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that is diversification protects you from ignorance, right? If you don't know what you're doing, just do a lot of things. You know, 10, 12 stocks is more than adequate diversification if you're investing in really high-quality companies. And so, the combination of concentration, kind of doing our homework and being good at, you know, figuring out where the risk of disruption is enabled us to be successful.
You know, so one of the things I say to when I talk at business schools and colleges and go to a lot of great schools is I the speech I give or the advice I give is that if you're here, you're unprepared for what's coming. And the reason for that is most of the places where I speak, you have students who did really well in high school, did well on their SATs, they got into a really good college, they did really well there.
They got a job for a couple of years, they did well in their job, now they're at Harvard Business School, they're about to graduate. And I said, "The problem is that if you're here, you've had no experience with the most important thing that you need to understand in order to be successful. You've had no experience with failure.
And you're going to fail. It's going to happen. And life is like that. You're going to might get fired from your first job, your first startup you may not be able to, you know, raise the second round. You could fail personally, you could have a challenges in your personal life, you could your partner, your girlfriend could, you know, have some challenge that takes you off offline.
And every successful person I know has their key to success was how they dealt with failure. And I think what's interesting about this place is I think they try to teach that while you're here. And it's one of the few schools I've spoken at. My biggest piece of advice is that be prepared for the unknown, be prepared for the uncertain, be prepared cuz you're you're going to fail, you're going to go bankrupt, something.
But, the great thing about this country is that there's always a second act. And actually, people like betting on people Uh that that have failed. I look at my trajectory, you know, it was not a straight line up. It I've had, you know, significant moments of major setbacks in business and personal life and otherwise.
And I just you know, I think the most meaningful part of my college education is I rowed crew. Maybe it's something like the equivalent of some of the challenges you deal here, but you learn to deal with a lot of pain, a lot of adversity, and you make it through. And if as long as you believe that, um you know, if you find yourself in a deep dark hole, you just power through one day at a time.
And this thing they teach you in business school about compounding and the laws of you know, the power of compounding, it it applies to saving yourself from challenges. Meaning, just make a little bit of progress every day. You won't notice the progress for the first 30 days. 90 days in, you're starting to notice the curve is starting to move.
6 months in, you've made huge progress. Don't look at where you fell from. Don't look at the startup that had a $300 million valuation where you raised money, and now you're starting all over again because the original idea didn't work. Don't don't focus on the 300. Focus on where you are. Focus on the next step.
Make a little progress every day. And it works every time. And you know, the never give up thing is entirely true. I'm a good example of that. So I made bigger mistakes in the investment business than almost anyone. I lost $4 billion on one investment. And yeah, it's a big number. Um and uh and despite that, all of my investors who stayed with me over time have done extremely well.
You know, it's been a 16% compounded return for 20 years at Pershing Square, but it wasn't a straight line up. There was a moment where we were down 35% in 2017 from the peak. Investors were redeeming capital. I was going through a divorce. You you there was I had litigation in connection with one of my investments.
It was a really sort of grim moment and um, you know, I took my own advice. Made a little progress every day, used good judgment, and I'm way better off um, today having gone through that sort of moment. Our firm is, you know, one of the important things about our uh, the investment business. Problem with the investment business, if you're a long-term investor, is investors generally give you money over relatively short period of time and you're and you're trying to generate value over a long period of time and there's this mismatch and people talk about, you know, the asset-liability mismatch problems.
You have a bank where you're taking deposits, you're making longer-term loans. That creates risk. The same thing's true in the investment business. So, my ambition was always to get to a place where the capital was permanent, where it never leave. And the path by which I got there, it was that failure that created the opportunity to create permanent capital and that's been a huge advantage for us.
So, look at every challenge as an opportunity. The good always comes from the bad. You just have to look for it. The most important thing for us is what we call business quality. So, we look for businesses that one, we can predict what they're going to look like with a high degree of confidence over a long period of time.
So, the value of any financial asset is the present value of the cash the business will generate over its life. If you can't predict what the business looks like 5 years, 10 years from now, 15 years from now, you really can't figure out what it's worth. So, we try to find businesses that are first predictable and then we will and in order to for the business to be predictable, it's also has to be protected from the various forces in the world.
The hardest thing to do as an investor is to figure out or determine, if you know, is this a disruptive business that's going to be disrupted by two Citadel students working in a garage or is it a business that's going to survive whatever technological changes occur, AI, etc. That's the hardest part about investing.
But, once you've found a business that meets that criteria, um, you know, we sort of have a library of these kind of companies and then we track them on a regular basis and even the best businesses in the world at various times, off sometimes for reasons completely unrelated to the business, become available at really cheap prices, right?
Every stock of the S&P went down, you know, something like 10 or more percent in the couple days after the tariff announcement. Uh, some businesses are materially affected by tariffs, others are not. If you if you do the sufficient work, you know the business as well. Um, because of the volatility in markets, every once in a while a really great company becomes available at a really cheap price and we just wait for those moments.
And so, it's not like we're figuring it out before other people, it's just that we know meaningful number of companies. Um, when the stock prices move significantly, they become a lot cheaper, we update our work. If if it's still as interesting as we thought before, now available at an interesting price, we buy.
There aren't that many companies that meet that description that are available at cheap price. So, the other thing we do is we just concentrate. Meaning, we own 10 things. Um, most investors own, you know, a typical mutual fund might own 100 securities. Typical investor Most investors make the mistake of owning too many things.
And the reason for that is diversification protects you from ignorance, right? If you don't know what you're doing, just do a lot of things, right? If you if you, you know, most business people know [snorts] a ton about their own business and they're super concentrated in their own business. I mean, you know, if you look at through the Forbes 400, the wealthiest people in the country made their money generally in one company.
They had a portfolio of one. That's an incredible degree of concentration, right? So, you know, 10, 12 stocks is more than adequate diversification if you're investing in really high quality companies. And so, the combination of concentration, kind of doing your homework and being good at, you know, figuring out where the risk of disruption has enabled us to be successful.
You the best investments are generally ones where everyone else thinks you're wrong, right? So, we had this company where everyone believed it was the most creditworthy company in the world. It was as good as the federal government, AAA rated. And actually, the federal government today is not even AAA rated.
It's like AA AA plus or something. Uh and we were we bet that a company with a AAA rating was going to go bankrupt and we made, you know, 35, 40 times our money. Um the inverse of that is in November 2008, uh a shopping mall company called General Growth, second largest shopping mall company in the country, uh the stock went from $63 a share to 34 cents in like 6 months.
And the reason why the stock went down 99 and 1/2% was they had a lot of debt. Uh they borrowed money in the CMBS market, which is the securitized real estate market. And that market shut down during the financial crisis. And um everyone said they're going to go bankrupt cuz they can't pay off their debts as they come due.
They had 27 billion of debt, about 15 billion coming due in the next 18 months. And the stock went from, you know, like a $6 million market cap to a $100 million market cap. And uh my bet was, you know, that the malls had gone from 93% occupancy in 2007 to 95% occupancy in 2008. So, the occupancies were up, the rents were up, the net operating income was up.
The fundamentals of the company were solid. And these were basically class A's, or the fanciest, you know, best malls. And so, the assets were fine. And if you Now, before this company, everyone who invested in a company that had gone bankrupt, the shareholders had lost all their money. But I didn't understand why that had to be the case.
You know, I'd read, you know, book on bankruptcy. I called our lawyers. I'm like, "Look, I think the assets are worth more than the liabilities. Why shouldn't the shareholders be able to make a a meaningful recovery?" And they said, "Look, it can happen, but it never does. Because what happens when a company gets delisted and goes bankrupt, is people sell the stock, uh distressed investors buy the debt at a discount, and then they work the process through the the uh and end up keeping 100% of the company.
So, I said, "Well, we're going to do something different." We bought 25% of the company in the market for $60 million, starting at 34 cents a share. I joined the board, and then I I helped the board run a process that benefited not just the creditors, but also the shareholders. The stock went from 34 cents to ultimately $31 a share.
Um but it was So, again, the most contrarian investment you can make buying something is to buy stock in a company going bankrupt, right? Cuz everyone says it has to go to zero. And if you have do a little bit of work, a little lot of work, and have an insight, uh those are the best This is advice I give everyone here.
Um the problem being young uh is that uh you want to get rewards as quickly as possible. Uh and um you know, time seems to pass really, really slowly. Uh but value is very rarely created overnight. It takes a very long It takes a long time. It can take decades to be created. And it's Going back to my, you know, compounding, something you really should spend a little time studying, understanding the curve of compounding, um doesn't really show much progress.
You know, it's a bit like COVID, right? People didn't notice COVID in the early days of COVID compounding, but it was compounding 100% a day or some number like that, and then eventually it exploded. Um once you understand the power of compounding, once you understand it takes a long time to create value, uh and that many people are short-term focused, uh if you one of the great competitive advantages you can have in life or as an investor is just having a long view.
Uh because some of the best opportunities, the the benefit of that opportunity doesn't show itself, you know, for a number of years. You know, so some people, for example, take the job that pays the highest salary coming out of uh the Citadel, because, you know, what? Um maybe they've got some student debt, or you know, they're planning to get married at some point, and you know, that that extra $20,000 or $30,000 or whatever the number is,
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