Want to Be a Billionaire? Don't Follow the Herd

William Ackman, CEO of Pershing Square Capital, is an expert at making money. In his Floating University Lecture, Ackman says to be a successful investor you have to be able to avoid the natural human tendency to follow the herd.

What's the Big Idea?


William Ackman isn't known for following the herd. The herd tends to want to follow him, and for good reason. A "Wall Street superstar," Ackman runs billion-dollar funds as CEO of Pershing Square Capital Management, one of the most successful hedge funds in the country.

In Ackman's Floating University lecture, entitled "If You're So Smart, Why Aren't You Rich?" Ackman argues that to be a successful investor, "you have to be able to avoid some natural human tendencies to follow the herd." And yet, that's easier said than done. According to Ackman, you need to have quite a stomach "to withstand the volatility of the stock markets."

Watch an excerpt from Ackman's lecture here:

What's the Significance?

Whatever your goals are in life, a smart investment strategy will help you to achieve them. We all want to be financially stable and enjoy a well-funded retirement, but we don't want to squander our hard-earned money on poor investments.

When the stock market is going down, Ackman explains, "every day your natural tendency is to want to sell. When the stock market is actually going up, every day your natural tendency is to want to buy, so in bubbles you probably should be a seller.  In busts you should probably be a buyer, and you have to have that kind of a discipline."

Discipline means thinking long-term. According to Ackman, the stock market is a "voting machine," and an extremely fickle one at that, which is subject to  "the whims of people in the short term." In today's global economy, all sorts of events may occur that scare investors, but as Ackman points out, stock prices are affected by many things "that really have nothing to do with the value of certain companies that you’re investing in."

So what is a smart investor to do? For one thing, Ackman says you need to be "financially comfortable." That means carrying a manageable amount of debt. You also want to have enough money in the bank to be comfortable with the amount of risk you're taking on the market. Most importantly, Ackman advises that the companies you invest in ought to be the kinds of businesses you really understand. Then you can start to think, as sophisticated investors do, about how much money a company will generate over a long period of time.

Follow Daniel Honan on Twitter @DanielHonan

LinkedIn meets Tinder in this mindful networking app

Swipe right to make the connections that could change your career.

Getty Images
Sponsored
Swipe right. Match. Meet over coffee or set up a call.

No, we aren't talking about Tinder. Introducing Shapr, a free app that helps people with synergistic professional goals and skill sets easily meet and collaborate.

Keep reading Show less

Brain study finds circuits that may help you keep your cool

Research by neuroscientists at MIT's Picower Institute for Learning and Memory helps explain how the brain regulates arousal.

Photo by CHARLY TRIBALLEAU / AFP/ Getty Images
Mind & Brain

MIT News

The big day has come: You are taking your road test to get your driver's license. As you start your mom's car with a stern-faced evaluator in the passenger seat, you know you'll need to be alert but not so excited that you make mistakes. Even if you are simultaneously sleep-deprived and full of nervous energy, you need your brain to moderate your level of arousal so that you do your best.

Keep reading Show less

34 years ago, a KGB defector chillingly predicted modern America

A disturbing interview given by a KGB defector in 1984 describes America of today and outlines four stages of mass brainwashing used by the KGB.

Politics & Current Affairs
  • Bezmenov described this process as "a great brainwashing" which has four basic stages.
  • The first stage is called "demoralization" which takes from 15 to 20 years to achieve.
  • According to the former KGB agent, that is the minimum number of years it takes to re-educate one generation of students that is normally exposed to the ideology of its country.
Keep reading Show less