Bill Ackman: How Ignoring My Own Rules Nearly Destroyed My Firm

During this interview with Lex Friedman, Bill Ackman recounts borrowing $300 million from JP Morgan during a financial crisis in his firm to buy stock in his public company, preventing an activist takeover. This decision, coupled with resolving his divorce and settling litigation, marked a turning point for his firm.

Ackman reflects on a pivotal moment when Gordon Singer recognized his buying power, signaling the activist’s defeat. Despite reputational damage from the Valiant failure, Ackman emphasizes the importance of adhering to core investment principles.

He had these principles written down and placed on desks, ensuring focus and discipline, leading to six successful years for his firm.

Here’s an excerpt from the interview:

Ackman: I did something I’d never done before. I talked about it before, that you don’t borrow money, but I borrowed money. I borrowed $300 million from JP Morgan in the middle of this mess. I give JP Morgan enormous credit for seeing through it.

Also, I had been a good client over a long period of time, and it’s like a handshake bank—they bet that I would succeed. I took that money to buy enough stock in my public company that I could prevent an activist from taking over, and I could effectively buy control of our little public company.

I got that done, and I knew it was the moment, the turning point. I resolved my divorce, and divorces get easier to resolve when things are going badly. I was able to resolve that.

We settled the litigation. I was buying blocks of our stock in the market. I remember a day I bought a big block of stock in the market, and I got a call from Gordon Singer, Paul Singer’s son, who runs their London part of their business. He’s like, “Bill, was that you buying that block?” I said, “Yes.” And he’s like, “Fuck.”

He knew that once I got that, they were not going to be able to succeed, and they went away. And that was the bottom. We’ve had an incredible run since then.

This is a business where you’re going to make some mistakes. It was a big one. It was very reputationally damaging. The press was a total disaster, but I’m not a quitter. And actually, the key moments for us were when we had never taken our core investment principles and really written them down.

We used to talk about them in meetings, in our investment team meetings. I told a member of the team, “Look, go find a big piece of granite and a chisel, and let’s take those core principles. I want them like Moses’ 10 Commandments.

We’re going to chisel them, and then we’re going to put it up on the wall.” Once we produced those, we put one on everyone’s desk. I said, “Look, if we ever again veer from the core principles, hit me with a baseball bat.” And that was the bottom. Ever since then, we’ve had the best six years in the history of the firm.

You can watch the entire discussion here: