A Conversation with Bill Ackman

Stephen Fraidin is a partner at Cadwalader, Wickersham & Taft LLP. This post is based on a conversation between Mr. Fraidin and Mr. William Ackman, Founder and CEO of Pershing Square Capital Management, in a keynote session at the Cadwalader Fifth Annual Finance Forum. Their discussion covered the current state of the financial markets, the resurgence of SPACs, and more.

STEPHEN FRAIDIN (SF): It’s always a pleasure to have an opportunity to have a conversation with Bill Ackman. Bill, I’d like to start with a personal question: at what point in your life did you realize or decide that what you wanted to do was become a professional investor?

BILL ACKMAN (BA): Actually when I went to work for my dad after college. He ran a firm that arranged financing for real estate developers and owners. It’s a service business, and after being in that business for six months or a year, it seemed like the real estate developer investors were having more fun than the service providers. So, I didn’t want to be a service provider—I wanted to be on the other side of the table. I was also contemplating whether to go to business school, which I thought would be a good way to transition from service provider to investor. I didn’t know much about investing, so I asked my dad: who do you know that’s a good investor? My dad mentioned a guy named Leonard Marx. I don’t know if you remember the name, but Leonard Marx was a very successful real estate investor and also a very successful stock market investor. And I happened to meet him, and he recommended I read a book called The Intelligent Investor by Benjamin Graham, which is kind of a value investing classic. I read the book, and it’s a bit like Jean-Paul Sartre’s essays on existentialism: you either read it and say “OK, I believe, I’m interested,” or it doesn’t appeal to you. I was intrigued, and from that moment on I became passionate about investing. I went to business school, and then from there I decided I wanted to start my own firm.

SF: Great. So Bill, I would say that we’re right now in a time of significant instability, both market instability and social instability. We’ve got the changeover of U.S. presidential administration. We’ve got the pandemic. We’ve got extraordinarily low interest rates. We’ve got, I think, a recession. How does all of this affect you as an investor? How do you see that instability playing out?

BA: I’ll try to be optimistic, because I generally have an optimistic point of view; there have only been a few brief moments in my life where I’ve been pessimistic. What you didn’t mention is that we actually have a presidential election that’s contested, so add that to your list of issues. But I’m confident that someone will be appointed president January 20 of next year, and that will, itself, create some stability. Building on comments that came before, I do think that having a divided government—I think a Republican-controlled Senate, a bare majority Democrat-controlled Congress, and President Biden, is actually a pretty good mix for a fairly stable business environment.

So, if you assume that the most likely outcome happens, which I think I’ve described, you have the set up for next year: consumers have not spent a lot of money in the last nine months; an excess level of savings has been reported, at $2.5 trillion dollars and growing; you have a 10-year Treasury under 100 basis points; you have a well-capitalized banking system; and you have people that have been caged in, if you will, for a long period of time, that are going to want to celebrate. Logically, I think that’s going to lead to a boom in everything from restaurants to travel to corporate events, and I think we’re set up for what could actually be a pretty good economic recovery. I don’t think Biden will put forth any aggressive tax plans because of the risk of holding back an economic recovery. Of course, I think we have to have a vaccine that looks likely to be available for distribution in the relative short term. I think the winter is going to be grim, but by the time the weather gets a little better, there will be a lot of reasons for optimism, and I think the back half of 2021 could be a very strong period for the economy.

When you’re an investor, unless you’re a day trader, you’re buying assets and you base the value of those assets on the present value of the cash they generate over their lifetime, whether it’s a real estate asset or whether it’s a corporate asset. As long as you have a balance sheet that can enable you to survive the storm, the value of the business is not materially affected by even a year of underperformance; that’s just a year removed from the financial model, and you discount the cash flows going forward.

What has happened, actually, in the last period is there has been a huge acceleration in terms of technological adoption. Hence, you can see [Stephen] Fraidin now as an expert in Zoom, as far as I can tell—and Steve claims to be a technological luddite in my interactions with him. I think you could see an acceleration in productivity. The other thing that’s going on is the sort of best-capitalized dominant companies are taking more market share. So all that is a positive.

The negative is that the “little guy” has really been hurt, very dramatically in the last year, and it’s going to take time for the little guy to recover. Think of the small hardware store, which is kind of a cramped space with low ceilings. That store is not getting nearly as many customers as the Home Depots and the Lowe’s—which we own—of the world, even though that business happens to be booming right now. When you look at Chipotle in terms of the stock being up something like 50% this year, their digital business is half their sales whereas it used to be 15% of their sales. They’re booming. Compare Chipotle with the local taco shop, which is probably closed at this point in time. This is the sort of K-shaped recovery. That said, I do think the rising tide will ultimately float all boats. I do think it will be a very good time to open a restaurant, for example. Rents will be down, demand will be up, and competition will be less. But it’s still going to be a challenging time for the smaller, less well-capitalized, less well-technologically-enabled companies. It should be a boom time for the dominant businesses, and we invest in those kinds of companies. That’s why we’re bullish.

SF: There has been, as you well know, a proliferation of SPACs in the last six to nine months and Pershing Square sponsored a SPAC called Pershing Square Tontine Holdings. Can you talk a little about first, the proliferation of SPACs, and second, how Pershing Square Tontine Holdings is different from all of the other [SPACs]?

BA: The proliferation of SPACs is due to a number of things. The biggest driver of that is the basic construct of the traditional SPAC, in which the sponsor puts up $25,000 to buy sponsor equity in the company and that turns into 20% of the common stock of the enterprise if they get a deal done. So if you raise a $400 million SPAC and you get a transaction done, you get $100 million of common stock in the target. And so $25,000 to $100 million is a 4,000-to-one payoff. It’s like being in the first round of Google. So that obviously is a compensation scheme that attracts a lot of people. I think that’s a big driver. The banks get paid a 5.5% underwriting fee, which is a nice fee. SPACs are actually quite easy to sell, if you have a decent sponsor.

The way I describe it, I don’t know who set up the original SPAC, but that person was kind of a genius but also a cynic—meaning, it was a genius idea, but everyone is basically bribed to participate. The sponsor gets founder’s stock and the opportunity to make a massive multiple, and the underwriter gets a fat fee. The IPO investor gets bribed with a package of warrants, for which the typical ratio is a third of a warrant for every share purchased, and they get a put option at the IPO price. How many stocks can you buy where you get all of your money back? It’s a very brilliant construct, and then you can get free options. I think each of the various participants are highly incentivized, and you’ve got a receptive market and you’ve got hedge funds that are going to buy basically every deal: they can buy every SPAC IPO and wait 52 days until the stabilization period is over, detach the warrants they receive and sell the shares for pretty much what they paid for them, because the shares come with a put option at the IPO price. This can create what I would call “free optionality.” You can build a whole strategy off of a portfolio of warrants on SPACs and you’ve got zero downside and substantial upside. You also have some well-publicized successes where stocks have traded up a lot on the announcement, and some very good businesses—Draft Kings perhaps being the paradigmatic example –that went public with a SPAC that I think helped legitimize the entity.

To see the problem with SPACs, you just need to look at Churchill Capital Corp. III, which did the largest SPAC deal of all time through a merger with MultiPlan, a Hellman & Friedman-controlled company. That deal closed a little over a month ago, and the stock of MultiPlan is now trading at six and a quarter, which means that the investors have lost about 37% of their money and the sponsor has made several hundred million dollars. I think that when those kind of dichotomies happen, there’s going to be a lot more scrutiny on the structure, and you have the example of the well-publicized Nikola SPAC, where there have been some allegations of fraud.

With Pershing Square Tontine Holdings, we said look, we like the idea of a SPAC but we hate the structure; we don’t think the terms make sense for investors. We approached this not from the perspective of getting additional assets we could charge for or promote, or getting founder’s stock. We approached this with the thought that this is a really interesting time in history to buy a large minority stake in a private company, and there are more large-cap private companies than ever before. Why? Because of the growth of private equity. Because of the very significant number of venture-backed businesses that stayed private for a very long time because of the ability to raise capital from funds like SoftBank. Because of the family-controlled businesses that have, just by compounding since the financial crisis, grown enormously in value. Then you have the proliferation of companies that want to spin off divisions, where a SPAC could be a very interesting reverse Morris trust execution. We thought, there’s a huge universe of potential targets, and if we could create the most investor-friendly SPAC then we could raise as much money as we want, and if we could create the most merger-friendly SPAC, we only need to find one of these companies and hopefully we can buy a great business at an attractive price where everyone wins. That was the thinking.

In a typical SPAC, you’ve got a sponsor that puts up a few million dollars, a forward purchaser that puts up $50 or $100 million and investors who buy stock in the IPO. Once they find a target, the sponsor ties it up. Because the capital can redeem, they have to run around and find so-called PIPE capital, so they tie up some PIPE capital, announce the transaction and hope that the public investors stay. That’s a very awkward process to try to do a deal. Our thinking was, how do we design a structure for the right investors who want to own the company, as opposed to arbitrageurs? How do we incentivize them to make it a really attractive deal? And how do we eliminate the bad incentives?

So, our structure works as follows. We maintain the same ratio of warrants to shares: for every share you buy, you get a third of a warrant. Therefore, for nine shares, you get three warrants. Unlike other SPACs, we don’t give you all three warrants upfront; we give you one warrant, or 1/9 of a warrant for each share. It’s only after we’ve announced the deal and the opportunity to redeem your capital has expired that you get the additional two warrants. If you redeem, you forfeit the warrants. For the investors who stay, there is a fixed pool of warrants that gets divided among those people. So we reward loyalty and punish, if you will, redemption or disloyalty.

What’s interesting about that structure is that every share always trades with 2/9 of a warrant. This means that once we announce a transaction, we expect the stock to trade up significantly because we’re going to do a good deal, of course. The stock will trade up even more because the stock will trade with 2/9 of a warrant per share. Our warrants today are trading at $7.27, meaning 2/9 of a warrant therefore are worth about $1.60 or $1.65 prior to the announcement of a deal. When we announce a deal, the warrants go live and they’ll be worth $8-$10. 2/9 of a warrant will be worth a couple bucks. With a stock with an IPO price of $20 plus warrants that are worth $2, if the stock doesn’t trade up at all in the deal, the package would be worth more than $20. As long as the stock trades for more than $20, no one will redeem from our structure. And because through redemption they only get $20, in order to get the value of the warrants they have to either stay in the deal or they have to sell to someone who exits. And I can actually pull up a PowerPoint or a presentation and walk you through this. We’ve designed a structure in which the $4 billion we’ve raised will actually be there, meaning we don’t need PIPE capital. Because there’s no separation between the sponsor and the forward purchaser—those two entities are the Pershing Square funds of which I personally am the largest shareholder—we fixed the alignment problem. And by committing a minimum $1 billion in capital by having this tontine warrant structure, we now have a $5 billion equity check that we can deploy. We also negotiated the underwriting fees from five and a half points to 1.9%. And we pay the underwriting fees with the purchase of a warrant [from the company]. The only economic difference between us and public shareholders is that we purchased a warrant at the time of the IPO, which we paid fair market value for. And then we took the proceeds, $68 million dollars, we paid off two-thirds of the underwriting cost. So our structure is $5 billion of equity, there’s only $30 million of frictional costs, and as a result it’s the most investor-friendly structure in the market.

This construct was very appealing to investors—we had $12 billion of demand by the second day of the roadshow. So we were able to pick and choose our investors, which include the most important sovereign wealth funds, community pension plans, state plans, 50 billionaire family offices, from Saudi Arabia, U.S., Switzerland and all over the world. We think companies will care about who their shareholders are, and this is sort of a unique opportunity to pick up a collection of the best investors in the world as your shareholder base.

So, a long-winded answer. It’s got a lot of features. The simple story is that we have the largest SPAC, the most efficient structure, the most investor-aligned entity and the ability to deploy $5 billion of capital to take a minority stake in a company and take it public. And we’re having some interesting conversations and we would welcome inbounds from people in your audience.

SF: Bill, you have made some truly remarkable investments over the years. The one I’d like you to discuss with us now is the recent investment that you made that netted your investors I think about $2.5 billion or $2.6 billion, and you made that investment at sort of the early stage of the COVID crisis. Can you tell us about that investment?

BA: Sure. Beginning in January, I became quite concerned about COVID first from a health point of view. I have a father who, at the time, was obese—and I’m proud to say that he’s lost 60 lbs. living with me, and has gotten in much, much better shape. Couldn’t walk a mile when he started living with me—now he walks five miles a day. So that’s probably the best thing for the family coming out of the crisis is that he got himself in shape. But I was very worried about him because he had limited lung function and a lot of the co-morbidities that created risk and I just, you know, following what was going on in Wuhan, following the Chinese government basically shutting down an entire city and locking people in, but also announcing that curfew 12 hours before it put it in place. The problem was that millions of people left Wuhan and, once that happened, I became very convinced that—plus the fact that it was spreading asymptomatically—it was a real threat. I just said, look, just the math tells me, common sense tells me, this will be everywhere and this will only be a matter of time. Thinking through the economic ramifications, the world had never experienced a global economic shut down. My presumption was that we were heading there, it was just a matter of time and we’d get there pretty quickly. In the pre-financial crisis, we were very bearish on credit but we were bearish a couple of years before things blew up. In this case, for the first time in my career, I thought we were within weeks or possibly a month or two from the virus spreading around the U.S. and the country being forced to shut down the economy. We were exposed to certain industries through big holdings like Starbucks, Restaurant Brands, Hilton, Lowe’s—companies you would expect would obviously be put at risk by a global economic shutdown.

As you know, we are long-term investors. We own Restaurant Brands now and we actually took it public with a SPAC eight years ago. We’re supportive of management teams—in many cases we’re on boards of directors and we own large stakes. It was the first time in my career that I thought of selling everything in the portfolio, but I said, instead, let’s hedge because I think this will hopefully be a short-term phenomenon, relatively speaking, and if we can hedge, we can position ourselves well. Then the question just became about how do we hedge? How do you hedge in a way where you minimize the risk of loss if you’re wrong about the outcome and where you get a very attractive reward if you’re right? Puts on the market don’t offer that degree of asymmetry because a big component of the cost of a put is volatility—you pay a big premium for volatility. What’s interesting about CDS is there’s no premium for volatility: it’s a five-year contract you enter into where you commit to make a series of payments on a quarterly basis and you can track the price minute-by-minute or second-by-second, and you can put it on and you can take it off. And so at the time we looked at CDS as a hedge, credit spreads were at very close to the all-time tightest levels ever. Our view was that we couldn’t envision a scenario where credit spreads would tighten further with the pandemic kind of raging around the country, so we built a very, very large short position by buying insurance, if you will, by buying credit protection on U.S. investment grade companies, European investment grade companies and U.S. high yield companies. We started buying the protection on the 24th of February, we finished by the 3rd of March and by the 12th it had gone from being worthless when we put it on, to being worth $2.7 billion by the 12th of March. We took it off as quickly as we could and we were fortunate. It looked like we just had incredible timing, but the reality was we had an investment that went from nothing to becoming as much as 40% of the portfolio at the same time that our stocks were down, our companies were down 30+%. Our portfolio of equities was down 30%, the hedge was up, you know, enormously, and became a massive, very risky position, at which point we decided to unwind it. We thought perhaps we could double our money in the hedge once it hit $2.6 billion, if the credit markets went where they went during the financial crisis, but the government had already begun to intervene. Mnuchin and Congress were taking steps to protect the financial system and talking about government stimulus and so on, and so we viewed our upside as capped in the hedge. Companies we really liked, that were well-capitalized and we thought would in some cases benefit from pandemic, were really cheap, and so we just unwound the hedge and bought stocks and we’ve had a really good year as a result.

SF: We’ve now talked about a huge success, but you’ve often said that success is not a straight line and that’s been true with respect to you and Pershing Square. Can you tell us what lessons you’ve learned from the vicissitudes that you’ve gone through, and that Pershing Square has gone through?

BA: Sure. So, if you’re a concentrated investor, the good news is that if you make a smart decision, the payoffs are very large. The bad news is that the mistakes are also very, very large and, because we get a lot of press attention, I guess they like the successes, but they love the failures, so, one thing is you have to have a pretty thick skin. Investing requires what [Warren] Buffett calls temperament—you need a good temperament, which means a certain emotional distance from what you know is going on. It can be challenging going through it and having your mistakes written about in the press, but I describe experience as making mistakes and learning from them. When I look back over 17 years at Pershing, the biggest takeaway from the mistakes we’ve made has been that they occurred when we stepped outside of the core strategy that has driven our results over time. Our core strategy is buying the greatest businesses in the world, super durable, high-quality, simple growth companies. When we’ve veered from that strategy it’s been expensive, and so the smartest thing I did after two contemporaneous big failures circa late 2015-2016, is that I took our investment principles—which we always talked about as a firm—and I had these little deal toy tombstones made where I had those principles engraved in stone on little tablets like Moses’ ten commandments, and I put them on everyone’s desk and it actually was a very helpful thing and we haven’t veered since, and we’ve actually had a remarkable several years just sticking to the strategy. So we’ve had a great strategy and in investing you always want to continue to expand your circle of confidence, but not get too far away from your core, and I think that would be the biggest takeaway for me.

SF: There is now an ongoing what I would describe as a “robust debate” among legal scholars and politicians about the purpose of a corporation. Some people see the purpose of a corporation being to benefit stockholders and others take a different view and they say they’re proponents of what’s called stakeholder responsibility. Where do you come down on that?

BA: What’s interesting is that when I graduated from college I thought business was about making money and philanthropy was about doing good. About a dozen years ago I started a foundation, giving away north of $500 million in the foundation and personally. I’ve learned a lot and I feel like we’ve done some good, but my takeaway from all of it is that actually you can’t move the needle enough, whether you’re Bill Gates or even Jeff Bezos, with only philanthropy. If you want to solve a problem, capitalism is a much better solution than a not-for-profit approach. The good news in terms of answering your question is I think that if you focus on what’s good for your stakeholders, that will ultimately lead to the most valuable corporation as opposed to a focus purely on your shareholders and your maximum short-term profitability. I think that’s particularly true today when you look at a company like Starbucks, which I think is a very good corporate citizen. They pay relatively high wages to their baristas, they offer them access to a college education and health care, they’re very thoughtful about minimizing the environmental impact, looking at eliminating straws and various things they do in their business. They’re not perfect, but I think the result is that it allows them to recruit a better quality workforce. It makes the consumer feel good when they walk in the store. The same thing is true with Chipotle, to mention a simple example, which sources its supply chain from a lot of smaller farms where livestock are raised responsibly, and the consumer cares and actually the food tastes better.

I think one of the most valuable businesses in the world, if not the most valuable business in the world, is one that was run entirely without generating a profit for many years, Amazon, right? Amazon took the approach of, how do we maximize the experience for our customers? Now, some people criticize Amazon’s practices of working their warehouse workers too hard—and I don’t think it’s a perfect company by any means—but maximizing profitability in the short term is clearly not the best way to maximize economic gain. I think if you focus on creating a great environment for your employees, if you treat your suppliers well and you make your customers happy, it’s going to lead to more profits than if you ignore those other stakeholders. So I think the good news is that stakeholder capitalism is completely correlated with the best economic outcome.

SF: Would you require companies to adopt Starbucks-type policies or would you let the market decide which companies should and should not function that way?

BA: Sure, so we don’t really require companies to do anything. We’re not—maybe in one case we would consider ourselves a controlling shareholder, and I guess we are in the case, for instance, of [Pershing Square] Tontine, but it’s still not a company, it’s a cash shell at this point in time. We try to recruit the best management teams to companies when we’re in a position to do so and I think every company I’m on the board of, or that’s in our portfolio, is very focused on how to be a good corporate citizen, and I think that’s driven by capitalism. I think it’s driven by various initiatives that people put on ballots. I think you can have different points of view on where we are with respect to climate change, but I think if you’re a consumer-facing company in any respect, you have to be focused on these issues because a meaningful percentage of, certainly, the younger generations are extremely focused on climate change and other situations. So I think the forces of capitalism drive companies to do the right thing economically or the right thing for the world, with a few exceptions. We still need regulation and the coal-fueled power plant doesn’t have many attractive alternatives, if any, to generate cash flow than to keep operating, so there are certain businesses that probably can’t or are going to have a difficult time adopting a “what’s-good-for-the-world” approach based on their current position, but I think if you look at the amount of capital that’s been withdrawn from the energy sector and from polluting companies, we’re going to get to the right place for what I think is good for society. So I think economics and capitalism will ultimately drive it. It doesn’t hurt to have the government nudging the companies in the right direction.

SF: One of the dramatic developments in the last, I’d say, decade has been the increased importance of index funds. Index funds are now the largest shareholder of I think most of the big companies in America. Can you talk about that? What are your thoughts about that?

BA: First, something I’ve written about years ago, I pointed out that we’re heading to a world in which index funds literally control every company and I think there are very significant implications there. You know, the problem with index funds is that their fees are also, I guess the good news for investors, their fees are basically zero or approaching zero. There are actually a meaningful number of index funds today that charge no fees at all. They make money by lending shares and in other ways. The problem with that is they don’t have a lot of resources, they have to keep their costs very low, which means you have a couple of [index fund] companies as the lead, in fact, control shareholders of corporate America when they don’t have the time or resources. We follow our companies incredibly closely. We own ten businesses. We have seven members of the investment team. We make very few changes in our portfolio over time. We really come to know our companies. When it comes to voting a proxy, we can be very thoughtful about that decision. Imagine if you received 10,000 proxies in February and you had to vote them by April and you had a 20-person team that had to make a decision in each of those cases. That’s pretty much an impossible job. And so I think the risk is that index funds are increasingly going to control the world and they also do have some strange incentives when they’re a major shareholder of multiple companies in the same industry. They avoid you, the lawyer, but they don’t have to make an HSR filing when they buy stakes and they eventually own controlling stakes in every airline. How can you vote a proxy in that case and it not be an antitrust issue? So I think there are some complicated and important issues. I know Larry Fink is taking stuff pretty seriously, writes an annual letter about it. We’ve been impressed with the Blackrock team. You know, Vanguard is, I think, taking similar steps, but without naming names, some of the other index funds that we’ve met in the context of proxy contests didn’t even have someone for us to meet with when we were presenting our case for our slate versus another, so I think they’ve got a long way to go in terms of improving their ability to be important stewards of shareholder capital.

SF: What do you think is the future of hedge fund activism? Does it have a future?

BA: So, I think today you’re either a passive investor, i.e. an index fund, or you’re an active investor. I think today pretty much every investor is an engaged owner and I think shareholder activism took a pretty sleepy governance world and made dramatic changes. It used to be if you were on the board of a S&P 500 company with a $10 billion market cap, as long as you kept your relationship with the CEO, you kept your board seat. It was kind of a life-tenured position and you’d have five or six of these and there wouldn’t be a lot of controversy and you’d support the CEO and that’s kind of how it worked. I think what shareholder activism has done is actually put some risk in being a director of even the largest companies, meaning if you’re not upholding your fiduciary duty, the board is at risk of being unseated by an activist. I think what that has done is meaningfully improve the governance structure of corporations, and that old-fashioned board that I talked about really, largely, to a great extent doesn’t exist today. And as a result I think, in a way, you could arguably say there’s less need for shareholder activism because boards are more active.

I think the other problem you have today is the point you mentioned before: more and more funds are indexed. The index funds are never going to run a proxy context, so you do need a group of entrepreneurial investors who take large stakes, concentrated positions where they’ve done a lot of work on a company, they’ve identified an underperforming business and they have ideas on how to fix it and then they might own 4%, 5%, 6%, 7% of the company and then they go to the index funds for support if they get rejected by a board. But I think the biggest change is boards are more receptive to ideas from the outside than ever before. And as a result, in a way, there’s less need for the true activist. There shouldn’t be as many proxy contests going forward as boards are more receptive to ideas from the outside. So I think activism is here forever, but perhaps it’s going to be less contentious going forward.

SF: We’re now going through what I would describe as a period of significant political polarization. When I was a young man, I grew up in Massachusetts and our Republican senator, Henry Cabot Lodge, disagreed with his party on civil rights. He was, I would say, in the right place. The party was not in that place. That kind of thing doesn’t seem possible nowadays. Do you see polarization beginning to wind down? Will people start working more cooperatively together in politics or is this just going to continue forever?

BA: Look, I think there are some structural problems with the way the system works, right? The primary system where, in order to raise money, you’ve got to appeal to people on the far right or the far left sides of the political system. To get through a primary you have to raise a large amount of money to be a candidate, and therefore you have to have views that appeal to—if you’re a Democrat, to the far left side of the party and if you’re a Republican, to the far right side of the party—and that sets us up for a more divisive set of circumstances and then the Facebooks of the world do. You know, you should watch this film called The Social Dilemma which talks about the way that Facebook makes money, which is by engaging their users, and they engage their users by feeding them content that reinforces views they have. That dynamic, I think, has led to more and more fringe reinforcement of very divisive views, so I think there are some very negative structural factors that are affecting politics. All that said, I think the country, the vast majority of the country, is centrist –people think that there’s some sense to what some Republicans’ policies are and that there’s some merit to Democratic policies. We have a two-party system which is an extreme. I guess, let’s assume that Biden is confirmed as our President, I think that while we might have a more centrist period, you’ve got a one-term president who doesn’t have to worry about getting re-elected, he’s got a lot of relationships across the aisle by virtue of his very long term in the Senate, including with McConnell, and you would hope that coming out of a crisis like this, with one of the most divisive presidents who created a fair bit of divisiveness, there might be a tilt toward a more centrist cooperative outcome. It’s a bit like coming after a war. You would think people would be more motivated to work together to solve the problems we have. I hope so.

SF: I thought that one of the lessons of the Trump presidency that people have missed is that Trump was not a politician, he was outside the political system, yet he managed to get the nomination and he managed to get elected. Do you think we’re going to see more non-politicians active in national politics? They may be business people. They may be athletes. They may be movie stars like Ronald Reagan was, but do you see that as a potential trend?

BA: Yes, I do. Look, I think the mistake the business community has made over the last, call it 30 years, is it walked away from politics and said, you know, it’s not really going to impact my business and so I’m just going to ignore what’s going on in Washington—and now we are where we are. I think the other problem is that if you are a super-successful, talented leader, being President is not that great a gig versus what you have going. If you’re a CEO of a big company, you’re the man or you’re the woman and you can call the shots, to a great extent. To be the President, one, getting elected is a very painful thing, so I think being in politics is very challenging. All that being said, I think the United States is actually the biggest business in the world from that perspective and a very talented—I look at a guy like Jamie Dimon. Jamie Dimon, by virtue of running one of the largest banks in the world, understands this country and has a global perspective. He’s a super-talented leader, highly respected, his family came to this country, Great American Dream kind of story. I would love to see a guy like Jamie Dimon run for president. But I think the people like that have—life is so good being CEO of JP Morgan, by comparison, that, you know, do you really want to go through the grind of trying to be President of the United States? So I think there’s a self-sacrifice that goes into it, but I do think we’d be very well served if a very talented, capable, business leader ran the country.

SF: So, let’s assume that Joe Biden called you up right after this conversation and said “Bill, I was super impressed with everything you said…” I know, this is hypothetical, Bill. “I was super impressed with everything you said, I’d like you to tell me the three things you think we should focus on first in this country. I admire your judgement. Tell us what the three things are that we should focus on first.”

BA: Number 1: economic growth. The country has been through an almost depression-like period in terms of what’s happened to the economy, and that is the biggest threat to health and human welfare and our ultimate defense of the country, and so we have to get the economy back on track and that’s got to be job number one. You have to be a pro-business president, and because that’s the only way for us to recover, it would be the first thing, I would say.

Second, I would say, is we have to bring the country together. Maybe not necessarily in this order. We’ve got to find unity around a shared mission and shared goals otherwise we’re not going to accomplish goal number one and we’re not going to move forward as a country. Of course, I’m almost forgetting to mention the pandemic. That’s obviously critically important: intelligently managing through the next several months of the pandemic without blowing up the country economically. I think that’s just a matter of setting the right examples in terms of mask wearing, social distancing, hand washing, discouraging large groups and very, very targeted quarantining to the extent that’s necessary, if they are letting or encouraging local municipalities to shut down bars, restaurants, gyms when necessary. I think another longer-term, but very important, thing where we need to take some steps forward where we have probably gone backwards in the last four years is addressing the longer-term environmental threats to the country. Those, to me, would be the most important things.

SF: The final question is, you’re a great investor, if you were to think ahead to the next five or ten years, you pick the time period, what would be the two or three industries that you would think would be interesting to invest in? And they could be global. You could say I would invest in XYZ country, but where would you think would be the most interesting potential in the next five or ten years?

BA: I actually think it’s a bit of the same answer to how capitalism will save us. I think the most interesting industries will be ones that help solve the environmental problems that we have. So, I think if you were a venture capitalist, a lot of the smartest people in Silicon Valley right now are kind of spinning out, coming up with carbon capture companies. I think that will be an extremely interesting opportunity. Look at Tesla, right? Tesla has a hundreds of billions of dollars market cap. Why? Because it’s on a path to solving combustion automobile problem and I think that industries that help solve the environmental issue will have a huge tailwind. So I think that would be pretty interesting place to put capital over the next decade.

SF: Bill, thank you so much for joining us. This conversation has been as interesting and as informative as our conversations usually are, frankly. It was really nice of you to share your perspectives with our audience here. Thank you very much.

BA: Thanks, Steve. I really enjoyed it.

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