The Exchanges

Q You said before that success is defined by how you deal with the failure. When you look back to say, you know, that fall from grace, so to speak, with Gotham in that time, and 2015 to 2017 in that patch, when the war's in process, what do you tell yourself?

A I tell myself to make progress every day. Um, you know, the, the, the advice I give friends who go through similarly challenging moments, and I guarantee you that, you know, in life, it's the rare person that doesn't go through a very, uh, dark, uh, period is, well, number one, you know, adequate sleep, proper nutrition, exercise is a huge, uh, help during, you know, build muscle during those periods of time. And get in really good shape, because that, I think, psychologically is a boost. Surround yourself with people who love you, and then make sure each day you make progress toward digging yourself out of the mess. And that, and that kind of progress, uh, physical, mental, business compounds, uh, and it compounds at a pretty high rate, and it's not long before you look back, 60, 9020, 180 days, and you've made massive progress. And, and One of the great things about America is, and, uh, you know, I know you, uh, deal with lots of startups and venture capitalists is that, you know, failure is something that's, uh, can be, you know, a lot of talented, uh, some of the most successful investors in the world are, are ones that the first one didn't work and that you can, you know, there's plenty of capital available for people who, who are, are, uh, second time founders and the first one was not a successful exit. You know, they, they quote unquote sold their company, but that, tha…

AI assessment note: “I tell myself to make progress every day.”

Q My question was, don't they have the same risk if interest rates go up further on the mark-to-market value of their assets?

A So, Silicon Valley Bank was, I would say, unique in, uh, the disproportionate amount of exposure they had to, kind of, long-duration fixed-income assets versus other banks. You know, we've looked at, um, First Republic Bank, which, you know, has, has been an underperformer, if you will, but its balance sheet, its loan portfolio, its business model looks very, very different from Silicon Valley Bank, but it's still getting shot, if you will, uh, in, in the market, and, and that's because, um, the government has still not given people assurance that every deposit is safe, and my point is, you know, my overarching point is we need to Get everyone calm. It's a bit like there were runs on mutual funds. I don't know if you remember during the financial crisis, one of the mutual funds broke the buck, if you will, like a money market mutual fund. People were redeeming and they, and they couldn't give people the dollar par and that was causing a run on every mutual fund. Basically the treasury fed came in and said, look, we're going to guarantee principal at mutual funds, which is a pretty extraordinary thing to do, but it stopped people from withdrawing their money, you know, so they could be comfortable. And then they put in new regulations about what Money market mutual funds could hold so the same problem would occur. I think basically the same thing has to happen with, with banks. …

AI assessment note: “my overarching point is we need to Get everyone calm.”

Q I've had my trust broken before, and it's very damaging and hurtful. Um, can I ask you, do you start from full trust, and it's there to be lost, or do you start from none, and it's there to be gained?

A Uh, probably, probably neither, um, but I, I would say I form a view of a person's, um, character pretty quickly, and the vast majority of the time I've been right, uh, with only a few disappointments, I would say. And the disappointments have been cases, in most cases, and there haven't been many, where my spidey sense Had a little bit of concern, but I chose to ignore the, the, the gut instinct, right? The gut is actually part of your brain, uh, as we've come to learn, I think, over time, and I think it's important to, to listen to it, and I've learned to listen to it a little more carefully, but, and by the way, it depends on what you're trusting someone with, right? Degree of trust required for someone to take care of a child or a parent versus someone to invest with a small sum of A large sum, you know, a bank, you know, different kinds of fiduciaries, or it depends on what kind of trust you need. Um, but you know, someone you're going to work with, um, so it, it, it kind of depends. Uh, but David is someone I was in the classroom with at HBS for basically a full year and then spent a lot of time with him the second year. I had a pretty good understanding of who he was by the time we went into business together, and I wasn't surprised by anything.

AI assessment note: “Uh, probably, probably neither, um, but I, I would say I form a view”

Q Do you do date night? Do you do Sunday evening walks? What's your thing?

A So, uh, I think date night is a really important thing, and we need a more official implementation of it. You know, we, we got married, and then we had COVID, and COVID is pretty amazing for marriage. Like, we lived in the same house. She worked upstairs in office. I worked down. We met for lunch. We played with the baby. Uh, and at night, we would go on these four or five mile walks down the beach. Uh, even in the winter, they would have a flashlight, and it was a really cool You know, way to kind of get through COVID and, and, uh, hopefully this summer we'll go back to that. We, we've not been doing that in the city. So I miss those kind of late night, uh, late night walks. And there was not much socialization, which is good in that if you spend an enormous time with each other, but when you get back to, you know, city life and, you know, you, you get the, you want to be supportive of, the people and you want to see friends and everything else. I think it's, it's, it's a massive time management problem. And so. You know, Neri is building a, yeah, she should be quite an interesting person for you to talk to. She's building an incredible company. Hired, I would say, yeah, maybe 17 or 18, you know, brilliant scientists, uh, engineers, roboticists, biologists, um, and.

AI assessment note: “we need a more official implementation of it. You know, we, we got married”

Q Does kind of, ah, wall to wall guarantees on deposits, not just allow for constraints to be removed and bad performance and behavior to be allowed?

A So again, we need a temporary government guarantee because we don't have a non-governmental insurance system to support it, right? The FDIC system is not a government guarantee of deposits. It's, well, it's a government guarantee in exchange for appropriate premiums, right? The The FDIC has a hundred and twenty five billion dollars of, of premiums. It's collected sitting in an account that to be, to, uh, backstop, you know, insurance on deposits. It's a good system. The problem is that the, the amount of insurance available per accounts is very small, right? Well, small, not small for your average American's checking account for sure takes care of that, but it doesn't take care of any kind of decent sized business. That has to have money on hand for payroll or working capital or otherwise. And you can't have, you know, millions of small businesses trying to assess the credit worthiness of banks on a regular basis. And by the way, the credit worthiness can change dramatically. You know, Silicon Valley bank was a very self solvent bank until rates moved a lot in 12 months.

AI assessment note: “we need a temporary government guarantee because we don't have a non-governmental insurance system”

Q Penultimate one. I'm worried about wealth terrorism. We hear about, like, climate terrorism, you know, the climate terrorists. I'm worried that actually, you know, people will start shooting down private jets style, and, like, the inequality of wealth will be violent. Do you share that concern?

A So I think wealth inequality is a big problem. I think there are ways to address it. And I think the, the key is it's a bit, the analogy I would make is one of the things the U S has done very, very well is promote home ownership. In fact, they did it a little too well going into the crisis, but in general, it's been a good thing. And our system of 30 year fixed rate mortgages has enabled home ownership for, for a lot of people. And that's also created a lot of, a lot of wealth and the Uh, sort of the, the middle classes and homeowners, uh, you know, up through the financial crisis while their wages weren't keeping pace, uh, you know, with, uh, upper income strata, they were making a lot of money in their homes. And then the financial crisis and over leveraging wiped out people's, uh, sort of home equity. And I, I sort of view that as kind of the fulcrum moment when the wealth inequality issues really started to build. Um, and I think the key is People need to own a piece. And by the way, that, well, that, that started to rebuild in the last, you know, since the financial crisis, a lot of people bought homes, recapitalized, and they built wealth, uh, in their homes. But the piece that a lot of people are missing out on is they're missing out on participating in the growth. You know, that's the Tom Piketty thing, which is that, you know, wages have not compounded at the same rat…

AI assessment note: “So I think wealth inequality is a big problem. I think there are ways to address it.”

Q What was the biggest takeaway? This one's from Jackie Reese's. She said, what was the biggest takeaway from the SPAC that didn't happen?

A I would say I was very surprised. So we did a transaction with probably the best company that about any of them that were from the SPAC, Universal Music. It was a super predictable, high quality business. We buy at a very attractive valuation. We gave up our warrants, which were the only Uh, sponsor economics we received due to the transaction. We committed a billion, six hundred million dollars alongside, uh, the public shareholders. And the transaction had some complexity because we had to accommodate, you know, tax and other issues of, of the counterparty who was, who was selling their, their interest in the company. And despite it being great for the shareholders, despite our having exactly the same alignment With other shareholders, every other SPAC there was founder stock and all kinds of other instruments. The SEC turned down the transaction for highly technical reasons, which substantively should be precisely the kind of transaction they're going to approve. And I think that I guess the takeaway from that is sometimes, you know, a lot government regulators focus on the technical details as opposed to high level principles. And I think they could, you know, you look at Silicon Valley bank just to close the circle, right? They made one of the most basic mistakes a bank could make, right? We had something called the S&L crisis in the eighties, right? Why? Because banks had…

AI assessment note: “the takeaway from that is sometimes, you know, a lot government regulators focus”

Q What happens if interest rates go to six percent to quell inflation? Where do we invest then?

A I don't think the Fed has to raise rates that much more. You're at a level today where certainly short rates are above, or just above, uh, kind of underlying inflation. So we're getting closer to the financial policy slowing, uh, slowing the economy. My favorite approach, actually, you know, the big problem we have is we've got And that Powell's focused on is, I hate to call it even a problem, is we have full employment, very full employment, and we have rising wages, or those are starting to temper. The best way to solve that problem is to open up immigration, right? Why, why force people out of work to slow the economy to get rid of inflation? Why not increase the supply of workers so that, um, you know, we temper the increases in wages? Um, I just think it's a better answer.

AI assessment note: “I don't think the Fed has to raise rates that much more.”

Q What happens if interest rates go to six percent to quell inflation? Where do we invest then?

A I don't think the Fed has to raise rates that much more. You're at a level today where certainly short rates are above, or just above, uh, kind of underlying inflation. So we're getting closer to the financial policy slowing, uh, slowing the economy. My favorite approach, actually, you know, the big problem we have is we've got And that Powell's focused on is, I hate to call it even a problem, is we have full employment, very full employment, and we have rising wages, or those are starting to temper. The best way to solve that problem is to open up immigration, right? Why, why force people out of work to slow the economy to get rid of inflation? Why not increase the supply of workers so that, um, you know, we temper the increases in wages? Um, I just think it's a better answer.

AI assessment note: “I don't think the Fed has to raise rates that much more.”

Q And even then it's dangerous. Do you worry? Because even then it's dangerous. You see people like JK Rowling, you know, a billionaire in her own right, who has bricks thrown through her window for free speech.

A Yeah, it's, that, that's a bad thing. I was speaking very freely this weekend, right, on the whole bank thing. I found, you know, I've kind of, in fact, become fascinated by Twitter in the last, I would say, three years. I really was not active on Twitter before that, and periodically active, and it's, what I like about it is, it's a way to, to have your views heard and debated, and, you know, I'm, you know, very meaningful number of people who matter in finance, media, You know, central banking, whatever, you know, follow me. And so, you know, while Jay Powell probably wouldn't take my call if I called him for, give him advice, because last thing he wants to do is talk to someone who's actively buying and selling securities in the marketplace. Not that we are that active buying and selling, but yeah, I think he would certainly think of me as someone. I can share my view with Jay Powell directly. I'm quite sure he actually follows me, you know, not under the The name Jay Powell. My point is, it's an effective way to reach the people that matter in DC and otherwise, uh, about important policy things. And during the financial crisis, I did the same thing with the occasional PowerPoint presentation or, or segment on CNBC. Uh, but here I can, you know, from the comfort of my couch, you know, share a point of view on something that I think is important. And I, you know, I was You kn…

AI assessment note: “that's a bad thing. I was speaking very freely this weekend, right, on the whole bank thing.”

Q And we made it to 3.1 with that check. I, I learned a lot from my first partnership. Um, you mentioned David there. What did you learn about great partnerships from that first partnership with David?

A So David was a great partner and we remain really great, uh, friends. We don't see each other as much as I would like. We actually, at the very, very beginning, we lived together. Uh, kind of a funny story. I had worked for a company called General Atlantic, uh, real estate, which was a real estate, uh, private equity subsidiary of the well-known, you know, kind of venture firm. It's something they disbanded over time. I worked there for the summer and Uh, I got an apartment. They gave me a good deal on an apartment and a building at, uh, the address was three 60 east 88 street. And, uh, we, we shared the apartment, uh, you know, keeping costs down at the very, very beginning of time. And kind of the funny story is, you know, many, many years later, um, my daughter, my, my youngest, uh, daughter was in the building, uh, with the, with the, the nanny on a way to a play date. And She said, um, you know, she was here to see, was Elwes Ackman here to see some other child in the building. And the, and the doorman said, or the concierge or whatever they called it, said, oh, Ackman, there used to be someone named Ackman who lived in this building, you know, like, you know, maybe eight or nine years ago. And, uh, is it, would it be Bill Ackman? And she said, yeah, Bill Ackman. And the guy laughed and laughed and laughed. Is he, is he married? And she said, yes. He said to a woman. And …

AI assessment note: “Anyway, I don't know if it's relevant for your particular podcast”

Q And we made it to 3.1 with that check. I, I learned a lot from my first partnership. Um, you mentioned David there. What did you learn about great partnerships from that first partnership with David?

A So David was a great partner and we remain really great, uh, friends. We don't see each other as much as I would like. We actually, at the very, very beginning, we lived together. Uh, kind of a funny story. I had worked for a company called General Atlantic, uh, real estate, which was a real estate, uh, private equity subsidiary of the well-known, you know, kind of venture firm. It's something they disbanded over time. I worked there for the summer and Uh, I got an apartment. They gave me a good deal on an apartment and a building at, uh, the address was three 60 east 88 street. And, uh, we, we shared the apartment, uh, you know, keeping costs down at the very, very beginning of time. And kind of the funny story is, you know, many, many years later, um, my daughter, my, my youngest, uh, daughter was in the building, uh, with the, with the, the nanny on a way to a play date. And She said, um, you know, she was here to see, was Elwes Ackman here to see some other child in the building. And the, and the doorman said, or the concierge or whatever they called it, said, oh, Ackman, there used to be someone named Ackman who lived in this building, you know, like, you know, maybe eight or nine years ago. And, uh, is it, would it be Bill Ackman? And she said, yeah, Bill Ackman. And the guy laughed and laughed and laughed. Is he, is he married? And she said, yes. He said to a woman. And …

AI assessment note: “I don't know if it's relevant for your particular podcast”

Q But Bill, this is highly logical and very much in vogue of, kind of, leftist regimes which are in power. Why do they not do it?

A I don't, these are, by the way, I think these, I think the Elon Musk of the world, uh, he, you know, I, I think it would support this kind of tax. It makes sense. The problem with the wealth tax, if you've got a, you know, the Biden wealth tax, which is like 25% of the appreciation of things that you own privately, it's going to bankrupt every startup. No one will ever start a business in America anymore, right? Because you, no one will be able to, what do you do? You sell as the You know, God forbid someone puts money in your company at a billion dollar valuation, all of a sudden you owe, you know, if you own half the company, you owe a hundred million dollars in taxes that year. You know, those kinds of taxes I think are, um, you know, just destructive. You don't want to, you don't want to have a tax policy that destroys the economy, right? You want to have a tax policy that makes sense, but there's certain things that are just wrong and unfair, and they just persist. Like by the way, carrot interest, which I've said my piece on for a long time, um, you know, certain Giving someone a disproportionate share of gain is a very powerful thing to drive economic behavior. But I think differently about the real estate entrepreneur, the oil and gas entrepreneur, you know, building a business than us folks in the asset management industry. I don't think we need that extra tax advantag…

AI assessment note: “You don't want to have a tax policy that destroys the economy”