Bill Ackman: Invest in the Business You Can Own Forever

William Ackman: The last bit is that you want to invest in a business that you could theoretically own forever.  If the stock market were to close for 10 years you wouldn’t be unhappy.  What do I mean by that?  Again if you’re going to compound your money at a 10 or 15 percent return over a 43 year period of time you really want a business that you can own forever.  You don’t want to constantly have to be shifting from one business to the next.  And what are businesses that you can own forever?  Well there are very few that sort of meet that standard.  Maybe a good example is Coca Cola.  What is good about Coca Cola?  It’s a relatively easy business to understand.  You understand how Coke makes money.  They sell a formula or syrup to bottlers and to retail establishments and they make a profit every time they serve a Coca Cola.  People drank a lot of Coca Cola for a very long period of time.  The world’s population is growing.  They sell it in almost every country in the world and each year people drink a little bit more Coca Cola, so it’s a pretty easy business to understand and it’s also a business that I think is unlikely to be competed away as a result of technology or some other new product.  It’s been around long enough.  People have grown used to the taste.  Parents give it to their children and you can expect it will be around a long period of time.  I think that’s one good example.

Another good example might be MacDonald’s.  You may not love MacDonald’s hamburgers.  You may or you may not, but it’s a business that it has been around for 50 years.  You understand how they make money.  They open up these little—build these little boxes.  They rent them to the franchisees.  They charge them royalties in exchange for the name and they sell hamburgers and French fries and you know what?  People have to eat.  It’s relatively low cost food.  The quality is pretty good and they continue to grow every year.  So I think the consistent message here is try to find a business that you can understand that’s not particularly complicated that has a successful long term track record that makes an attractive profit and can grow over time.

So what are the key things to look for in a business as I say that lasts forever?  Well you want a business that sells a product or a service that people need and that is somewhat unique and they have a loyalty to this particular brand or product and that people are willing to pay a premium for that.  Another good example might be a candy business.  While people are going to buy generic versions of many kind of food products, flour, sugar, they don’t need to have the branded product.  When it comes to candy people don’t tend to like the Walmart version or the Kmart version.  They want the Hershey chocolate bar or the Cadbury chocolate bar or the See’s Candy.  They want the brand and they’re willing to pay a premium for that and so that’s I think a key thing.  You want the product to be unique.  You don’t want it to be a commodity that everyone else can sell because when you sell a commodity anyone can sell it and they can sell it at a better price and it’s very hard to make a profit doing that.

In this portion of his Floating University lecture, activist investor William Ackman talks about investing in the kind of company that you can own forever. In other words, what is the kind of company you'd be happy to hold stock in even if the stock market was closed for tn years?

Big Think Edge
  • In some fundamental ways, humans haven't changed all that much since the days when we were sitting around communal fires, telling tales.
  • Although we don't always recognize them as such, stories, symbols, and rituals still have tremendous, primal power to move us and shape our lives.
  • This is no less true in the workplace than it is in our personal lives.

Has a black hole made of sound confirmed Hawking radiation?

One of Stephen Hawking's predictions seems to have been borne out in a man-made "black hole".

Image source: NASA/JPL-Caltech
Surprising Science
  • Stephen Hawking predicted virtual particles splitting in two from the gravitational pull of black holes.
  • Black holes, he also said, would eventually evaporate due to the absorption of negatively charged virtual particles.
  • A scientist has built a black hole analogue based on sound instead of light.
Keep reading Show less
Big Think Edge
  • The word "creative" is sometimes waved around like a badge of honor. We speak of creativity in hushed tones, as the special province of the "talented". In reality, the creative process is messy, open, and vulnerable.
  • For this reason, creativity is often at its best in a group setting like brainstorming. But in order to work, the group creative process needs to be led by someone who understands it.
  • This sense of deep trust—that no idea is too silly, that every creative impulse is worth voicing and considering—is essential to producing great work.