WEBVTT - Pershing Square Founder & CEO Bill Ackman Talks Succession, Universal Music Bid and Mamdani

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>Welcome to Bloomberg's coverage of the Global Milk and Conference.

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<v Speaker 2>I'm Danny Berger alongside Bill Ackman, the founder and CEO

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<v Speaker 2>of Pershing Square. Bill, thank you so much for sitting down.

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<v Speaker 2>Of course, I mean, you got to be the most

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<v Speaker 2>busy man on Wall Street right now. It's just compiling

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<v Speaker 2>a list of what you're currently working on. You have

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<v Speaker 2>two publicly traded equity funds now, a publicly traded asset manager,

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<v Speaker 2>a publicly traded real estate company that you're working into

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<v Speaker 2>transforming a mini Berkshire Hathaway, and you're running a campaign

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<v Speaker 2>with Universal Music Group. Where's your attention most focused on

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<v Speaker 2>right now?

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<v Speaker 1>I'm investing. They're all related, They're all correlated.

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<v Speaker 3>They're all part of one very small portfolio, which is

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<v Speaker 3>why it's possible.

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<v Speaker 2>It is possible. And I know you run with a

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<v Speaker 2>slim team there, so it's always impressive. And you got

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<v Speaker 2>this IPO out last week and we talked about it,

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<v Speaker 2>but we talked before it started to trade. I know

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<v Speaker 2>you don't concern yourself with a day's worth a trader

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<v Speaker 2>or a few days, but what do you make of

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<v Speaker 2>the reception? That it got, that it did fall considerably.

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<v Speaker 2>Is this an issue with bankers mispricing it?

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<v Speaker 3>No, I mean we sold a pile of cash. I

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<v Speaker 3>don't know why anyone would buy a pile of cash

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<v Speaker 3>and then the next day sell it at a discount.

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<v Speaker 3>What I think I didn't appreciate when we last spoke

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<v Speaker 3>is we did something different in this offering that people

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<v Speaker 3>don't normally do. Normally, retail investors get kind of a

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<v Speaker 3>very small allocation and they're disappointed by the shares they

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<v Speaker 3>get in an IPO. In our case, we give the

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<v Speaker 3>retail investors what they asked for and we cut the

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<v Speaker 3>institutions back. And I think the impact of that was

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<v Speaker 3>retail investors woke up with more shares than they had

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<v Speaker 3>intended to buy, and we're put in kind of a

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<v Speaker 3>forced selling position, and that has to work its way through.

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<v Speaker 3>I think once that's done, I mean, now again, the

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<v Speaker 3>package of securities is modestly down from where we where

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<v Speaker 3>we priced the offering. Remember, you get an interest in

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<v Speaker 3>a TSUS, which is then either I think of it

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<v Speaker 3>as investment holding company, you could think it was a

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<v Speaker 3>clothed in fund. There you're getting forty nine dollars in

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<v Speaker 3>cash that we're in the process of deploying in the market.

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<v Speaker 3>Then to get an interest in our business, which is

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<v Speaker 3>a very good business. It's a bit like a Blackstone

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<v Speaker 3>or a KQR, but some important differences. Substantially, all of

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<v Speaker 3>our assets are in these sort of permanent capital vehicles,

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<v Speaker 3>and so the business model itself is like owning a

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<v Speaker 3>royalty on compounding and as we so that's why I

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<v Speaker 3>all have to do is focus on generating returns. I

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<v Speaker 3>generate returns that generates an increase in our assets, that

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<v Speaker 3>generates more cash flow.

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<v Speaker 1>For the business.

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<v Speaker 3>And it's a bit of a self fulfilling prophecy as

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<v Speaker 3>long as we do a good job allocating the money.

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<v Speaker 2>One of the things that's different and I kind of

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<v Speaker 2>hinted this at the beginning from you from the other

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<v Speaker 2>big publicly traded asset managers, is just how slim you are.

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<v Speaker 2>And this was brought up actually in one analysis of

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<v Speaker 2>Persian square.

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<v Speaker 1>I like being slim. I think we all do.

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<v Speaker 2>I think, especially in this day and age. But this

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<v Speaker 2>idea that there is key man risks because so much

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<v Speaker 2>of it is your ideas and your ability.

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<v Speaker 1>To try to raise it's not true.

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<v Speaker 2>So yeah, so talk about that. How do you mitigate it?

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<v Speaker 3>I actually think we have the least key man risk

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<v Speaker 3>of any hedge fund in the world. And that sounds

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<v Speaker 3>surprising because usually you put me on. I do more

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<v Speaker 3>TV appearances than other Persian Square employees. But what causes

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<v Speaker 3>a hedge fund to go out of business is something

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<v Speaker 3>happens to a key person and then investors. The first

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<v Speaker 3>thing they do is they ask for their money back,

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<v Speaker 3>and then they asset shrink and the rest of the

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<v Speaker 3>team leaves. In our case, the assets are in these

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<v Speaker 3>public corporations where the money can't leave, and so if

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<v Speaker 3>something happened to me, the money stays, the asset state

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<v Speaker 3>of the team stays. The team owns, you know, forty

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<v Speaker 3>five percent of the business, right, so the company of

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<v Speaker 3>equities widely spread throughout the firm. And it's unusually about

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<v Speaker 3>our firm. In an industry where's a lot of turnover,

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<v Speaker 3>there hasn't been a persect Square. So my CEO, Ryan Israel,

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<v Speaker 3>and I we've work together now seventeen years. He's been

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<v Speaker 3>CIO for almost four. You know, if I disappeared tomorrow,

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<v Speaker 3>nothing would really change. In the early days of Persian Square,

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<v Speaker 3>I generated most of the ideas, and I work with

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<v Speaker 3>analysts on analyzing those ideas. Today I'm generating a minority

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<v Speaker 3>of the ideas, so I'm not saying I'm unimportant. Hopefully

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<v Speaker 3>I can still, you know, generate value for the firm.

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<v Speaker 3>But the firm itself is very robust. You know, it's

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<v Speaker 3>the only firm in the world that if something happened

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<v Speaker 3>to all of the employees because the ass or forever,

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<v Speaker 3>the board would just hire a new team or put

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<v Speaker 3>the assets in an index fund and you'd still build

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<v Speaker 3>a very valuable kind of business over time. So it's

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<v Speaker 3>one of the most robust businesses in the world, and

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<v Speaker 3>it's one of the highest quality businesses in the world.

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<v Speaker 2>By the way, just just kind of on a similar notice,

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<v Speaker 2>as you know a Warren Buffett fan. This past weekend

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<v Speaker 2>was the first Berkshire Hathaway Annual meeting, where Abel was

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<v Speaker 2>at the helm. You're obviously a young man, but have

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<v Speaker 2>you thought it all about setting up succession what that

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<v Speaker 2>eventually looks like at Pershing, Well, I.

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<v Speaker 3>Think it's really effectively set up, you know, identified as

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<v Speaker 3>CEO Ryan, as I mentioned, he's really leading the investment

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<v Speaker 3>team at this point. Ben Haakim president of the firm.

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<v Speaker 3>He kind of runs everything other than the investment side

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<v Speaker 3>and the operation. It's amazing there's anything for me to do.

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<v Speaker 3>I have the privilege of thinking about big ideas, and

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<v Speaker 3>you know, occasionally a big idea drive some value.

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<v Speaker 2>Can we talk about one of those big ideas in

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<v Speaker 2>Universal Music Group. You come forward with an offer to

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<v Speaker 2>buy this company, and a lot of people scratch their heads.

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<v Speaker 2>Why would you do this with the company that has

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<v Speaker 2>very large majority shareholders where it's tough to put through.

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<v Speaker 2>What is the game plan?

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<v Speaker 3>Actually the the game plan there is absolutely we need

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<v Speaker 3>the support of Boulay Group, but what we're proposing, I

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<v Speaker 3>think is very much aligned with what they're interested in.

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<v Speaker 3>I mean, Universal is sort of a interesting case of

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<v Speaker 3>a company that's.

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<v Speaker 1>Done well in its core business. Right.

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<v Speaker 3>Universal remains the dominant company in the recorded music industry.

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<v Speaker 3>They remain very close to being the number one company

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<v Speaker 3>the music publishing industry. It's done a very good job

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<v Speaker 3>with that. But they've not sort of graduated from being

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<v Speaker 3>operating like a private company into being a public company,

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<v Speaker 3>and they've lost i would say, the confidence of kind

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<v Speaker 3>of the shareholders in the analyst community, which is why

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<v Speaker 3>the stock. You know, the business value has grown and

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<v Speaker 3>the multiple that people assigned to the earnings of the

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<v Speaker 3>company has de cliented, and the result is a stock

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<v Speaker 3>that trades at the same price that traded. You know,

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<v Speaker 3>the company first day of trading was twenty five euros,

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<v Speaker 3>and this is in September of twenty one. Here we

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<v Speaker 3>are almost five years later that the stock is nineteen

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<v Speaker 3>euros eighteen euros. So that's not a good performance. The

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<v Speaker 3>company really needs a reset. It's also listed really in

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<v Speaker 3>the wrong exchange. It's really a US company. So our

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<v Speaker 3>transaction moves the com company from Amsterdam to a US listing.

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<v Speaker 3>That alone is meaningfully value creating. We kind of recast

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<v Speaker 3>the balance sheet. The company has unmonetized assets on the

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<v Speaker 3>balance sheet, their stake in Spotify, and now notably, the

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<v Speaker 3>company announced in the last couple of days that they're

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<v Speaker 3>going to sell half their interest in Spotify. We think

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<v Speaker 3>they should sell the balance The company announced a more

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<v Speaker 3>aggressive buyback program. We think there's an opportunity to do more.

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<v Speaker 3>But our transaction effectively enables a cancelation of about seventeen

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<v Speaker 3>percent of the outstanding shares, a migration of the company. Here,

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<v Speaker 3>a new board of the directors, led by Mike Ovitz.

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<v Speaker 3>You know, Mike, I've known a very long time. I

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<v Speaker 3>think it can be a very value added value operate

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<v Speaker 3>to the operations of the company and then just a

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<v Speaker 3>better a program in terms of how the company communicates

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<v Speaker 3>with shareholders. You know, the company right now is sort

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<v Speaker 3>of analyzing the proposal. We'll hear back from them soon.

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<v Speaker 3>We've been engaged with the option the big shareholders.

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<v Speaker 2>And you're hopeful that they will be receptive to this.

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<v Speaker 1>I mean, the company has to do something.

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<v Speaker 3>This is a very good solution to the various issues that.

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<v Speaker 1>Confront the company.

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<v Speaker 2>By the way, on this idea of European versus US exchanges,

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<v Speaker 2>it feels like that is something that a lot of

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<v Speaker 2>companies see that they can unlock that they move to

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<v Speaker 2>a US exchange on the day we talk. For example,

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<v Speaker 2>I have the ASTROSENICACFO and they did something similar. Does

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<v Speaker 2>Europe have a real.

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<v Speaker 3>Problem, Bill, I mean yes, Look, the exchanges are natural monopolies.

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<v Speaker 3>And you know, if you today, if you're not listed

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<v Speaker 3>in a market which has the most demand your stock,

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<v Speaker 3>your cost of capital is going to be higher than

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<v Speaker 3>should be. And so they're sort of and I think,

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<v Speaker 3>you know, Europe has too many exchanges. The what if

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<v Speaker 3>I were in charge of Europe, I would consolidate the

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<v Speaker 3>London Stock Exchange. Your next kind of bring the various exchanges,

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<v Speaker 3>because again it's a natural monopoly and you want the

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<v Speaker 3>maximum liquidity and demand in one in one place. But

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<v Speaker 3>they're sort of nationalism, I think prevents that.

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<v Speaker 2>One of the kind of newer features of markets is

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<v Speaker 2>the prevalence and the explosion of betting markets. And there's

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<v Speaker 2>this real criticism that we're seeing almost a casinoification of

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<v Speaker 2>the world where you can bet on anything. They're ETFs

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<v Speaker 2>listing this week, where you can bet on whether the

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<v Speaker 2>Dems or the Republicans are going to be winning the

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<v Speaker 2>House or the Senate. Is it a problem? Does this

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<v Speaker 2>concern you at all? This trend?

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<v Speaker 3>I think the negative is that there's a positive and negative.

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<v Speaker 3>I think the negative is it's not the most productive

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<v Speaker 3>activity in the world. And there is a lot of

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<v Speaker 3>gambling that goes on, whether it's sports betting or otherwise,

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<v Speaker 3>and there are people and particularly young people, you know,

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<v Speaker 3>losing money they can't afford to lose betting on the

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<v Speaker 3>outcome of things that are difficult to predict. So that's

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<v Speaker 3>the obviously the unfortunate. It's been like a lottery tickets,

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<v Speaker 3>you know, it's it's a net loss I think for society.

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<v Speaker 3>On the positive side, what betting markets allow is they

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<v Speaker 3>allow people.

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<v Speaker 1>To hedge risks that they're exposed to.

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<v Speaker 3>It also creates information, you know, you know, looking at

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<v Speaker 3>where things are priced. You know, the betting markets have

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<v Speaker 3>done a better job of predicting outcomes or elections.

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<v Speaker 2>Some could say because maybe not elections, but there's more

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<v Speaker 2>insider trading that incentives exist for that to happen.

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<v Speaker 1>Yeah.

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<v Speaker 3>Look, the people make arguments that the insider trading should

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<v Speaker 3>not be illegal because that would bring a sort of

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<v Speaker 3>more transparently one of those people, I believe that I'm not,

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<v Speaker 3>but you can make some markments for it. So I

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<v Speaker 3>think it's it's sort of interesting. But you know, the

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<v Speaker 3>more the market becomes casino like, I think the risk

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<v Speaker 3>the risk is I guess people get they withdraw capital

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<v Speaker 3>because they lose confidence, right, and you know, I think

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<v Speaker 3>markets are going more and more short term. And if

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<v Speaker 3>you think about what a stock market is, it's these

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<v Speaker 3>are very long term assets. So the short termism drives liquidity,

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<v Speaker 3>which I think on the margin is a positive, but

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<v Speaker 3>it also can lead to short termism in the way

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<v Speaker 3>businesses are run well.

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<v Speaker 2>I would love to just leave on the note of

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<v Speaker 2>your hometown city, New York. There's been a lot of

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<v Speaker 2>discussion about Mayor Mom Donnie making very public pronouncements against

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<v Speaker 2>specific people, against Ken Griffin, announcing a pie to tear

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<v Speaker 2>a tax, directly attacking some of the business leaders of

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<v Speaker 2>this city. I know you were concerned heading into this

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<v Speaker 2>election and the outcome of it too. How are you

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<v Speaker 2>feeling now?

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<v Speaker 1>Not great about things?

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<v Speaker 3>I think Bondammi is not If your goal is to

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<v Speaker 3>make New York City kind of financially solvent, what you

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<v Speaker 3>don't want to do is drive out the Ken Griffins

0:10:08.840 --> 0:10:13.720
<v Speaker 3>of the world. Right, Ken brings very valuable business. That's

0:10:13.800 --> 0:10:15.600
<v Speaker 3>you know, it's a six billion dollar project which will

0:10:15.640 --> 0:10:20.319
<v Speaker 3>generate you know, thousands of construction jobs, architecture jobs, marketing jobs,

0:10:20.360 --> 0:10:23.400
<v Speaker 3>make your list employees who will pay material amounts of

0:10:23.440 --> 0:10:25.840
<v Speaker 3>taxes because they're highly compensated employees.

0:10:25.920 --> 0:10:26.880
<v Speaker 1>And it's that.

0:10:26.840 --> 0:10:30.439
<v Speaker 3>It's sort of the the Wall Street and the tax

0:10:30.480 --> 0:10:33.040
<v Speaker 3>revenues from Wall Street are what enable New York City.

0:10:33.360 --> 0:10:35.720
<v Speaker 3>Kind of all the people in New York City to

0:10:35.760 --> 0:10:37.520
<v Speaker 3>have a better life, and if you drive out the

0:10:37.559 --> 0:10:40.880
<v Speaker 3>Ken Griffins of the world, who notably you know, has

0:10:40.920 --> 0:10:43.560
<v Speaker 3>made a major contribution to New York not just from

0:10:43.600 --> 0:10:46.520
<v Speaker 3>bringing his business there, but he's been very philanthropic. If

0:10:46.559 --> 0:10:49.000
<v Speaker 3>a four hundred million dollar donation to Morris lom Kettering,

0:10:49.400 --> 0:10:51.600
<v Speaker 3>which is an institution that doesn't just help New York,

0:10:51.720 --> 0:10:53.320
<v Speaker 3>is to help people with cancer all over the world

0:10:53.400 --> 0:10:56.920
<v Speaker 3>to go to get treated there. So it's just not

0:10:57.040 --> 0:10:58.640
<v Speaker 3>it's not a very smart approach the way.

0:10:58.679 --> 0:11:00.400
<v Speaker 2>I can't think about person to square with out thinking

0:11:00.440 --> 0:11:02.680
<v Speaker 2>about New York City. But could you ever see yourself

0:11:02.720 --> 0:11:03.440
<v Speaker 2>being driven out.

0:11:03.360 --> 0:11:05.400
<v Speaker 1>Of New York I think it's unlikely.

0:11:05.760 --> 0:11:07.360
<v Speaker 3>I'm more of the Ghana guy to fight to make

0:11:07.360 --> 0:11:09.360
<v Speaker 3>sure New York City is a great city than someone.

0:11:09.160 --> 0:11:09.839
<v Speaker 1>Who's going to lead.

0:11:10.000 --> 0:11:12.719
<v Speaker 2>The problem is, though, that with these policies, even if

0:11:12.760 --> 0:11:16.640
<v Speaker 2>they have dire economic consequences, Gandhani is incredibly popular and

0:11:16.679 --> 0:11:19.440
<v Speaker 2>he's still very popular with his base. So how do

0:11:19.559 --> 0:11:22.240
<v Speaker 2>things change then? How do you fight this tide if

0:11:22.280 --> 0:11:24.480
<v Speaker 2>there still is this broad based popular support for these

0:11:24.520 --> 0:11:27.280
<v Speaker 2>types of ideas.

0:11:27.000 --> 0:11:28.040
<v Speaker 1>It's an issue.

0:11:28.120 --> 0:11:29.520
<v Speaker 3>I mean, I think the answer is a better can

0:11:29.559 --> 0:11:34.120
<v Speaker 3>thing who you know. Look, where Mandami was correct is

0:11:34.160 --> 0:11:35.960
<v Speaker 3>that New York is not a very affordable place to live.

0:11:36.520 --> 0:11:39.000
<v Speaker 3>But you're not going to make it more affordable, like

0:11:39.080 --> 0:11:40.240
<v Speaker 3>getting rid of.

0:11:39.960 --> 0:11:42.079
<v Speaker 1>The biggest drivers of tax revenues for the city.

0:11:43.040 --> 0:11:45.480
<v Speaker 3>Mandami already has a budget crisis, but we got to

0:11:45.480 --> 0:11:47.400
<v Speaker 3>figure out how to run New York City much more efficiently.

0:11:47.840 --> 0:11:52.560
<v Speaker 3>But when you raise taxes, you know, and the most

0:11:52.600 --> 0:11:55.160
<v Speaker 3>mobile people, frankly are the ken Grifvenths of the world.

0:11:55.200 --> 0:11:57.120
<v Speaker 3>Can can choose to locate his business wherever he wants,

0:11:57.600 --> 0:12:00.240
<v Speaker 3>and he can locate his Jetta wherever he wants.

0:12:00.320 --> 0:12:02.720
<v Speaker 2>Very true, though, we are heading into midterms and again

0:12:02.760 --> 0:12:05.080
<v Speaker 2>affordabilities on the ticket and that's pushed a lot of

0:12:05.080 --> 0:12:07.840
<v Speaker 2>people left. Are you worried about how this shakes out,

0:12:07.840 --> 0:12:09.800
<v Speaker 2>that we might get more candidates who want to put

0:12:09.800 --> 0:12:12.320
<v Speaker 2>forward these types of ideas into economic policy.

0:12:12.760 --> 0:12:13.000
<v Speaker 1>Yeah.

0:12:13.000 --> 0:12:15.560
<v Speaker 3>Look, I think you look at a country like Argentina

0:12:15.679 --> 0:12:18.160
<v Speaker 3>and how far it fell right one of the most.

0:12:20.040 --> 0:12:21.880
<v Speaker 1>Argentina GDP whatever.

0:12:21.920 --> 0:12:23.240
<v Speaker 3>One hundred years ago, it was one of the most

0:12:23.840 --> 0:12:25.920
<v Speaker 3>significant countries in the world and fell off the map

0:12:25.920 --> 0:12:29.240
<v Speaker 3>because of socialism and other bad policies. Nice Malay coming

0:12:29.280 --> 0:12:32.120
<v Speaker 3>back in the country dramatically recovering. It's sort of a

0:12:32.120 --> 0:12:35.920
<v Speaker 3>great example, and it's crazy to me that socialist ideas

0:12:37.320 --> 0:12:39.760
<v Speaker 3>can travel into a country like this one.

0:12:39.840 --> 0:12:41.880
<v Speaker 2>I have only about thirty seconds, but I've we were remiss

0:12:41.880 --> 0:12:43.480
<v Speaker 2>if I didn't ask about some of the work that

0:12:43.480 --> 0:12:45.520
<v Speaker 2>you've been doing trying to make for a one case,

0:12:45.600 --> 0:12:49.040
<v Speaker 2>those types of investment vehicles more broadly accessible. We had

0:12:49.040 --> 0:12:51.560
<v Speaker 2>an executive action last week. What are you pushing for

0:12:51.600 --> 0:12:52.160
<v Speaker 2>at this moment?

0:12:52.520 --> 0:12:55.920
<v Speaker 3>I think every American has to own a piece of capitalism.

0:12:56.280 --> 0:12:59.480
<v Speaker 3>And when you do, you're excited when the stock market

0:12:59.480 --> 0:13:02.120
<v Speaker 3>goes up and it allows you know, power of compounding,

0:13:02.120 --> 0:13:06.000
<v Speaker 3>allows you to save for your retirement. You know, we

0:13:06.520 --> 0:13:11.240
<v Speaker 3>you know, unfortunately, wages cannot compound as fast as stock market,

0:13:12.240 --> 0:13:14.280
<v Speaker 3>and so I think it's very important for every American

0:13:14.280 --> 0:13:16.960
<v Speaker 3>to participate in capitalism or or we'll end up in socialism.

0:13:17.160 --> 0:13:19.600
<v Speaker 3>And that's so I think the President's plan is a

0:13:19.600 --> 0:13:22.760
<v Speaker 3>great one. You know, you have to be able to

0:13:23.240 --> 0:13:25.760
<v Speaker 3>you know, I think if you believe that you're gonna

0:13:25.760 --> 0:13:28.360
<v Speaker 3>be able to retire comfortably, maybe even leave something for

0:13:28.400 --> 0:13:30.040
<v Speaker 3>your kids so they got a head start. You know,

0:13:30.120 --> 0:13:32.319
<v Speaker 3>that makes you believe in the country, and if you can,

0:13:32.440 --> 0:13:33.560
<v Speaker 3>it makes you angry.

0:13:34.200 --> 0:13:35.520
<v Speaker 1>So I think a very important program.

0:13:35.559 --> 0:13:36.640
<v Speaker 2>We're going to have to end it there. Thank you

0:13:36.720 --> 0:13:39.360
<v Speaker 2>so much for joining, really appreciate your time with that

0:13:39.440 --> 0:13:41.280
<v Speaker 2>will toss it back to New York. That is, of course,

0:13:41.320 --> 0:13:44.000
<v Speaker 2>Bill Ackman, the founder and CEO of Pursing Square,