Bill Ackman talked about his investment philosophy in a recent interview and briefly touched on cryptocurrencies.
The billionaire hedge fund manager discussed the difference between speculation and investing, noting that the former involves making guesses about the future without solid knowledge.
While he sees short-term crypto trading more as a speculative move, he believes there might be intrinsic value in the long run, he said.
“Speculation is just a bit like trading crypto… well, short-term trading crypto. Maybe in the long run, there’s intrinsic value,” he told podcaster Lex Fridman in an interview released Wednesday.
Ackman is well-respected in the investing world, mostly because of his bold investment strategies. He’s also been involved in controversial situations over the years. He gained fame by accurately predicting the crash of the junk bond market in 1989, while working as an analyst for a hedge fund in New York.
He is currently the founder and CEO of hedge fund Pershing Square Capital Management. But he’s also famous for making smart moves in companies like Chipotle Mexican Grill, Valeant Pharmaceuticals, and Herbalife. These bets paid off, proving Ackman’s knack for spotting good opportunities.
Bill Ackman Breaks Down Investing Vs. Short-Term Gains
Ackman elaborated on his view regarding crypto as a speculative investment. He said that many crypto investors were caught up in a bubble, heading towards an inevitable crash, driven mainly by speculative motives.
“They didn’t know what things were worth. They just knew they were going up. That’s speculation,” he said. “And investing is doing your homework, digging down, understanding a business, understanding the competitive dynamics of an industry, understanding what management’s going to do, understanding what price you’re going to pay.”
The way the billionaire sees it, investing boils down to predicting what a company will deliver over its entire lifespan. It’s not about quick wins or short-term trends, but building a blueprint of its long-term value creation.
Ackman Highlights Useful Tech, but Unethical Actors
In 2022, Ackman admitted that he was originally a crypto skeptic. But after looking into some interesting projects, he said crypto “can enable the formation of useful businesses and technologies that heretofore could not be created.”
The telephone, the internet, and crypto share one thing in common. Each technology improves on the next in terms of its ability to facilitate fraud. As such, I was initially a crypto skeptic, but after studying some of the more interesting crypto projects, I have come to
— Bill Ackman (@BillAckman) November 20, 2022
Still, he was worried about unethical promoters making tokens just for pump-and-dump schemes.
He’s also said the crypto industry needs more enforcement, rather than more rules.
“Regulators need more resources to police the bad actors. Unfortunately, it will likely take years for the regulators to catch up, and they may never get there. The crypto industry therefore needs to self-police and out the bad actors, or it is at risk of being shut down,” he said.
How ‘The Intelligent Investor’ Shaped Ackman’s Approach to Investing
Separately in the interview, Ackman talked about a book called “The Intelligent Investor” by Benjamin Graham. He mentioned it was the first investment book he ever picked up and that it influenced his career and most of his life.
The book was published after the Great Depression, a time when people were skeptical about investing in markets, Ackman said.
He explained how it highlights the difference between price and value, saying, “Price is what you pay. Value is what you get.” He also elaborated on an analogy about how the stock market is like a neighbor who pops by every day, offering to buy your house. If the offer seems silly, you ignore it, but if it’s really good, you might consider it.
The main thing is figuring out what something is truly worth. He pointed out that in the short-term, the stock market behaves like a voting machine, influenced by speculation and short-term demand.
But in the long run, it’s more like a weighing machine, giving a more accurate measure of value. So, if you can figure out what something’s worth, you can make the most of the market. Because ultimately, it’s there to help you out.
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