저자: Financial Enlightenment · 외국인
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nurse so for those of you who are students as a as a 20 something year old bill set up his first hedge fund so why did you set up gotham bill and what did you learn from that experience experience is making mistakes and learning from them so that's what i learned um you know so so uh the answer is um i went to business school to learn how to be a good investor and i learned the first rule of investing which is you do your due diligence before you wire in your your money and when i got to hbs i actually opened the course catalog for the first time and there wasn't a class on investing now there were classes on accounting or classes on finance so i decided i had to develop my own little self-study program and i wanted to so i opened a fidelity brokerage account i said this i had some money i'd made in the real estate brokerage business this was my tuition uh in the investment business and it was about a year of tuition and if i lost it it was as if i had gone to business school for you know two years but paid for three so i figured it wasn't like the the inverse of the oxford uh one plus one program but um and uh you know i the first stock i bought went up and then i said okay i found what i want to do a little more involved than that but i i uh actually my father who's here he he came with us uh that's dad over there in the corner you can ask him whatever questions you want afterwards um he told me it's a really dumb idea to start an investment fund right out of business school and he recommended that i go work for michael steinhardt or george soros or one of the other famous investors at the time but i figured that i knew enough this is the the perils of youth um but uh the answer is i was an entrepreneur and uh i felt that i wanted to approach investing my own way as opposed to learn from someone else and it's one of the few things you can really learn on your own you can learn investing by reading books by reading annual reports by having a you can have a portfolio and invest a hundred dollars and you can and you can learn the business unlike many other businesses which require a lot more uh at least that's what i thought at the time so you went far away from just investing in fidelity type you know on a brokerage platform and pershing square has a particular form of investing which some of our members of the audience may not understand and it's sometimes called activist investing so maybe you can just help you know orient the audience about what exactly does persian square capital do what's the general investment style and and why did you set it up that way um so the vast majority of capital invested in the markets today is passive so if you think of index funds or etfs or even the big kind of long-only institutions the vast majority of that capital is by charter passive passive means you you do your research in some cases you don't do the research you sort of just blindly follow an index and you judged based on how closely you follow the index if you think about investing 100 years ago though investing you had andrew carnegie owning 20 of us steel where you had jp morgan as a large owner of various companies over time and in the old days of investing an owner would act like an owner so if they were unhappy with the performance of the business they would replace the ceo they were unhappy with the board's judgment they would make changes to the board and as capitalism sort of democratized the investment process and as any kid in business school can open a brokerage account and as uh it's you know the uh the owners of many of these great businesses over time you know gave the shares away to a university or their heirs and the ownership was just you know spread out you know the sam waltons of the world uh kind of passed away and the boards became to be managed by uh professional owners and so uh what we do is we look for situations where a business has lost its way uh where an otherwise great company with in a in a business that we would define as one that has significant barriers to entry that warren buffett would describe as having a moat around it a business that is simple predictable generates cash and we can be confident we'll be here 50 years from now a good example is we own a stake in canadian pacific which is a a railroad in canada and if you think about the railroad business you know it's not it's a business where they're not going to build a new one across the street you can have absence some fairly dramatic changes in technology you can be pretty comfortable that you know goods will be shipped on rail for a very long time to come so it's a business we can predict we can think about it from a very long-term perspective we can buy it at a price that's interesting and in the case of cp uh this was the worst-run railroad in north america it had the lowest profit margins it was trading at the lowest valuation relative to earnings and had a very unhappy shareholder base but there was nothing they could do about it because they were inherently again the biggest investors tend to be very passive and we saw an opportunity and the opportunity was if you could replace the worst ceo in the railroad industry with the best ceo in the railroad industry a lot of money could be made and we bought uh first 12 of the stock and then another two percent about 14 of the stock we recruited a guy named hunter harrison who is widely considered the best railroad executive of all time you know certainly in north america he had retired at 65 he was 66 and a half he had signed a two-year non-compete with his employer and i think the biggest mistake they made was a two-year non-compete because he was running the other canadian railroad canadian national and we hired him as a consultant he helped us study the railroad and he had plenty of fire in his belly and we said look would you be interested in the day job and he said let me check with my wife she said you know what it's time to get you out of the house again and the uh and and uh we recruited them and then we had to simply put them in place now the problem was canadian pacific has one of the most sort of esteemed and illustrious boards in canada at least at the time and it was the former head of the royal bank of canada the former ceo of suncor energy the former head of the steel business you know it's very very important board and um they didn't like the idea that this idea was coming from outside the company so they said no um so we went to the shareholders and we ran an election a proxy contest we put up seven directors for uh seven seats on a 13 seat board uh and the shareholders voted with us uh ninety percent of the time and voted against the other guys uh and they got between three and eleven percent of the vote we put our directors on uh we did a review of the best ceos in the world turns out the guy we identified was the best guy we put him in a ceo that was 16 months ago and it's almost the most profitable railroad in north america after 16 months that's how quick this guy goes to work stocks gone from 46 to 151 dollars a share it's you know a little under 8 billion market cap to a 25 billion market cap that's kind of the perfect example now it doesn't always work that way and i have a feeling that peter might ask me about one of those cases so i used to cold call bill as a student so this is going to be fun um so it's very clear you've had notable successes bill's only own uh estimation is 23 2 and 1.
is that do i get the numbers right 24 24 count one 24 wins two not wins one tie something like that um and canadian pacific is clearly a win i think you just monetized eight hundred million that's what i read in the past about a billion dollars um and then mbia is another one where bill was prescient about you know the fact that the financial markets were gonna well that mbia which is a large insurance uh uh bond insurer was in for a a bad ride and you figured that out but there are some the two and one where i think what you've said in in some of your recent things where you've had some things that you've learned from those experiences they might include for example jcpenney that's been in the news this summer so what have you learned from the successes and then maybe what have you learned from the ones that haven't been successes you know again as i said in the beginning experience is making mistakes and learning from mistakes and uh unfortunately as students you haven't made many mistakes yet if you've gotten to oxford at this point in your career the biggest risk is you probably haven't screwed up a lot and so you know the risk of that is when data comes across your desk that's inconsistent with your being successful you're less likely to pay attention to it than if you've made a few mistakes so i encourage you to make some mistakes and actually i've made plenty over the course of my career and i think i've been very successful uh over time but it's not been a straight line up in fact i had if i were a stock it would look something like this after business school you know and then and so the concern is whether this is coming you know but so far you know we've you know the overall trend has generally been positive but you know there are certainly bumps along the way and uh jcpenney is a company uh that we invested in that we knew on the way in was a much higher risk situation than a canadian pacific so jcpenney for those of you not familiar is 112 year old american sort of iconic retailer that's certainly way past its prime it probably peaked 25 or 30 years ago again another example you had james cash penny who founded the company he died i think in the early 70s and there's a pretty good correlation between when the founder goes and when the company goes and part of that has to do with governance which is a topic i'm sure we'll get to but the time we invested jcpenney stock was down from 80 to about 20 a share uh it was trading at about four times operating income it had lots of assets lying around in the company that were non-core assets it had a very bloated expense uh base and it was generating very little sales per square foot it was a very underachieving retailer and part of that is the brand had become somewhat tired and they had gone to a very highly discount oriented model where they'd mark a address at forty dollars and they wouldn't sell any of that price and a week later they'd mark it to 20 and they probably wouldn't sell many at that price and then they would send you a coupon where you got 10 off and then you start to sell a few and then if you use your credit card you got four dollars off and if you bought this moment you get another five dollars off and eventually it was you know eight bucks or whatever and they sell a lot of them at that price and um but this was undifferentiated merchandise and the thesis was um this company has actually still a brand all faded uh restorable and uh because they were created over the last 112 years they actually own about 112 million square feet of some of the best real estate in the shopping mall and the shopping malls uh in the shopping uh real estate industry they own or have very long term leaseholds at very low rents and we said look this is a great platform to rebuild the company and we bought a 16 stake in the company uh we i was invited to join the board i joined the board with a friend who bought 10 along with us we owned together 26 of the company we both joined the board we were two of 11 directors and the ceo was 64 and the board was very much focused on succession as any board should be generally but particularly when they're ceos in his mid 60s and we helped the board with succession and there was a candidate uh that kept surfacing as the best guy in retail and this guy's name is ron johnson and he had an ideal background he didn't go to the oxford business school but he said he went to harvard business school and he graduated he went to work for mervin's his dream in life was to reinvent the department store and mervin's was kind of a dying department store it was acquired by target so he spent a few years at mervin's he spent 10 or 11 years at target which is probably the best run u.s discount department store and then he was hired by steve jobs to build the apple store from a blank sheet of paper and he did an absolutely incredible job and we said look you couldn't ask for a better background to do what we're trying to do here reinvent the department store combine the apple customer store experience with uh you know kind of some of the target brand excellence and cost management and the problem was recruiting him he's very happy living in you know atherton california he had uh three four hundred million dollars restricted stock and apple 100 million of which he was going to lose if he left and he had kids who were in you know 13 15 years old in the middle of their you know a time when parents don't like to move but i managed to convince him to take the job and he walked away from 100 million restricted stock uh we gave him 50 million to make up for it but he still took a loss when he took the job then he invested 50 million dollars in seven year options that he bought with his own money that he couldn't sell for six years i thought this is the absolute perfect thing we have the best guy we've got a great platform at a really cheap price we have the perfect alignment of incentives and i thought it's done but it didn't work but it didn't work and uh and so ron got started in november of uh 2011 and he proceeded to make a series of changes many of them very favorable among them took a very hard look at the cost structure and found about a billion dollars that he could take out of the cost structure of the business we took a hard look at all the non-core assets and we monetized about 600 million dollars of the non-core assets so far so good and then he launched a business plan to convert the jcpenney store into basically a mini shopping mall a selfridges type model where there were a series of brands each of which would have their own kind of presence in the store and then you'd have a consolidated checkout you know with a wireless experience and sort of this apple like customer service experience and he sold this idea to brands that heretofore wouldn't be willing to go into jcpenney and the guy's very charismatic was a great idea they had a whole bunch of brands that he got from around the world who were excited about opening up inside jcpenney and he went to work but he made one very significant strategic mistake this whole notion of what he almost called fraudulent pricing this overpricing an item and then marking it down and marking down in coupons he said look there's a waste of time let's just mark it at the price the consumer knows the fair price because when you looked at those forty dollar dresses and forty dollar shirts they all sold it for something like twelve dollars and thirty cents but you got on average and very little sold at any other prices let's just market it 12 bucks the consumer understands value we can save a huge amount of you know the company had spent enormous amount of man hours actually changing signs if you think about how often they're constantly repricing and re-ticketing and changing signs made the stores look really cluttered and you know it sounded like a brilliant idea and apple the apple experience was not about testing so instead of trying this out in one or two stores or in a region he rolled it out across the country and it failed and the customer who had become accustomed to getting coupons in their sunday circular all of a sudden the coupons weren't there and so they decided not to come and we lost about a third of our customers after about 12 months and the great thing about a retail business if you get it right is this business has enormous operating leverage right because you've got a substantial fixed cost base but once you start generating additional sales it almost all drops a lot of it drops to the bottom line well you know only a problem with leverage as you learn in business schools it works in reverse and so all of a sudden the company was losing huge amounts of money after having spent a ton of money on capital rebuilding and redesigning these stores we found ourselves in a turnaround 15 months after he was hired and we had to replace him and the lesson there are many um so number one this is what i call an extreme makeover of a company and when you do an extreme makeover it requires perfect board alignment uh and backing for the ceo and uh we didn't have that number one we were one of 11 directors on the board and there was still a well had it worked perfectly from the beginning there wouldn't have been a problem as things got dicier there was a divergence of opinion on the board of what to do and when to do it and who to hire so i think that's one interesting lesson i don't think i'll ever go on a board and be one of 11 anymore i like going on with a mandate like in canadian pacific um two you know i think ron is an incredible talent but i don't think like the students in the room uh he'd ever made a mistake before and i think it was as the data kept coming back you know ron still had a lot of confidence it was going to work and you've got to back your ceo and give in and give him and give him robe and i think ron will be and i think he'd say this today he'll be a much better ceo the next time because having had a big negative experience like this i think third retail is one of the businesses where you can really test right you can take a region you can take a store and you can try things out and rejigger them and test them and i think you know the apple experience steve jobs was all about the customer doesn't know what he or she wants i know what the customer wants and and steve jobs you know got it right i think in retail you know there's a kind of a saying the customer knows what he or she wants and i think you really have to listen to that um so while i actually i still love the vision for jcpenney i think it was right i think the execution was difficult um and uh you know to do something like that and also in the public domain right this is a major change and the company was constantly being harassed by the press and ron was attacked i think it makes it difficult to make decisions in that kind of a public context there's a lot i could use up the rest of the lecture here with that other idea what's amazing for the audience is this is this is on the bad side of the ledger and bill you know you're being so frank about what worked and what didn't work um i think this is how we learn in a business school because even though you may not have failed yet you know we us old guys typically have and we have an opportunity to do that on failure just for a second i don't know there are very few people uh you look at the most successful people in the world i i know very few of them that haven't had a major failure you know if you read through the uh they're not the financially most successful people if you'll read through the forbes billionaire list and you read their stories you know they've had failed businesses and they've lost everything and they've hung on the you know they've almost died holding on to the ledge you know what's his name uh the k the uh the guy on cbs and uh yeah sumner fire uh some redstone redstone here so there are lots of examples of people who had huge adversity and i think it's how you deal with adversity that determines your ultimate success as opposed to how you deal with success that determines your ultimate success so so that's one of the things i've learned good lesson from jcpenney and otherwise okay
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