Bill Ackman Distinguishes Speculative Short-Term Crypto Trading from Long-Term Value

Bill Ackman discussed his investment philosophy in a recent interview, briefly addressing cryptocurrencies.

The billionaire hedge fund manager highlighted the distinction between speculation and investing, noting that speculation involves making predictions about the future without solid knowledge.

While he views short-term crypto trading as primarily speculative, he believes there may be intrinsic value in the long run.

“Speculation is just a bit like trading crypto… well, short-term trading crypto. Maybe in the long run, there’s intrinsic value,” he told podcaster Lex Fridman in an interview released on Wednesday.

Ackman is highly respected in the investing world, largely due to his bold investment strategies. He has also been involved in controversial situations over the years. He gained fame for accurately predicting the crash of the junk bond market in 1989 while working as an analyst for a hedge fund in New York.

He is currently the founder and CEO of Pershing Square Capital Management. He is also known for successful investments in companies such as Chipotle Mexican Grill, Valeant Pharmaceuticals, and Herbalife. These bets paid off, demonstrating Ackman’s ability to identify promising opportunities.

Bill Ackman Breaks Down Investing Vs. Short-Term Gains

Ackman elaborated on his view of crypto as a speculative investment. He stated that many crypto investors were caught up in a bubble, heading toward an inevitable crash driven mainly by speculative motives.

“They didn’t know what things were worth. They just knew they were going up. That’s speculation,” he said. “And investing is doing your homework, digging down, understanding a business, understanding the competitive dynamics of an industry, understanding what management’s going to do, understanding what price you’re going to pay.”

In his view, investing boils down to predicting what a company will deliver over its entire lifespan. It is not about quick wins or short-term trends, but rather building a blueprint of long-term value creation.

Ackman Highlights Useful Tech, but Unethical Actors

In 2022, Ackman admitted that he was originally a crypto skeptic. However, after examining certain interesting projects, he stated that crypto “can enable the formation of useful businesses and technologies that heretofore could not be created.”

The telephone, the internet, and crypto share one thing in common. Each technology improves on the next in terms of its ability to facilitate fraud. As such, I was initially a crypto skeptic, but after studying some of the more interesting crypto projects, I have come to

— Bill Ackman (@BillAckman) November 20, 2022

Nevertheless, he expressed concern about unethical promoters creating tokens primarily for pump-and-dump schemes.

He has also stated that the crypto industry requires more enforcement rather than more regulations.

“Regulators need more resources to police the bad actors. Unfortunately, it will likely take years for the regulators to catch up, and they may never get there. The crypto industry therefore needs to self-police and out the bad actors, or it is at risk of being shut down,” he said.

How ‘The Intelligent Investor’ Shaped Ackman’s Approach to Investing

Separately in the interview, Ackman discussed the book “The Intelligent Investor” by Benjamin Graham. He mentioned it was the first investment book he ever read and that it influenced his career and most of his life.

The book was published after the Great Depression, a period when people were skeptical about investing in markets, Ackman noted.

He explained how the book highlights the difference between price and value, stating, “Price is what you pay. Value is what you get.” He also elaborated on an analogy comparing the stock market to a neighbor who visits daily to offer to buy your house. If the offer seems unreasonable, you ignore it; if it is very good, you might consider it.

The key is determining what something is truly worth. He pointed out that in the short term, the stock market behaves like a voting machine, influenced by speculation and short-term demand.

However, in the long run, it acts more like a weighing machine, providing a more accurate measure of value. Therefore, if you can determine what something is worth, you can leverage the market effectively, as its ultimate purpose is to assist investors.

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