Bill Ackman: Why Permanent Capital Is an Investor's Biggest Edge

Bill Ackman tells Nicolai Tangen why permanent capital is Pershing Square’s biggest edge and how Howard Hughes becomes a Berkshire-style insurer. In this episode of In Good Company, the podcast from Norges Bank Investment Management, Ackman explains what makes a business truly great, why his team is paid on one portfolio, how AI is shortening market time horizons, why he no longer needs to be a loud activist, and how his daughter’s brain hemorrhage led him to fund a new brain recovery institute in New York.

TLDW

Ackman runs a concentrated portfolio of 12 to 14 royalty-like businesses that he believes he can model 10 to 20 years out, and he argues the scarcest ingredient in investing is not ideas but capital that cannot be pulled. He walks through Buffett’s 1969 decision to trade hedge fund economics for permanent capital, and his own plan to copy it by moving Howard Hughes cash into the Vantage specialty insurer. He also covers his feud with Carl Icahn, using X to find the best argument against his own views, his fight with Harvard, his daughter’s recovery, and advice for young people that centers on character, reading and choosing a partner carefully.

Thoughts

Ackman’s best argument is that an investor’s real edge sits on the liability side of the balance sheet, not the asset side. Everyone has access to the same 10-Ks and, increasingly, the same AI reading them. What almost nobody has is money that will not leave when prices fall. His retelling of Buffett in 1969 makes the point sharply: Buffett gave up 25% of profits over a 6% hurdle on a $100 million fund, took a $100,000 salary, and bought a struggling textile mill, because he had done the compounding math and saw that a capital base that could vanish overnight would cap what he could build. Ackman connects that directly to COVID, when Pershing Square could buy aggressively while the world melted down because nobody was going to redeem at month end. “Time arbitrage” gets said a lot in investing circles, but here it is described as a structural fact, not a temperament. You cannot be dispassionate about volatility if your clients can pull the money.

The second idea explains where his opportunities now come from, and it is uncomfortable for anyone who thinks markets are getting more efficient. Ackman says a high quality business that missed earnings used to drop 3% or 4%, and now it can drop 30% or 40%. He blames indexation, which shrinks the tradable float, and leveraged short-term capital, which has to react instantly. Add his point that AI lets a fund read a filing the second it posts, and the picture is a market that is faster but more myopic. His recent buys follow that pattern almost mechanically: Amazon after the April tariff announcement, Meta and Microsoft after they disappointed investors by raising capital spending to meet demand. A company says demand is overwhelming and the stock falls. If that is the main source of mispricing, then faster information does not close the gap for a patient buyer. It widens it.

His method for staying honest is worth stealing outright. To build conviction in a stock, find the best short seller in it and see whether you can rebut every argument. He applies the same rule to politics and news: on any issue, find the most articulate person on each side. He even wants X to add a button under every post that surfaces the strongest opposing argument, and says he has nudged Elon Musk about it. There is a tension here worth noticing, since Ackman is himself one of the loudest partisan voices on the platform, with close to three million followers. But the discipline he describes is the right one, and it lines up with his firm’s structure. Pershing Square pays no one on an individual P&L, so no analyst has a reason to lean into getting their idea into the portfolio. Two people go deep, two do some work, the rest come in fresh, and objections trigger more diligence rather than a vote.

The most affecting part of the interview comes near the end, and it carries an investor’s lens into medicine. Ackman’s 26-year-old daughter suffered a brain hemorrhage from an undiagnosed arteriovenous malformation and was not found for about 19 hours. She lost the ability to walk, speak and see, and is now relearning speech and walking, though optic nerve damage has taken roughly 98% of her vision. What struck him was how many neurosurgeons and neurologists are “sort of nihilists” about recovery. That is the same pattern he looks for in markets: an area where the consensus has quietly given up and the funding system is badly structured. His response uses his own toolkit, real estate and a large audience. He has assembled a 3.4 acre site in New York with a 400,000 square foot biotech building, recruited people with a tweet, and is betting that brain computer interfaces plus AI decoding will restore sight and movement within years, not decades.

The Howard Hughes plan is the test of whether all this theory works. Ackman calls Howard Hughes his “version of a textile business”: a good business building master-planned communities, but one the market assigns a high cost of capital. The plan is to pull as much cash out of real estate as possible and push it into Vantage, the specialty insurer and reinsurer it closed on in June, with a team led by former Arch Capital executives Marc Grandisson and David Gansberg. Pershing Square sold the insurer’s longer-dated bonds, moved the float into short-term Treasuries, and put part of the surplus into common stocks. He is careful to separate this from the Apollo model of using annuity liabilities to fund levered private credit. In a decade he expects the company to be more than 80% insurance. Plenty of people have tried to be the next Berkshire. What makes this attempt interesting is that Ackman is copying the specific mechanism, not just the vibe.

Key Takeaways

Ackman defines a great company as one you could buy today, see the market close for 20 years, and still be confident you own something enormously valuable.
He favors royalty-like, annuity-style businesses whose cash does not need to be reinvested, and thinks only 200 to 300 truly great businesses exist at a size Pershing Square can buy.
Pershing Square has compounded at about 16% a year with a portfolio of only 12 to 14 investments.
The firm has 48 people and nine investment professionals, led by CIO Ryan Israel, and no one is paid on an individual P&L.
Its checklist favors predictable cash flows, durable moats, and avoids businesses exposed to commodities, interest rates or regulation.
Ackman calls X his most important information source, follows about a thousand people, and says X users hear news a week or two before conventional media readers.
He thinks AI is making market participants shorter and shorter term, which creates bigger drops on earnings misses.
Amazon, Meta and Microsoft, bought after sell-offs on tariffs and capex, make up about a third of the portfolio.
His last activist campaign was launched in 2016. Today CEOs often send a thank-you note when Pershing Square takes a stake.
Carl Icahn owed Pershing Square about $4.5 million under a “schmuck insurance” clause, fought the payment for six or seven years, lost, and later squeezed Ackman’s Herbalife short, which cost about $1 billion.
Ackman prefers one share, one vote, and avoids controlled companies unless the controlling shareholder is a phenomenal CEO.
Howard Hughes plans to become 80%+ insurance in a decade, with Pershing Square managing Vantage’s investment portfolio the way Buffett ran Berkshire’s float.
He is funding a brain rehabilitation and recovery institute on a 3.4 acre New York site after his daughter’s brain hemorrhage.
His advice to young people: choose your friends carefully, read a lot, look after sleep and exercise, skip alcohol, lift weights, and treat character as a decision you can make tomorrow.

Chapters

01:00 What Makes a Great Company and Why So Few Investors Own Them

Ackman says structure matters more than industry. He wants businesses that behave like annuities, growing at high rates for decades without needing their cash reinvested. Only a few hundred such companies exist, and they rarely trade at prices that make them great investments, which is why Pershing Square concentrates. Few investors copy the approach because most capital in asset management can be redeemed daily, quarterly or annually, and firms like Citadel and Millennium run leveraged short-term strategies that cannot absorb volatility. He reads the Wall Street Journal, FT and Economist, but says X has become his main source because he can follow people with sharply different views.

07:06 A Checklist and a Team Paid on One Portfolio

Pershing Square turned its core principles into a checklist, displayed on a tablet in the meeting room that was meant to be stone and came back as heavy plastic. The first test is predictability: if you cannot model a business 10 to 20 years out, you cannot value it. The team of nine meets formally each week and has lunch together almost daily. Two people go deep on an idea, Ackman or Ryan Israel does lighter work, and the rest come in fresh. Brookfield, which Ackman got to know through the General Growth Properties restructuring, took several months of diligence once it became more asset light.

13:48 AI Is Making Markets Shorter Term

Ackman says AI reads a 10-K instantly and feeds a huge pool of capital hunting short-term edges. He thinks every business is either AI related, should be, or will be disrupted by it. Pershing Square bought Amazon after the tariff announcement and Meta and Microsoft after their capex disappointed the market. On AI’s broader impact, he expects near-free access to high intelligence, an explosion of entrepreneurship, and possibly abundance, with creativity as the space left for humans.

16:34 From Breaking Down Doors to Thank-You Notes

Ackman says he is still active, he just no longer has to break down the door. Activism earned credibility, Pershing Square built reputational equity, and he now knows nearly every CEO in America. He traces activism’s history from J.P. Morgan and Carnegie through Michael Milken, Carl Icahn, Nelson Peltz and Marty Lipton’s poison pill, and argues shareholder pressure is healthy in an era of passive ownership. Indexation and leverage now produce 30% to 40% drops on misses, which brings great companies within reach without a fight.

20:57 Carl Icahn, Schmuck Insurance and Herbalife

In 1998 Ackman sold Icahn a stake in Hallwood Realty Partners with a clause giving Pershing Square half of any profit above a 10% return if Icahn sold within three years. Icahn sold, owed about $4.5 million, and appealed all the way to the Supreme Court while the claim accrued 9% interest. After losing, Icahn called to congratulate him, Ackman replied with strong words, and Icahn later squeezed the Herbalife short. Asked about weaker shareholder rights, Ackman says he likes founder control under people like Buffett, Sam Walton or Elon Musk, but worries about their heirs and prefers one share, one vote.

25:35 Permanent Capital and Buffett’s 1969 Trade

Calling himself a Buffett disciple, Ackman recounts how Buffett closed his hedge fund, gave up his performance fee and took control of a textile business, trading rich economics for capital that could not leave. Ackman uses a savannah analogy: when animals run, instinct says run with them, which is why people sell at the bottom. Outside sovereign wealth funds like Norway’s, very little capital in asset management is permanent, and that scarcity is the opportunity.

28:36 Turning Howard Hughes Into a Berkshire-Style Insurer

Ackman explains how Buffett used insurance float differently, holding it in short-term Treasuries and investing surplus in stocks to run a 20%+ ROE insurer. Howard Hughes will move capital from real estate into Vantage, run by a team he says would normally lead a $50 to $100 billion insurer but is running one with under $2 billion of capital. He contrasts this with Apollo, Brookfield, KKR and Ares, which use life and annuity liabilities to fund levered credit. Vantage underwrites property and casualty risk with much lower leverage.

32:34 X, Steelmanning and Harvard

Ackman says Steven Pinker talked him into joining X, he had 25,000 followers after one tweet, and now has nearly three million. He blames engagement-driven social media for polarization and wants X to surface the best counterargument to every post. He then explains his anger at Harvard after 34 student groups blamed Israel for the October 7 attacks, professors told him they could not speak freely, and he believed admissions had moved away from meritocracy.

40:05 His Daughter’s Recovery and a New Brain Institute

Ackman describes his daughter’s brain hemorrhage seven months earlier and his goal of bringing her back. He has met many brain computer interface companies, including Neuralink, and believes AI will extract and interpret far more signal from the brain, letting the blind see and paraplegics walk within years. He is building a brain research and recovery institute in New York, arguing that almost everyone has a family member affected by stroke, injury or cognitive decline.

44:24 Gratitude, Rawls and Advice for Young People

Ackman calls himself an optimist and an inherently grateful person, and jokes that his hidden talent is volleyball. The book that most affected him is A Theory of Justice, with its thought experiment of designing a fair world before knowing where you will be born. He defends capitalism, the Bill of Rights and a strong US military and AI lead. His advice to young people: choose your circle, read widely, take health seriously, follow Buffett’s point that character is a decision, and be thoughtful about who you marry, without rushing or waiting too long.

Notable Quotes

“A great company is a business you could buy today. The markets could shut for 20 years and you know with a enormous degree of certainty that you’ll own something that’s enormously valuable 10 or 20 years from now.”
Bill Ackman, defining a great company at the start of the interview

“I think it’s making market participants increasingly shorter and shorter term.”
Bill Ackman, on what AI is doing to markets

“In a world where the vast majority of other investors have capital that can leave tomorrow. It’s a huge competitive advantage.”
Bill Ackman, on why Buffett traded fees for permanent capital

“Time arbitrage as some people refer to it the ability to be a long-term investor in a short-term world really exists for us because of our capital base.”
Bill Ackman, on Pershing Square’s structural edge

“What’s the best way to get conviction in an investment idea? Find the best short seller in something that you own and hear their arguments.”
Bill Ackman, on testing investment ideas and personal views alike

“Many neurosurgeons and neurologists are sort of nihilists. They don’t really believe that they can do much for patients and there’s so much that can be done.”
Bill Ackman, on what he learned during his daughter’s recovery

“All of these human character traits are things you can have tomorrow. It’s just a decision you make.”
Bill Ackman, passing on Warren Buffett’s advice to Harvard Business School students

Watch the full conversation here.

Bill Ackman: Why Permanent Capital Is an Investor’s Biggest Edge