Loading...

William Ackman: Everything You Need to Know About Finance and Investing in Under an Hour | Big Think

  • 🎬 Video
  • ℹ️ Description
Everything You Need to Know About Finance and Investing in Under an Hour
----------------------------------------------------------------------------------
Bill Ackman is one of the top investors in the world, and he's said that he's aiming to have "one of the greatest investment track records of all time." As the CEO of Pershing Square Capital Management, the hedge fund he founded, he oversees $19 billion in assets.

But before he became one of the elite, he learned the basics of investing in his early 20s.

This Big Think video is aimed at young professionals just starting out, as well as those who are more experienced but lack a financial background.

Ackman takes viewers through the founding of a lemonade stand to teach the basics, explaining how investors pay for equity, a word interchangeable with "stock." In the example, the owner starts with $750, with $250 of that coming from a loan.
----------------------------------------------------------------------------------
WILLIAM ACKMAN:

William Ackman is founder and CEO of Pershing Square Capital Management. Formed in 2003, the hedge-fund has acquired significant shares in companies such as JC Penney, General Growth Properties, Fortune Bands and Kraft Foods. Ackman advocates strategies of "activist investing," the practice of using stock shares in publicly-traded companies to influence management practices in a way that benefits shareholder interests.
----------------------------------------------------------------------------------
TRANSCRIPT:

Hi, I'm Bill Ackman. I'm the CEO of Pershing Square Capital Management and I'm here today to talk to you about everything you need to know about finance and investing and I'm going to get it done in an hour and you’ll be ready to go.

How to Start and Grow a Business

So let’s begin. We’re going to go into business together. We’re going to start a company and we’re going to start a lemonade stand and now I don’t have any money today, so I'm going to have to raise money from investors to launch the business. So how am I going to do that? Well I'm going to form a corporation. That is a little filing that you make with the State and you come up with a name for a business. We’ll call it Bill’s Lemonade Stand and we’re going to raise money from outside investors. We need a little money to get started, so we’re going to start our business with 1,000 shares of stock. We just made up that number and we’re going to sell 500 shares more for a $1 each to an investor. The investor is going to put up $500. We’re going to put up the name and the idea. We’re going to have 1,000 shares. He is going to have 500 shares. He is going to own a third of the business for his $500.

So what is our business worth at the start? Well it’s worth $1,500. We have $500 in the bank plus $1,000 because I came up with the idea for the company. Now I'm going to need a little more than $500, so what am I going to do? I'm going to borrow some money. I'm going to borrow from a friend and he’s going to lend me $250 and we’re going to pay him 10% interest a year for that loan.

Now why do we borrow money instead of just selling more stock? Well by borrowing money we keep more of the stock for ourselves, so if the business is successful we’re going to end up with a bigger percentage of the profits.

So now we’re going to take a look at what the business looks like on a piece of paper. We’re going to look at something called a balance sheet and a balance sheet tells you where the company stands, what your assets are, what your liabilities are and what your net worth or shareholder equity is. If you take your assets, in this case we’ve raised $500. We also have what is called goodwill because we’ve said the business—in exchange for the $500 the person who put up the money only got a third of the business. The other two-thirds is owned by us for starting the company. That is $1,000 of goodwill for the business. We borrowed $250. We’re going to owe $250. That is a liability. So we have $500 in cash from selling stock, $250 from raising debt and we owe a $250 loan and we have a corporation that has, and you’ll see on the chart, shareholders’ equity of $1,500, so that’s our starting point.

Now let’s keep moving. What do we need to do to start our company? We need a lemonade stand. That’s going to cost us about $300. That is called a fixed asset. Unlike lemon or sugar or water this is something like a building that you buy and you build it. It wears out over time, but it’s a fixed asset. And then you need some inventory. What do you need to make lemonade? You need sugar. You need water. You need lemons...


💬 Comments on the video
Author

I was waiting for the part when he recommends shorting the lemonade stand

Author — Michelle Tong

Author

William Ackman, you are a billionaire. You are a busy man. You didn’t have to take time out of your life to make this video, but you did. So thank you.

Author — D Keo

Author

Coca cola is just one big lemonade stand, when you think about it 🤔

Author — A t t i

Author

This guy looks very smart, he should start a hedge fund I think

Author — Russell Fernandez

Author

Jobs will pay your bills, business will make you rich but investment makes and keep you wealthy, the future is inevitable

Author — Marley Li

Author

"Why are you going public with the company?"
*"I want a new car"*

Author — keep itsteel

Author

When someone just dishes out in 6 minutes what I had to study for in 6 months.. literally 🚶🏾‍♀️🚶🏾‍♀️🚶🏾‍♀️

Author — Veli Em

Author

Rule no.1: Never lose money
Rule no.2: Never forget rule no. 1.

Me, after losing $2500 on GME: "About that.."


Amazing video by the way.

Author — perviguana

Author

Billionaire: *creates free educational content*
Comments: *well ACTUALLY*

Author — MrCk1234567890

Author

All you do is scare the public, the shares crash, you buy them up, they reinflate - Ackmann

Author — J R

Author

Shocked to see this came out all the way back in 2012. The production value is super high for such an old youtube video. I wouldn't have blinked if you told me it was uploaded this year

Author — Nic Halabicky

Author

Fantastic lecture. I'm definitely going to watch this over and over again. Also, what a flawless and neat presentation! Can't believe this was uploaded 8 years ago

Author — 전또횬

Author

You can always measure someone’s knowledge by how easy they are able to explain it and teach it to someone else. This was absolutely amazing!

Author — Perdomowikman

Author

I wish people would understand the information that is being shared instead of trying to find faults in the information. This presentation is extremely valuable information and I am sorry for the negative comments certain people are saying. Thank you for the valuable information. Thank you thank you. And to the comments about grey hair and a few dollars off, and pink lipstick...please control you're childish behavior. Some people are trying to learn and you are trying to ruin a good thing.

Author — Randy Thibodeaux

Author

I remember seeing this eight years ago and knew it would come in handy one day.

Author — Evan Michael Hardin

Author

I pray whoever reads this should become successful. keep fighting for success. the rich stay rich by spending like the poor and investing why the poor stay poor and be spending like the rich yet not investing. Roar! Invest earn and be successful.

Author — Bentley Chan

Author

His calm tone and moderate pace is perfect for me! Thank you for this video!

Author — son

Author

whats really sad is that none of this info is taught to students in high school. we are teaching children nonsense instead of financial independence.

Author — BobRooney

Author

this is so well done especially by someone who is a CEO and took time out to do this, thank you

Author — green miner

Author

I learned more in one video than in my entire semester

Author — im Savage