSTALK) 439 00:14:24,901 --> 00:14:26,901 What's that say to you? 440 00:14:26,901 --> 00:14:28,901 -- it says very little. 441 00:14:28,901 --> 00:14:30,901 And I think -- look, ultimately, investors are -- are only as 442 00:14:30,901 --> 00:14:31,901 good as their track records. 443 00:14:31,901 --> 00:14:33,901 If you were to look at our track records over the last 10 444 00:14:33,901 --> 00:14:35,901 years, we have one of the best track records in the investment 445 00:14:35,901 --> 00:14:36,901 business, bar none, right? 446 00:14:36,901 --> 00:14:37,901 That's a ten- year record. 447 00:14:37,901 --> 00:14:39,934 On Herbalife today the market is saying we're wrong, but simply 448 00:14:39,934 --> 00:14:41,934 because in the short term -- what the market tells you in the 449 00:14:41,934 --> 00:14:43,934 short term is what a certain subset of people believe. 450 00:14:43,934 --> 00:14:44,934 Yes. 451 00:14:44,934 --> 00:14:46,934 That doesn't mean they're right. 452 00:14:46,934 --> 00:14:48,934 I mean in MBIA, by the way, we were short for seven years 453 00:14:48,934 --> 00:14:50,934 before the stock went from $73 to $3. 454 00:14:50,934 --> 00:14:51,934 And there are -- 455 00:14:51,934 --> 00:14:52,934 (CROSSTALK) 456 00:14:52,934 --> 00:14:54,901 What finally happened to cause it to go to 457 00:14:54,901 --> 00:14:55,901 $3? 458 00:14:55,901 --> 00:14:57,901 The markets woke up. 459 00:14:57,901 --> 00:14:59,901 Really so they finally came around to your 460 00:14:59,901 --> 00:15:01,968 point of view and they sold and therefore you came out a hero. 461 00:15:01,968 --> 00:15:03,968 Well they started reporting meaningful losses and 462 00:15:03,968 --> 00:15:05,968 they had to raise capital at very low prices and that 463 00:15:05,968 --> 00:15:07,968 ultimately caused the stock price to go down. 464 00:15:07,968 --> 00:15:09,968 In the short term -- and Buffett talks about or there's a famous 465 00:15:09,968 --> 00:15:11,968 expression -- in the short term the market is a -- is a voting 466 00:15:11,968 --> 00:15:13,000 machine. 467 00:15:13,000 --> 00:15:14,000 People vote one way or another. 468 00:15:14,000 --> 00:15:15,000 Yes right, right. 469 00:15:15,000 --> 00:15:16,968 Long term it's a weighing machine -- 470 00:15:16,968 --> 00:15:17,968 Right. 471 00:15:17,968 --> 00:15:19,968 Weighing is much more precise. 472 00:15:19,968 --> 00:15:21,968 That's why they call it value investing. 473 00:15:21,968 --> 00:15:22,968 That's right. 474 00:15:22,968 --> 00:15:23,968 Yes. 475 00:15:23,968 --> 00:15:25,968 You know he's not looking at what the stock is going to be 476 00:15:25,968 --> 00:15:27,968 tomorrow or the next day, looking at whether it's going to 477 00:15:27,968 --> 00:15:28,968 be -- 478 00:15:28,968 --> 00:15:29,968 Sure. 479 00:15:29,968 --> 00:15:31,968 -- as whether it's a good company or not, is it a 480 00:15:31,968 --> 00:15:32,968 good value or not? 481 00:15:32,968 --> 00:15:33,968 Sure. 482 00:15:33,968 --> 00:15:35,968 Let me just talk more about you. 483 00:15:35,968 --> 00:15:37,968 Because I mean what it is I mean you have been very 484 00:15:37,968 --> 00:15:38,968 successful. 485 00:15:38,968 --> 00:15:39,968 You started with $50 million. 486 00:15:39,968 --> 00:15:40,968 It's now $11 billion. 487 00:15:40,968 --> 00:15:42,968 That's a pretty good growth I would suggest. 488 00:15:42,968 --> 00:15:43,968 Sure. 489 00:15:43,968 --> 00:15:46,000 Target -- another retailer. 490 00:15:46,000 --> 00:15:47,000 What happened there? 491 00:15:47,000 --> 00:15:48,000 What was the result there? 492 00:15:48,000 --> 00:15:49,000 Sure. 493 00:15:49,000 --> 00:15:50,968 So you're -- you're going to -- not my greatest hits. 494 00:15:50,968 --> 00:15:52,968 You're focused on my worst hits. 495 00:15:52,968 --> 00:15:54,968 No I want to go to your basic -- no you just 496 00:15:54,968 --> 00:15:55,968 mentioned one, the MBIA. 497 00:15:55,968 --> 00:15:56,968 Sure. 498 00:15:56,968 --> 00:15:58,968 That was a greatest hit, wasn't it? 499 00:15:58,968 --> 00:16:00,968 What happen on -- that was one of the best 500 00:16:00,968 --> 00:16:01,968 investments we ever made. 501 00:16:01,968 --> 00:16:02,968 Exactly. 502 00:16:02,968 --> 00:16:04,968 Sure $30 million became whatever $1 billion and a 503 00:16:04,968 --> 00:16:05,968 $1.5 billion. 504 00:16:05,968 --> 00:16:06,968 Exactly that's a pretty good deal for you. 505 00:16:06,968 --> 00:16:07,968 Sure. 506 00:16:07,968 --> 00:16:08,968 So that's a hit. 507 00:16:08,968 --> 00:16:09,968 It's a hit. 508 00:16:09,968 --> 00:16:10,868 So I'm not just focusing on. 509 00:16:10,868 --> 00:16:12,501 Sure the answer with Target is we took a stake 510 00:16:12,501 --> 00:16:13,567 in the company. 511 00:16:13,567 --> 00:16:15,567 We admired the management. 512 00:16:15,567 --> 00:16:17,567 We liked the business but we thought they had a large amount 513 00:16:17,567 --> 00:16:19,567 of exposure to the credit card -- to their customers -- 514 00:16:19,567 --> 00:16:22,567 You wanted them to eliminate that. 515 00:16:22,567 --> 00:16:24,567 That's right. 516 00:16:24,567 --> 00:16:26,567 And we approached them in the summer of 2007 and we said, 517 00:16:26,567 --> 00:16:28,567 "Look, fabulous business. 518 00:16:28,567 --> 00:16:30,567 Your stock trades at a lower multiple than your peers because 519 00:16:30,567 --> 00:16:32,567 people are nervous about your credit card exposure. 520 00:16:32,567 --> 00:16:34,567 You can sell that credit card exposure to a handful of 521 00:16:34,567 --> 00:16:36,567 financial institutions. 522 00:16:36,567 --> 00:16:38,567 They will buy it from you. 523 00:16:38,567 --> 00:16:40,567 They will pay you fees for continuing to recruit customers. 524 00:16:40,567 --> 00:16:42,567 You can get out of the business for providing credit to your 525 00:16:42,567 --> 00:16:43,567 customers. 526 00:16:43,567 --> 00:16:45,567 You can take that $8 billion and reinvest it in your business. 527 00:16:45,567 --> 00:16:47,567 Your stock will go up, you'll have less risk in the company, 528 00:16:47,567 --> 00:16:48,567 and that will be a win." 529 00:16:48,567 --> 00:16:50,567 And that was a meeting that we had privately with the 530 00:16:50,567 --> 00:16:52,567 management of Target and they seemed to love the idea. 531 00:16:52,567 --> 00:16:54,567 And they asked us not to share our thinking publicly. 532 00:16:54,567 --> 00:16:56,834 And ultimately, the company did not execute on our advice. [00:20:02:27-] The financial crisis hit. [-00:20:07:13] The stock went down from $55 where we had bought it to at 533 00:17:01,367 --> 00:17:05,534 one point $25 a share and then over time, the stock rose back 534 00:17:05,534 --> 00:17:08,734 probably in the mid-70s today and then I think in the last 535 00:17:08,734 --> 00:17:11,667 year or so, they finally got rid of their credit card assets. 536 00:17:11,667 --> 00:17:14,734 You were long gone. 537 00:17:14,734 --> 00:17:17,634 We bought in the mid-50s, we exited in the 538 00:17:17,634 --> 00:17:18,634 mid-50s. 539 00:17:18,634 --> 00:17:20,968 Not a great investment we ended up losing a proxy contest. 540 00:17:20,968 --> 00:17:25,234 You know, one of the mechanisms by which we implement our ideas 541 00:17:25,234 --> 00:17:27,834 if we are unsuccessful in convincing management is by 542 00:17:27,834 --> 00:17:29,801 going to the shareholders. 543 00:17:29,801 --> 00:17:31,801 Do you worry -- I mean this seriously -- do you 544 00:17:31,801 --> 00:17:34,300 worry that you're getting an image that's not necessarily 545 00:17:34,300 --> 00:17:35,300 helpful? 546 00:17:35,300 --> 00:17:36,334 Yes, of course. 547 00:17:36,334 --> 00:17:39,234 You know, that Bill Ackman is in there like -- 548 00:17:39,234 --> 00:17:41,534 what they used to call takeover artists, you know. 549 00:17:41,534 --> 00:17:44,734 He goes in and he buys the company so he can pump up the 550 00:17:44,734 --> 00:17:47,133 stock and then he can sell it and get rid of it. 551 00:17:47,133 --> 00:17:48,133 I mean image, not reality. 552 00:17:48,133 --> 00:17:50,133 Let's talk about image. 553 00:17:50,133 --> 00:17:51,167 I mean let's talk about facts. 554 00:17:51,167 --> 00:17:53,167 If you look at every investment we've made since the beginning 555 00:17:53,167 --> 00:17:55,167 of time, active investments we made 26. 556 00:17:55,167 --> 00:17:57,133 23 of the 26, I think, are best described as home runs. 557 00:17:57,133 --> 00:17:59,367 And I could walk through each of them, if you'd like. 558 00:17:59,367 --> 00:18:00,534 Every investor made a fortune. 559 00:18:00,534 --> 00:18:02,534 Obviously other than the people who were short in the stock and 560 00:18:02,534 --> 00:18:03,534 on the side of us. 561 00:18:03,534 --> 00:18:05,534 We've had a few disappointments. 562 00:18:05,534 --> 00:18:06,567 I think J.C. 563 00:18:06,567 --> 00:18:08,567 Penney is a disappointment, obviously. 564 00:18:08,567 --> 00:18:10,567 Target was a disappointment. 565 00:18:10,567 --> 00:18:12,567 Target worked out fine for investors. 566 00:18:12,567 --> 00:18:14,567 And then and Borders, Borders was passive investment and 567 00:18:14,567 --> 00:18:16,567 actually management asked us to help them when the business got 568 00:18:16,567 --> 00:18:17,567 in trouble. 569 00:18:17,567 --> 00:18:20,167 We did our best, but the -- the winds of change harmed us. 570 00:18:20,167 --> 00:18:23,667 But you know, investing is not a business where every investment 571 00:18:23,667 --> 00:18:24,667 is profitable. 572 00:18:24,667 --> 00:18:25,667 Yes. 573 00:18:25,667 --> 00:18:27,667 In fact I would argue that our batting average 574 00:18:27,667 --> 00:18:28,667 is extremely high. 575 00:18:28,667 --> 00:18:30,667 If you were to talk to the shareholders of Canadian Pacific 576 00:18:30,667 --> 00:18:34,200 I think they would give you universal appreciation for what 577 00:18:34,200 --> 00:18:36,200 we are able to accomplish there. 578 00:18:36,200 --> 00:18:38,200 This is a company that had been the worst-run railroad in North 579 00:18:38,200 --> 00:18:40,667 America for the last you know call it 10 years. 580 00:18:40,667 --> 00:18:42,801 The stock was $46 at the time. 581 00:18:42,801 --> 00:18:45,501 We took our investment in the company. 582 00:18:45,501 --> 00:18:47,801 We bought a 14 percent stake in the business. 583 00:18:47,801 --> 00:18:51,033 We ended up replacing management with a guy named Hunter 584 00:18:51,033 --> 00:18:53,033 Harrison, who is really the greatest railroader of all time. 585 00:18:53,033 --> 00:18:55,501 And it's becoming very quickly the best railroad in North 586 00:18:55,501 --> 00:18:56,501 America. 587 00:18:56,501 --> 00:18:59,734 The stocks tripled or almost tripled over the last two years 588 00:18:59,734 --> 00:19:01,067 and -- and everyone is happy. 589 00:19:01,067 --> 00:19:04,033 But we're not going to -- not every investment we want to make 590 00:19:04,033 --> 00:19:05,033 -- 591 00:19:05,033 --> 00:19:07,033 Warren Buffett made a huge investment in 592 00:19:07,033 --> 00:19:08,033 railroads, too. 593 00:19:08,033 --> 00:19:10,033 Sure Buffet -- railroad business is one of the 594 00:19:10,033 --> 00:19:11,033 great businesses of the world. 595 00:19:11,033 --> 00:19:12,033 Why is that? 596 00:19:12,033 --> 00:19:14,067 Well first of all, they're not going to build a new 597 00:19:14,067 --> 00:19:15,067 one right? 598 00:19:15,067 --> 00:19:17,067 If you own the second largest railroad in Canada -- 599 00:19:17,067 --> 00:19:19,067 That was what you yes -- 600 00:19:19,067 --> 00:19:21,033 That's Canadian Pacific. 601 00:19:21,033 --> 00:19:23,033 You know it's an asset that was created 150 or 60 years ago and 602 00:19:23,033 --> 00:19:25,033 you had to -- the government granted a bunch of land and you 603 00:19:25,033 --> 00:19:28,434 know the -- the replacement cost of the railroad is you know, 604 00:19:28,434 --> 00:19:30,434 hundreds of billions of dollars. 605 00:19:30,434 --> 00:19:32,434 And it's cheaper to ship by rail than it is by 606 00:19:32,434 --> 00:19:34,400 plane. 607 00:19:34,400 --> 00:19:35,400 That's right. 608 00:19:35,400 --> 00:19:36,400 It's more efficient. 609 00:19:36,400 --> 00:19:37,400 Right. 610 00:19:37,400 --> 00:19:39,400 It's more efficient, it's better for the 611 00:19:39,400 --> 00:19:40,400 environment. 612 00:19:40,400 --> 00:19:42,400 If you think about the trucking -- shipping by a truck, you 613 00:19:42,400 --> 00:19:44,400 know, the taxpayer pays for the infrastructure right. 614 00:19:44,400 --> 00:19:45,634 The roads are taxpayer expense. 615 00:19:45,634 --> 00:19:48,033 In rail, the railroad pays for the infrastructure. 616 00:19:48,033 --> 00:19:50,067 The railroad pays for the rail and the ties. 617 00:19:50,067 --> 00:19:53,067 You know so it's good for governments running out of 618 00:19:53,067 --> 00:19:54,067 money. 619 00:19:54,067 --> 00:19:55,133 It's good for efficiency. 620 00:19:55,133 --> 00:19:56,133 It's good for the economy. 621 00:19:56,133 --> 00:20:01,701 And look, I think because we're so high profile, we're going to 622 00:20:01,701 --> 00:20:03,567 attract some critics. 623 00:20:03,567 --> 00:20:05,767 When you short a stock you know there are a large number of 624 00:20:05,767 --> 00:20:07,767 people on the other side who don't like what you're doing. 625 00:20:07,767 --> 00:20:09,767 Certainly the company is fighting back. 626 00:20:09,767 --> 00:20:11,767 Characterize yourself. 627 00:20:11,767 --> 00:20:13,767 You know here are people saying he's the most optimistic guy, 628 00:20:13,767 --> 00:20:15,968 he believes he'll prevail, all of that. 629 00:20:15,968 --> 00:20:18,567 I've seen very few people in the world accomplish 630 00:20:18,567 --> 00:20:20,567 anything unless they were optimists. 631 00:20:20,567 --> 00:20:21,601 Right. 632 00:20:21,601 --> 00:20:23,968 Pessimists don't get very much done. 633 00:20:23,968 --> 00:20:25,801 But I'm -- you know in th investing business you need a -- 634 00:20:25,801 --> 00:20:28,334 a high degree of confidence but you also need a high degree of 635 00:20:28,334 --> 00:20:30,334 humbleness and you have to balance those two. 636 00:20:30,334 --> 00:20:32,334 And where is the humbleness? 637 00:20:32,334 --> 00:20:34,334 Humbleness comes from mistakes. 638 00:20:34,334 --> 00:20:35,334 You know J.C. 639 00:20:35,334 --> 00:20:37,334 Penney has been a big disappointment and you learn 640 00:20:37,334 --> 00:20:38,334 from mistakes like that. 641 00:20:38,334 --> 00:20:40,334 You know, General Growth has been an incredible success. 642 00:20:40,334 --> 00:20:42,634 You learn from -- so you need to do a sufficient amount of 643 00:20:42,634 --> 00:20:45,901 research and homework and we -- when you place your bet you 644 00:20:45,901 --> 00:20:48,467 have confidence -- I mean investing is a business where 645 00:20:48,467 --> 00:20:51,133 you can look very silly for a meaningful period of time before 646 00:20:51,133 --> 00:20:52,133 you're proven right. 647 00:20:52,133 --> 00:20:55,467 I looked very silly in MBIA and attracted a lot of scrutiny in 648 00:20:55,467 --> 00:20:56,467 the press -- 649 00:20:56,467 --> 00:20:57,467 (CROSSTALK) 650 00:20:57,467 --> 00:20:59,467 And did you ever doubt yourself? 651 00:20:59,467 --> 00:21:00,467 No. 652 00:21:00,467 --> 00:21:01,467 No. 653 00:21:01,467 --> 00:21:03,467 Did you ever doubt yourself in J.C. 654 00:21:03,467 --> 00:21:04,467 Penney. 655 00:21:04,467 --> 00:21:06,467 Sure -- big difference. 656 00:21:06,467 --> 00:21:08,467 What's the difference? 657 00:21:08,467 --> 00:21:10,467 The difference is it's kind of like Herbalife. 658 00:21:10,467 --> 00:21:12,467 It's a certainty that Herbalife is a pyramid scheme. 659 00:21:12,467 --> 00:21:13,467 That's a provable certainty. 660 00:21:13,467 --> 00:21:14,467 The doubt of that investment -- 661 00:21:14,467 --> 00:21:16,467 Well if it's such a provable certainty why haven't 662 00:21:16,467 --> 00:21:17,467 you been able to prove it? 663 00:21:17,467 --> 00:21:19,467 I think the answer is -- we don't have a -- I think 664 00:21:19,467 --> 00:21:20,467 we have proven it. 665 00:21:20,467 --> 00:21:22,467 I think the market has not yet accepted our proof and I think 666 00:21:22,467 --> 00:21:23,467 ultimately -- 667 00:21:23,467 --> 00:21:25,434 (CROSSTALK) 668 00:21:25,434 --> 00:21:27,467 So you haven't proven it, if the market hasn't 669 00:21:27,467 --> 00:21:29,467 accepted it, you haven't proved it. 670 00:21:29,467 --> 00:21:31,467 I think the answer is that ultimately regulators 671 00:21:31,467 --> 00:21:33,467 will determine the fate of the company. 672 00:21:33,467 --> 00:21:34,467 Yes. 673 00:21:34,467 --> 00:21:36,467 The government doesn't complete its work 674 00:21:36,467 --> 00:21:37,467 overnight. 675 00:21:37,467 --> 00:21:39,467 And you know, we -- we will -- I'm confident that we've done 676 00:21:39,467 --> 00:21:40,467 our work correctly. 677 00:21:40,467 --> 00:21:43,501 You do worry about the image issue. 678 00:21:43,501 --> 00:21:44,501 . 679 00:21:44,501 --> 00:21:46,501 "Worry" is the wrong word. 680 00:21:46,501 --> 00:21:48,801 I mean I think the answer is as long as I'm operating honestly, 681 00:21:48,801 --> 00:21:51,334 ethically and doing the right thing, I feel very good about 682 00:21:51,334 --> 00:21:52,300 what I do. 683 00:21:52,300 --> 00:21:56,567 I mean I think our strategy -- if you think about the stock 684 00:21:56,567 --> 00:21:57,567 market. 685 00:21:57,567 --> 00:21:59,934 Most of the investors in the stock market are passive, 686 00:21:59,934 --> 00:22:00,968 right. 687 00:22:00,968 --> 00:22:02,968 they're index funds, they're mutual funds, they're 688 00:22:02,968 --> 00:22:03,968 exchange-traded funds. 689 00:22:03,968 --> 00:22:06,234 Many investors trade all the time. 690 00:22:06,234 --> 00:22:08,634 It's a very healthy thing for the market to have someone place 691 00:22:08,634 --> 00:22:12,801 a bet where they buy 10 percent of a company and where they are 692 00:22:12,801 --> 00:22:15,767 -- take a business that has underperformed for 10 years and 693 00:22:15,767 --> 00:22:18,601 bring in a CEO like Hunter Harrison and turn around a 694 00:22:18,601 --> 00:22:19,567 railroad. 695 00:22:19,567 --> 00:22:21,667 That's a great thing for the market and it's a very healthy 696 00:22:21,667 --> 00:22:22,634 thing for the economy. 697 00:22:22,634 --> 00:22:23,634 Yes. 698 00:22:23,634 --> 00:22:25,734 Is it possible -- I mean take a look at what happened to Eddie 699 00:22:25,734 --> 00:22:27,033 Lampert and Sears. 700 00:22:27,033 --> 00:22:28,367 Sure. 701 00:22:28,367 --> 00:22:31,834 He combined it with K-Mart, first and it may -- 702 00:22:31,834 --> 00:22:34,067 and obviously, I'd assume he hoped he would make it into the 703 00:22:34,067 --> 00:22:35,067 next Wal-Mart -- 704 00:22:35,067 --> 00:22:36,067 (CROSSTALK) 705 00:22:36,067 --> 00:22:37,067 Sure. 706 00:22:37,067 --> 00:22:39,067 -- which would be a huge payday. 707 00:22:39,067 --> 00:22:40,067 He didn't do that. 708 00:22:40,067 --> 00:22:41,067 What happened? 709 00:22:41,067 --> 00:22:43,067 Other than retail is a difficult business. 710 00:22:43,067 --> 00:22:46,100 I would start with retail is a difficult business. 711 00:22:46,100 --> 00:22:48,334 I think that Eddie is not a trained retailer. 712 00:22:48,334 --> 00:22:49,334 I'm sure he's learned a lot -- 713 00:22:49,334 --> 00:22:50,334 And nor are you. 714 00:22:50,334 --> 00:22:51,334 Nor am I. 715 00:22:51,334 --> 00:22:53,334 And you're trying to tell J.C. 716 00:22:53,334 --> 00:22:54,334 Penney what to do. 717 00:22:54,334 --> 00:22:56,334 There's a difference. 718 00:22:56,334 --> 00:22:57,334 Let me explain. 719 00:22:57,334 --> 00:22:59,334 So Eddie is actually the CEO of Sears. 720 00:22:59,334 --> 00:23:00,334 Right. 721 00:23:00,334 --> 00:23:02,334 He became that because a series of CEOs didn't work out. 722 00:23:02,334 --> 00:23:03,334 That's right. 723 00:23:03,334 --> 00:23:04,334 In the case of J.C. 724 00:23:04,334 --> 00:23:05,334 Penney I've been an investor. 725 00:23:05,334 --> 00:23:07,367 I joined the board, I'm one of 11 directors. 726 00:23:07,367 --> 00:23:08,367 I don't control the company. 727 00:23:08,367 --> 00:23:10,334 I worked with the board and alongside the board to recruit a 728 00:23:10,334 --> 00:23:12,334 new CEO for the business when the CEO -- when it was time for 729 00:23:12,334 --> 00:23:13,334 the CEO to retire. 730 00:23:13,334 --> 00:23:15,334 We collectively decided on Ron Johnson as the CEO Of the 731 00:23:15,334 --> 00:23:16,334 business. 732 00:23:16,334 --> 00:23:17,334 We put him in place. 733 00:23:17,334 --> 00:23:19,334 I've never -- I'm not the CEO of J.C. 734 00:23:19,334 --> 00:23:20,334 Penney. 735 00:23:20,334 --> 00:23:22,334 I haven't made day-to-day decisions in the company. 736 00:23:22,334 --> 00:23:24,334 My decision as a member of the board is to work with the other 737 00:23:24,334 --> 00:23:26,334 directors in making decisions about hiring and firing the CEO 738 00:23:26,334 --> 00:23:28,334 and long-term strategic direction of the business. 739 00:23:28,334 --> 00:23:29,334 That's what I've done. 740 00:23:29,334 --> 00:23:31,334 That's very different from -- and I think you know the media, 741 00:23:31,334 --> 00:23:33,334 because we are -- I'm probably the highest visibility person on 742 00:23:33,334 --> 00:23:35,934 the board -- everything, you know when -- when J.C. 743 00:23:35,934 --> 00:23:39,300 Penney was you know, when the stock went from $20 to $42 on 744 00:23:39,300 --> 00:23:44,033 Ron being hired we got too much credit for that because you 745 00:23:44,033 --> 00:23:47,033 know while I actually helped the company recruit Ron Johnson and 746 00:23:47,033 --> 00:23:49,267 it was really the collective decision of the board to bring 747 00:23:49,267 --> 00:23:50,267 him on. 748 00:23:50,267 --> 00:23:52,267 And when the business failed I probably got too much of the 749 00:23:52,267 --> 00:23:54,267 blame for trouble we've had over the last year. 750 00:23:54,267 --> 00:23:56,267 It's the paradox right. 751 00:23:56,267 --> 00:23:58,267 -- for recruiting Ron. 752 00:23:58,267 --> 00:23:59,267 But that's OK. 753 00:23:59,267 --> 00:24:00,267 That's the risk of my business. 754 00:24:00,267 --> 00:24:03,234 Here's -- here's another issue that comes up in 755 00:24:03,234 --> 00:24:04,501 these kinds of things. 756 00:24:04,501 --> 00:24:08,434 It is that, you know, you're about transactions. 757 00:24:08,434 --> 00:24:10,901 You know, you want to buy and then you want to sell and you 758 00:24:10,901 --> 00:24:12,067 want to make a huge profit. 759 00:24:12,067 --> 00:24:15,868 You know we can -- it may be you want to buy up to 10 years, 15 760 00:24:15,868 --> 00:24:17,367 years, sell after 15 years. 761 00:24:17,367 --> 00:24:22,200 But it's a transactional thing, rather than spending a whole 762 00:24:22,200 --> 00:24:25,300 lot of money to really run a business and create a product 763 00:24:25,300 --> 00:24:28,467 and do all those kinds of things -- you know the argument. 764 00:24:28,467 --> 00:24:30,467 Even Paul Volcker has made this argument. 765 00:24:30,467 --> 00:24:32,467 Too many people are going to Wall Street, too many smart 766 00:24:32,467 --> 00:24:36,667 people and working with you and it's all about transactions -- 767 00:24:36,667 --> 00:24:37,667 (CROSSTALK) 768 00:24:37,667 --> 00:24:38,667 Yes. 769 00:24:38,667 --> 00:24:39,667 I don't think -- 770 00:24:39,667 --> 00:24:41,667 -- not about building something. 771 00:24:41,667 --> 00:24:43,667 Let me -- let me take a counter to that -- 772 00:24:43,667 --> 00:24:44,667 (CROSSTALK) 773 00:24:44,667 --> 00:24:45,667 OK. 774 00:24:45,667 --> 00:24:47,667 -- in terms of what we do. 775 00:24:47,667 --> 00:24:49,634 So we're not about transactions at all. 776 00:24:49,634 --> 00:24:51,667 In fact we do very few transactions, maybe one or two a 777 00:24:51,667 --> 00:24:52,667 year. 778 00:24:52,667 --> 00:24:53,667 OK. 779 00:24:53,667 --> 00:24:54,667 You're not a pure trader. 780 00:24:54,667 --> 00:24:56,667 We're not a trader at all. 781 00:24:56,667 --> 00:24:57,667 We don't trade. 782 00:24:57,667 --> 00:24:58,667 We buy a stake in the business. 783 00:24:58,667 --> 00:25:00,667 We get actively involved in the business. 784 00:25:00,667 --> 00:25:02,667 We work to make the business more valuable. 785 00:25:02,667 --> 00:25:04,667 And by the way, pretty much everything we've ever owned, 786 00:25:04,667 --> 00:25:06,667 with the exception of Borders, has a higher value today than 787 00:25:06,667 --> 00:25:08,667 it did after we sold it which means that the impact that we've 788 00:25:08,667 --> 00:25:10,667 had on the business has been positive. 789 00:25:10,667 --> 00:25:12,667 I'm also an executive officer of a business, chairman of the 790 00:25:12,667 --> 00:25:14,667 board of a company called Howard Hughes. 791 00:25:14,667 --> 00:25:15,667 Right. 792 00:25:15,667 --> 00:25:17,667 This is a business that I created, it's the 793 00:25:17,667 --> 00:25:19,667 business I created by taking 34 assets outside of General 794 00:25:19,667 --> 00:25:21,667 Growth, sticking them into a new company, recruiting a 795 00:25:21,667 --> 00:25:22,634 management team. 796 00:25:22,634 --> 00:25:23,634 Right. 797 00:25:23,634 --> 00:25:25,667 Building a board of directors and this company is 798 00:25:25,667 --> 00:25:26,667 doing marvelous things. 799 00:25:26,667 --> 00:25:28,667 So for example in New York City we own the South Street 800 00:25:28,667 --> 00:25:29,667 Seaport. 801 00:25:29,667 --> 00:25:31,667 The management team, they're going to want to take credit for 802 00:25:31,667 --> 00:25:33,667 their work of what they've accomplished because they got 803 00:25:33,667 --> 00:25:35,667 approvals to do a new -- they're going to completely 804 00:25:35,667 --> 00:25:37,667 transform the Seaport, they're going to do a new development 805 00:25:37,667 --> 00:25:38,667 there. 806 00:25:38,667 --> 00:25:40,667 We're building a new shopping center in -- in Las Vegas. 807 00:25:40,667 --> 00:25:42,667 We're changing kind of the landscape in Hawaii with a 808 00:25:42,667 --> 00:25:44,667 60-acre development and nine million square feet of -- of 809 00:25:44,667 --> 00:25:45,667 real estates. 810 00:25:45,667 --> 00:25:47,801 So these are companies that are building and adding enormous 811 00:25:47,801 --> 00:25:51,467 value and a business that would not have happened were we not to 812 00:25:51,467 --> 00:25:53,701 have taken a stake in General Growth and spun off that entity. 813 00:25:53,701 --> 00:25:56,667 What about Procter & Gamble? 814 00:25:56,667 --> 00:26:01,067 Procter & Gamble a great company, 175 years of you 815 00:26:01,067 --> 00:26:03,067 know generally pretty fabulous successes. 816 00:26:03,067 --> 00:26:05,067 Great brand names. 817 00:26:05,067 --> 00:26:07,033 Great brand names. 818 00:26:07,033 --> 00:26:09,868 The last four years have been very difficult for the company. 819 00:26:09,868 --> 00:26:13,868 And you came in adamant to remove Bob McDonald. 820 00:26:13,868 --> 00:26:15,868 You know the -- we thought it was time. 821 00:26:15,868 --> 00:26:16,868 As the CEO. 822 00:26:16,868 --> 00:26:17,868 And by the way -- 823 00:26:17,868 --> 00:26:19,868 He hadn't been there that long. 824 00:26:19,868 --> 00:26:21,868 He had been there about four years. 825 00:26:21,868 --> 00:26:23,868 OK that's not long. 826 00:26:23,868 --> 00:26:25,868 And he had been with the company, obviously, a 827 00:26:25,868 --> 00:26:26,868 long period of time. 828 00:26:26,868 --> 00:26:28,868 And you know the -- because most of the capital in the stock 829 00:26:28,868 --> 00:26:30,901 market is passive, investors can't themselves make these kind 830 00:26:30,901 --> 00:26:31,901 of changes. 831 00:26:31,901 --> 00:26:33,901 So they rely on someone to take a lead, in which we did on 832 00:26:33,901 --> 00:26:35,901 Procter & Gamble -- by the way, in Procter & Gamble I worked 833 00:26:35,901 --> 00:26:37,901 very quietly with the lead director. 834 00:26:37,901 --> 00:26:38,901 We would speak periodically. 835 00:26:38,901 --> 00:26:40,901 It was only when we felt it was time that I made a public 836 00:26:40,901 --> 00:26:42,868 presentation about what our concerns were at P&G. 837 00:26:42,868 --> 00:26:44,868 And a couple of weeks later Bob I think resigned of his own -- 838 00:26:44,868 --> 00:26:45,868 of his own doing. 839 00:26:45,868 --> 00:26:47,868 Now that stock has gone, yo know, it's up 35 percent -- 840 00:26:47,868 --> 00:26:49,868 And, of course, a CEO has come back, one of the 841 00:26:49,868 --> 00:26:50,868 legendary names. 842 00:26:50,868 --> 00:26:51,868 A.G. 843 00:26:51,868 --> 00:26:53,868 Lafley is a fabulous CEO and I think he's going to do a great 844 00:26:53,868 --> 00:26:54,868 job turning the business. 845 00:26:54,868 --> 00:26:56,868 He's also working on recruiting the next founder of the 846 00:26:56,868 --> 00:26:57,868 company. 847 00:26:57,868 --> 00:26:59,868 But as a -- you know I got enormous number of phone calls 848 00:26:59,868 --> 00:27:03,300 from Procter & Gamble alums thanking us for the work that we 849 00:27:03,300 --> 00:27:04,567 did at P&G. 850 00:27:04,567 --> 00:27:06,567 And the same thing is true at General Growth. 851 00:27:06,567 --> 00:27:09,067 I mean if you look at the Bucksbaum family had a $5 852 00:27:09,067 --> 00:27:12,167 billion net worth going into the -- the financial crisis. 853 00:27:12,167 --> 00:27:16,400 That was down to $25 million when the General Growth stock 854 00:27:16,400 --> 00:27:19,133 went from $63 a share to 20 cents to 30 cents. 855 00:27:19,133 --> 00:27:21,501 We helped take it back to $34 a share. 856 00:27:21,501 --> 00:27:24,701 That's been a great thing not just for a wealthy family, but 857 00:27:24,701 --> 00:27:28,167 for the pension funds that own that stock for the -- you know, 858 00:27:28,167 --> 00:27:30,567 I get thank you notes from investors who've invested 859 00:27:30,567 --> 00:27:31,567 alongside us. 860 00:27:31,567 --> 00:27:33,567 So what's the drive for you? 861 00:27:33,567 --> 00:27:34,567 What's the motivation? 862 00:27:34,567 --> 00:27:36,567 One, I think what we do is important. 863 00:27:36,567 --> 00:27:39,901 I think I'm making -- you know I do a lot of -- 864 00:27:39,901 --> 00:27:42,000 You're making companies stronger because you 865 00:27:42,000 --> 00:27:44,000 come in and you have a certain amount of power because you have 866 00:27:44,000 --> 00:27:47,667 a certain amount of investment, and therefore, you would like to 867 00:27:47,667 --> 00:27:50,701 say that if you look at your track record, you do much better 868 00:27:50,701 --> 00:27:53,267 making companies stronger than you do in weakening companies 869 00:27:53,267 --> 00:27:54,267 in any way. 870 00:27:54,267 --> 00:27:56,267 That's absolutely true. 871 00:27:56,267 --> 00:27:58,267 I don't think anyone would ever accuse us of weakening a 872 00:27:58,267 --> 00:27:59,267 business. 873 00:27:59,267 --> 00:28:01,701 Now, J.C.Penney -- not every investment is going to work 874 00:28:01,701 --> 00:28:02,000 out. 875 00:28:02,000 --> 00:28:03,934 There was more risk in J.C.Penney than pretty much 876 00:28:03,934 --> 00:28:05,934 every other investment we've made, because of the nature of 877 00:28:05,934 --> 00:28:06,934 the changes that were -- 878 00:28:06,934 --> 00:28:10,767 What was the attraction for you? 879 00:28:10,767 --> 00:28:12,767 There was more risk than anything else you've ever done. 880 00:28:12,767 --> 00:28:14,767 The potential for reward. 881 00:28:14,767 --> 00:28:16,767 And what's the reward. 882 00:28:16,767 --> 00:28:17,767 If you look at -- 883 00:28:17,767 --> 00:28:19,767 The reward is simply how much money you make 884 00:28:19,767 --> 00:28:20,767 for you? 885 00:28:20,767 --> 00:28:21,767 And keep score or what? 886 00:28:21,767 --> 00:28:23,767 No, I don't need more money. 887 00:28:23,767 --> 00:28:25,767 I'm not motivated by financial returns. 888 00:28:25,767 --> 00:28:27,767 I'm motivated by I want to have a great track record. 889 00:28:27,767 --> 00:28:29,767 If you look at Buffett he's had -- whatever -- a 60-year track 890 00:28:29,767 --> 00:28:30,767 record. 891 00:28:30,767 --> 00:28:32,767 I've got - - I'm 20 years in, but the record's been good so 892 00:28:32,767 --> 00:28:33,767 far. 893 00:28:33,767 --> 00:28:35,767 I'd like to have one of the best track records. 894 00:28:35,767 --> 00:28:37,767 What's the annual growth? 895 00:28:37,767 --> 00:28:39,767 I'm not allowed to comment on returns. 896 00:28:39,767 --> 00:28:40,767 That's an SEC restriction. 897 00:28:40,767 --> 00:28:42,501 But you can look around there. 898 00:28:42,501 --> 00:28:44,501 I'll tell you they're quite good. 899 00:28:44,501 --> 00:28:47,434 What I like -- I've done a lot of philanthropic work over the 900 00:28:47,434 --> 00:28:49,601 last number of years. 901 00:28:49,601 --> 00:28:52,300 I actually think I make a much greater contribution through 902 00:28:52,300 --> 00:28:53,334 what I do -- 903 00:28:53,334 --> 00:28:54,334 You have. 904 00:28:54,334 --> 00:28:56,334 -- in my for profit activities than I do in my not 905 00:28:56,334 --> 00:28:57,334 for-profit activities. 906 00:28:57,334 --> 00:28:59,334 And not only that, you signed a giving pledge. 907 00:28:59,334 --> 00:29:00,334 That is true. 908 00:29:00,334 --> 00:29:01,334 That is true. 909 00:29:01,334 --> 00:29:02,334 That is very true. 910 00:29:02,334 --> 00:29:04,334 Meaning that you don't want to leave just your 911 00:29:04,334 --> 00:29:06,767 children, you're going to leave it to -- half of it at least -- 912 00:29:06,767 --> 00:29:07,767 charity. 913 00:29:07,767 --> 00:29:08,801 Yes. 914 00:29:08,801 --> 00:29:11,667 Well more than half -- well more than half. 915 00:29:11,667 --> 00:29:15,801 I think what people forget is, you know, Wall Street has 916 00:29:15,801 --> 00:29:18,834 unfortunately in the last -- certainly since the crisis, has 917 00:29:18,834 --> 00:29:21,534 gotten a pretty bad name, but Wall Street is responsible -- [00:32:27:18-] it's probably the biggest engine for job creation, enabling [-00:32:34:12] businesses to access capital, enabling businesses to grow. 918 00:29:28,334 --> 00:29:31,567 You look at Howard Hughes was a creation out of thin air. 919 00:29:31,567 --> 00:29:34,067 It's now a business that employs -- you know, it's going 920 00:29:34,067 --> 00:29:36,934 to employ thousands of people, create a ton of jobs. 921 00:29:36,934 --> 00:29:39,601 Do you think the criticism of Mitt Romney during 922 00:29:39,601 --> 00:29:43,067 the campaign for his activities in running a private equity firm 923 00:29:43,067 --> 00:29:44,067 were unfair? 924 00:29:44,067 --> 00:29:48,100 Yes, yes -- absolutely. 925 00:29:48,100 --> 00:29:50,467 I think good, private equity investors create a lot more 926 00:29:50,467 --> 00:29:52,467 economic value than they destroy. 927 00:29:52,467 --> 00:29:54,467 And grow more jobs than they save? 928 00:29:54,467 --> 00:29:56,467 They grow a ton of jobs. 929 00:29:56,467 --> 00:29:58,467 I think the biggest risk for private equity -- 930 00:29:58,467 --> 00:30:00,501 The same jobs that would be going away. 931 00:30:00,501 --> 00:30:02,501 The biggest problem with private equity is -- there 932 00:30:02,501 --> 00:30:04,501 are periods of time when private equity firms use too 933 00:30:04,501 --> 00:30:06,501 much leverage which puts too much pressure on a business and 934 00:30:06,501 --> 00:30:07,501 risks a business' failure. 935 00:30:07,501 --> 00:30:10,734 Putting aside that, I think the top private equity firms create 936 00:30:10,734 --> 00:30:11,734 a lot of economic value. 937 00:30:11,734 --> 00:30:16,234 Too much leverage and too much -- was part of the 938 00:30:16,234 --> 00:30:18,234 economic recession we went through. 939 00:30:18,234 --> 00:30:19,234 Uh-huh. 940 00:30:19,234 --> 00:30:21,367 But we're not going to save the country with philanthropy 941 00:30:21,367 --> 00:30:24,067 despite the fact that I'm philanthropic, I don't think 942 00:30:24,067 --> 00:30:26,868 that's going to solve our economic issues. 943 00:30:26,868 --> 00:30:28,868 What will save the country? 944 00:30:28,868 --> 00:30:30,868 What will save the country are good economic 945 00:30:30,868 --> 00:30:34,801 policies that create the right incentives and an administration 946 00:30:34,801 --> 00:30:36,801 that is supportive of the business community. 947 00:30:36,801 --> 00:30:39,033 I think that's actually very important. 948 00:30:39,033 --> 00:30:41,033 And, you know, policies that will make us competitive 949 00:30:41,033 --> 00:30:42,033 globally. 950 00:30:42,033 --> 00:30:43,367 It's global economy. 951 00:30:43,367 --> 00:30:45,601 The story today I think in today's "Journal" about 952 00:30:45,601 --> 00:30:48,901 companies merging with European businesses to move their 953 00:30:48,901 --> 00:30:50,901 operations offshore from a tax point of view. 954 00:30:50,901 --> 00:30:53,634 We have to have a tax policy that discourages that kind of 955 00:30:53,634 --> 00:30:54,634 activity. 956 00:30:54,634 --> 00:30:56,634 So you can bring the money home. 957 00:30:56,634 --> 00:30:57,634 Yes. 958 00:30:57,634 --> 00:30:58,834 I look at the United States -- 959 00:30:58,834 --> 00:31:00,834 Is that the idea, have a tax policy so that the 960 00:31:00,834 --> 00:31:02,834 money will come home rather moving it offshore so you don't 961 00:31:02,834 --> 00:31:03,901 have to pay taxes on it. [00:34:09:29-] BILL ACKMAN: Yes. [-00:34:13:00] But I think if -- you know, the United States is not dissimilar 962 00:31:06,934 --> 00:31:08,934 to the kind of companies we invest in. 963 00:31:08,934 --> 00:31:11,367 We invest generally in very good companies that have lost 964 00:31:11,367 --> 00:31:12,434 their way. 965 00:31:12,434 --> 00:31:15,501 And with better management, enormous value can be created. 966 00:31:15,501 --> 00:31:17,868 If you look at Canadian Pacific, this was a dying -- 967 00:31:17,868 --> 00:31:19,868 This is one of your investments. 968 00:31:19,868 --> 00:31:22,367 -- it was dying railroad under Hunter Harrison. 969 00:31:22,367 --> 00:31:25,033 And in very short order, you know, less than a year and a 970 00:31:25,033 --> 00:31:27,234 half he's made dramatic changes to the business. 971 00:31:27,234 --> 00:31:32,767 The President is the CEO of this business that we call America. 972 00:31:32,767 --> 00:31:37,200 And the decisions he makes with respect to, you know, the way 973 00:31:37,200 --> 00:31:40,300 incentives are designed, the way he works with Congress as a 974 00:31:40,300 --> 00:31:43,133 leader in effectuating policy change can make an enormous 975 00:31:43,133 --> 00:31:46,167 difference in the growth rate of the country, in job creation, 976 00:31:46,167 --> 00:31:48,968 in happiness, in our safety. 977 00:31:48,968 --> 00:31:55,234 I think that we can't diminish the importance of business and 978 00:31:55,234 --> 00:31:56,234 business practices. 979 00:31:56,234 --> 00:31:58,701 I mean look at what Bloomberg has accomplished as the mayor of 980 00:31:58,701 --> 00:32:00,734 New York City. 981 00:32:00,734 --> 00:32:05,767 He took his for-profit mentality and has applied it to a city. 982 00:32:05,767 --> 00:32:08,901 And I think the city has accordingly thrived. 983 00:32:08,901 --> 00:32:10,901 I'd love to see the same thing happen to the country. 984 00:32:10,901 --> 00:32:12,901 It's tough management, too. 985 00:32:12,901 --> 00:32:13,901 Yes. 986 00:32:13,901 --> 00:32:15,901 And it's also -- he has the benefit of independence. 987 00:32:15,901 --> 00:32:17,901 Financial independence? 988 00:32:17,901 --> 00:32:19,901 It's an enormous benefit. 989 00:32:19,901 --> 00:32:21,901 So you're not obligated to anybody [00:35:27:29-] particularly. [-00:35:30:00] BILL ACKMAN: Very important. 990 00:32:23,934 --> 00:32:25,934 So we should only let rich people? 991 00:32:25,934 --> 00:32:28,267 No, but we should -- I think that there's a lot to 992 00:32:28,267 --> 00:32:32,067 be said to have someone with a business background making 993 00:32:32,067 --> 00:32:33,200 decisions about the economy. 994 00:32:33,200 --> 00:32:36,000 Just because I don't quite understand this, I 995 00:32:36,000 --> 00:32:39,100 mean are -- is hedge fund performance down? 996 00:32:39,100 --> 00:32:42,634 Yes, if you look at the overall statistics, yes. 997 00:32:42,634 --> 00:32:44,534 And why is that? 998 00:32:44,534 --> 00:32:47,100 The answer is I think there are a lot more 999 00:32:47,100 --> 00:32:48,100 participants. 1000 00:32:48,100 --> 00:32:49,534 I think that there have been -- 1001 00:32:49,534 --> 00:32:53,367 So it looked like it was just a sweet place to be 1002 00:32:53,367 --> 00:32:54,434 and it's less sweet now. 1003 00:32:54,434 --> 00:32:56,434 It's become a much greater percentage of the amount 1004 00:32:56,434 --> 00:33:00,267 of capital it's invested and the scale by just the math makes 1005 00:33:00,267 --> 00:33:03,167 it harder for that capital to grow at a high enough rate. 1006 00:33:03,167 --> 00:33:05,501 I also think there's been some regulatory change that's made it 1007 00:33:05,501 --> 00:33:08,000 harder for certain kinds of hedge funds to make money, you 1008 00:33:08,000 --> 00:33:09,000 know. 1009 00:33:09,000 --> 00:33:11,534 I think it used to be that, you know, people could -- you hear 1010 00:33:11,534 --> 00:33:16,100 of hedge funds that would just ask enough questions that they 1011 00:33:16,100 --> 00:33:18,400 would get answers ahead of the market, and there was some bad 1012 00:33:18,400 --> 00:33:20,400 behavior that took place, and the government put -- 1013 00:33:20,400 --> 00:33:22,400 You've had some insider trading issues as well. 1014 00:33:22,400 --> 00:33:23,400 Yes. 1015 00:33:23,400 --> 00:33:25,400 And I think a lot of the crackdown has taken away some 1016 00:33:25,400 --> 00:33:27,367 of the bad returns from the business. 1017 00:33:27,367 --> 00:33:31,534 But I think the biggest driver has been the fact that the 1018 00:33:31,534 --> 00:33:32,701 business has scaled. 1019 00:33:32,701 --> 00:33:34,701 But, look, it's just like the mutual fund industry. 1020 00:33:34,701 --> 00:33:37,767 As a collective, it's not a particularly attractive place to 1021 00:33:37,767 --> 00:33:38,767 invest your money. 1022 00:33:38,767 --> 00:33:41,067 But there are a few very good mutual fund managers who have 1023 00:33:41,067 --> 00:33:43,067 done a lot better than the market over time. 1024 00:33:43,067 --> 00:33:45,067 The same thing is true for hedge funds. 1025 00:33:45,067 --> 00:33:47,067 Same thing is true for investors in real estate. 1026 00:33:47,067 --> 00:33:49,100 If you weren't an investor, what would you be? 1027 00:33:49,100 --> 00:33:52,067 That's a good question. 1028 00:33:52,067 --> 00:33:55,567 I mean I would do what I do now, even if I weren't compensated 1029 00:33:55,567 --> 00:33:59,801 for doing it because I think it's a way for me to make the 1030 00:33:59,801 --> 00:34:01,801 biggest contribution that I can make. 1031 00:34:01,801 --> 00:34:04,868 I mean look, I think about government, if I could. 1032 00:34:04,868 --> 00:34:08,701 If I could effectuate change the same way I can effectuate 1033 00:34:08,701 --> 00:34:10,801 change in the private sector but I think I can have more 1034 00:34:10,801 --> 00:34:14,300 influence as a private participant than a public 1035 00:34:14,300 --> 00:34:15,300 participant. 1036 00:34:15,300 --> 00:34:17,300 Thanks for coming. 1037 00:34:17,300 --> 00:34:18,300 Sure. 1038 00:34:18,300 --> 00:34:18,534 Bill Ackman. 1039 00:34:18,534 --> 00:34:20,133 Back in a moment, stay with us.