Bill Ackman: Investment Strategy, What the Market is Missing, How AI Breaks Businesses

The evolution of investment philosophy toward prioritizing long-term business quality and the distinct advantages of founder-led companies is rooted in Bill Ackman's experience with Pershing Square. As the firm’s strategy matured, the focus shifted from activist intervention to emphasizing durability, competitive moats, and supportive but not intrusive board involvement.

From Activist Interventionism to Business Durability and Moats

Early Activism Needed Campaigns, Media Appearances due To Pershing Square's Obscurity and Difficulty In Gaining Management Access For Negotiations

In its early years, Pershing Square was relatively unknown and had limited access to company management. Bill Ackman recalls investing in Wendy’s International with a simple thesis: acquire Wendy's, spin off Tim Hortons, and double the investment. Despite buying a 10% stake, Ackman’s calls to the CEO went unanswered, forcing Pershing Square to resort to public strategies. This included obtaining a fairness opinion from Blackstone and filing it publicly. Only after the campaign led to the Tim Hortons spinoff did the CEO reach out in gratitude. To gain influence, Ackman had to make public presentations and appear on CNBC, as direct engagement was difficult.

Firm Built Reputation, Welcomed Pershing Square Investments, Eliminating Need for Public Pressure

Over time, the landscape changed as Pershing Square built a reputation as a constructive and capable shareholder. Ackman notes that today, their investments are often welcomed by management, sometimes even prompting public statements in support of Pershing Square joining as a shareholder. The need to force management’s hand through the media has thus all but disappeared, with doors now opened rather than shut.

Fundamental Change Shows Lasting Competitive Advantages Matter More Than Tactical Activism for Long-Term Returns

Ackman emphasizes that the most significant evolution in his philosophy is the growing appreciation for business quality and long-term, durable, non-disruptible growth. Experience showed that companies with robust competitive advantages deliver more reliable long-term returns than those requiring activist agitation. Durable, protected growth and the presence of business moats have become central investment criteria.

Founder-Led Organizations Show Superior Decision-Making and Commitment vs. Professional Management

Advantages of Founder-Led Companies

Founder-led businesses consistently demonstrate an ability to make necessary, sometimes radical decisions to adapt and persist in changing environments. Ackman agrees with David Friedberg that founders, deeply invested in the company’s success and reputation, wield unique advantages over non-founder professional managers.

Non-founder CEOs Focus On Short-Term Gains, Avoiding Long-Term Risks and Controversial Decisions That Could Impact Immediate Earnings

Ackman highlights that professional CEOs in large public companies face short average tenures, typically three to four years, and tend to focus on short-term earnings and compensation. Unlike founders, they rarely have substantial economic ownership or stake their reputations and livelihoods on a single firm. This leads to risk aversion and avoidance of drastic but necessary changes if such decisions might jeopardize short-term earnings or employment.

Founder-Led Leadership Enhances Investment Value

When a founder is still at the helm, the company benefits from leadership that can make bold or counterintuitive moves. Founders bring authority, significant voting and economic stakes, and a deep, personal commitment to the organization’s long-term health.

Successful Founders Have Made Risky, Counterintuitive Decisions (E.G., Zuckerberg's Instagram and Whatsapp Acquisitions) That Generated Tremendous Value, Showing Founder Discretion's Worth

Ackman provides the example of Mark Zuckerberg, who made controversial but visi ...

Artificial intelligence is fundamentally transforming the business landscape, presenting both unprecedented opportunities and significant risks for investors and corporations alike. Insights from Bill Ackman, Jason Calacanis, and David Sacks help illuminate the changing dynamics driven by AI’s rapid advance.

Disruption Risk Rises Due to Democratization of Computing, Capital, and Talent

Bill Ackman asserts that we are living in the greatest era in history to build a business, due to unlimited access to compute, abundant venture capital, and a wealth of talented individuals. These factors democratize entrepreneurship, allowing startups to challenge established firms more easily. Consequently, Ackman warns, the probability of businesses being disrupted has risen dramatically.

He identifies assessing the risk of disruption, especially from small, agile teams—“two guys, two women from Stanford in a garage”—as the most challenging aspect of long-term investing. Understanding the threat posed by such innovators now consumes most of an investor’s focus, given that barriers to entry for new competitors continue to fall.

Major Platforms Like Microsoft, Amazon, Meta Undervalued Despite Ai Potential, Similar to Berkshire Hathaway in Dot-com Bubble

Ackman points out that markets tend to chase the “new new thing”, with current capital flows heavily favoring emerging AI categories such as chips, semiconductors, and energy. This focus leaves high-quality, established businesses undervalued. He draws a historical parallel to the dot-com bubble, recalling how excitement over internet stocks led investors to dismiss established firms like Berkshire Hathaway, which then traded at its lowest valuation.

Today, Ackman observes a similar dynamic. Tech giants such as Amazon, Meta, and Microsoft are perceived as “old fashioned” in the era of OpenAI. However, he believes these companies are fundamentally undervalued—well-positioned to benefit from AI advances, much as Berkshire Hathaway weathered the dot-com storm.

Software and Saas Companies Risk Extinction Without Ai in Low-switching-Cost Markets

Ackman warns that software companies must become as AI-enabled as possible. Companies that have enjoyed monopolistic profits by selling niche software—sometimes for $30,000 a year per customer—face major risk from new AI-powered entrants. High price points in markets with low switching costs create prime openings for AI disruption.

In contrast, platforms with vast user bases—like Microsoft, where the average customer pays “50 bucks a seat or some small number”—have deep network effects and high barriers to displacement. Their large scale results in lower downside risk, bolstering their ability to withstand t ...

Bill Ackman highlights inefficiencies in market valuation and discusses how investors can identify undervalued, high-quality businesses, especially as technology companies increasingly dominate the late-stage private market.

Valuation Fundamentals Show Quality Companies Can Become Irrationally Cheap

Ackman compares market valuation dynamics to a rubber band: during euphoria, valuations stretch far above fundamentals, but during panic, they compress to irrationally low levels before reverting. This analogy illustrates how quality companies can become irrationally cheap during market downturns, offering opportunities for investors who remain focused on fundamentals.

Sometimes, simply calling out extreme undervaluation in strong businesses acts as a psychological reset for other market participants. By clearly communicating that a business is trading far beneath its intrinsic worth, investors can catalyze a shift in market sentiment, contributing to a realignment of the stock to fair value.

Evaluating Venture-Stage vs. Late-Stage Pre-ipo Companies Requires Different Analysis Than Traditional Value Investing

Ackman contrasts traditional value investing, rooted in Ben Graham’s focus on buying businesses below liquidation or cash value, with the evaluation of leading late-stage and pre-IPO technology companies. He explains that a different toolkit is required: whereas Graham invested in times with limited information and frequent extreme discounts, companies like SpaceX, Anthropic, OpenAI, and Palantir must be underwritten using venture capital methodologies.

Rather than relying solely on traditional valuation metrics, investors must assess late-stage companies by focusing on four pillars: people, opportunity, context, and deal structure. Among these, Ackman argues that “people” dominate, especially in technology-driven businesses. Leadership talent, pivotal track records, and the capacity for organizational redirection matter more than cash flow statements or current balance sheet health. Using SpaceX as an example, Ackman describes the leadership as “one of one,” the opportunity as unprecedented, and the market context as exceptionally advantageous, even compared to formidable competitors like Blue Origin.

He extends this thinking to other top technology firms—Anthropic, OpenAI, and Palantir—which, though more established than early-stage ventures, still share key venture characteristics. These businesses have already demonstrated significant revenue generation but remain best analyzed throug ...

Bill Ackman and Pershing Square have developed a transformational strategy modeled after Warren Buffett’s Berkshire Hathaway, using insurance economics and real estate expertise to build a compounding investment machine—starting with Howard Hughes Corp as the focal point.

Buffett's Success: Insurance as an Investment Platform Over Underwriting

Ackman explains that running an insurance company is fundamentally about two things: underwriting risk for premiums and investing the up-front premiums (float). Unlike most insurers who focus primarily on underwriting (liabilities), Buffett emphasized the investment (asset) side.

Insurance Economics: Upfront Payments Create Cost-Free Investment Float

In insurance, companies collect premiums before paying out claims. This float acts as capital they can invest, often at little or no true cost. Buffett’s approach was to invest 100% of the insurance float in short-term Treasuries—taking zero risk with policyholder funds—while deploying 100% of the insurer’s equity in common stocks, maximizing investment returns without jeopardizing solvency. This model creates a powerful engine for compounding wealth, especially in a tax-efficient manner, and is central to Ackman’s own insurance strategy.

Buffett Directed Focus On Optimizing Investment Returns of Insurance Assets Over Decades

Buffett’s innovation lay in applying investment expertise to the insurance company’s asset base, recruiting and leveraging in-house investment talent—a rarity, as most skilled investors work for hedge funds rather than insurers. By allocating float safely and surplus aggressively, Buffett turned Berkshire from a failing textile business into a compounding juggernaut without diluting shareholders. He rarely issued new stock, starting with a million shares and barely increasing that over decades.

Howard Hughes Corp: An Undervalued Buffett Insurance-Investing Model

Ackman describes Howard Hughes Corp as embodying a Buffett-style opportunity but in real estate. The company arose from the bankruptcy and restructuring of General Growth Properties—spun off as a collection of overlooked and undervalued real estate assets Wall Street despised. Despite its scale and potential, Howard Hughes has languished in valuation discount territory, ignored by traditional investors.

Pershing Square's Howard Hughes Acquisition Amid $27b Debt, Spinoff to Overlooked Real Estate Company

During General Growth’s bankruptcy, Pershing Square bought a major stake at fire-sale prices. After restructuring, the equity holders retained value, and the Howard Hughes assets were spun off—effectively the “junk” misunderstood by analysts but packed with long-term value. This included vast land holdings with significant development potential.

Howard Hughes: Owns and Develops Summerlin's 26,000 Acres, Controls Residential/Commercial Land, Sells Lots, Develops Infrastructure Platform

Howard Hughes controls enormous swaths of real estate, such as the 26,000-acre mixed-use Summerlin project near Las Vegas. The company owns and develops both commercial and residential land, sells lots to homebuilders, builds supporting infrastructure, and creates entire downtowns—similar to the economic flywheel that made the Irvine Company worth $100 billion. However, the development scale is measured in decades, not quarters, causing short-term-oriented Wall Street investors to deeply undervalue it.

Transformation Strategy: Howard Hughes' Shift From Struggling Developer To Investment In Appreciating Assets

Ackman’s next step is to transform Howard Hughes from a pure real estate developer to an investment platform. Rather than reinvesting cash from land and property sales back into more real estate, future cash flow will be deployed into a newly created insurance subsidiary within Howard Hughes. This mirrors Buffett’s model: use stable real estate cash flows to generate float and invest surplus capital for higher long-term returns.

Reinvesting Real Estate Cash Flows Into an Insurance Subsidiary

By funneling real estate profits into a tightly run insurance business—with policyholder float invested in Treasuries and company equity invested in stocks—Howard Hughes aims to replicate Berkshire’s compounding engine but from a $4 billion base instead of the textile beginnings.

Buffett's Disciplined Allocation: Policyholder Funds in Treasuries, Company Equity in Stocks

Ackman emphasizes the discipline of keeping policyholder funds ultra-safe and aggressively allocating company funds, just as Buffett did, to maximize per-share wealth over decades rather than diluting ownership for superficial growth or chasing risky projects.

Long-Term Investment Requires Patience Beyond Wall Street's Quarterly Timeline Limits

Ackman is frank about why this approach remains rare and misunderstood. Real estate operates on decadal timelines—large development projects, city-building, and land appreciation all require patience, which contrasts with Wall Street's preference for short-term results.

Real Estate's Decadal Timeline Creates Wall Street Disinterest, Valuation Discounts, and Long-Term Capital Opportunities

Because public m ...

Ackman's Commitment to Transparency Amplified by Social Media

Bill Ackman’s longstanding commitment to transparency and open communication is rooted in his personal philosophy, dating back to high school, where his yearbook caption read "most verbose" and his friend included the phrase "a closed mouth gathers no foot." Ackman explains that he lives by this ethos and has always had a desire to speak truthfully about the markets and his observations. With the arrival of social media, and especially Twitter, Ackman finds this instinct greatly amplified. His 2.2 million followers offer a direct audience, allowing him to publicly communicate market views and investment theses instantly, bypassing traditional media and wall street intermediaries. Ackman highlights the power of being able to express his view and instantly reach millions with the push of a button, emphasizing how this changes the landscape for both investors and the companies in which they invest.

Personality-Driven Capital and Retail Investor Mobilization Shift Market Mechanics

Market participants note a distinct shift in recent years as personalities and celebrity status begin to exert unprecedented influence over capital markets. Ackman references Ryan Cohen and the GameStop phenomenon as a prime example: stock valuations can now decouple from traditional, fundamental value due solely to the persuasive sway of founder or celebrity figures commanding large retail followings. This marks a significant change in market microstructure, where influence and narrative on platforms like Wall Street Bets can mobilize armies of retail investors. Chamath Palihapitiya observes that not only major hedge fund figures with established profiles have influence, but also previously unknown voices now shape market action through notoriety and the democratizing reach of social media.

Higher Stock Prices Create Value Via Lower Capital Costs, Increased Strategic Flexibility, and Equity Issuance For Acquisitions

Ackman explains that elevated stock valuations driven by amplified communication and strong retail alignment don’t just benefit a company on paper—they confer real-world advantages. Higher stock prices enhance a company's value because they lower its cost of capital and make it easier to raise funds. This additional flexibility can be deployed to issue new equity, pursue acquisitions, and support overall business strategy. Good stock performance can also boost internal morale and help with talent recruitment. Ackman points to Elon Musk and Tesla as the ultimate example: Musk’s enormous army ...