William Ackman: Everything You Need to Know About Finance and Investing in Under an Hour | Big Think finance after 40

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Everything You Need to Know About Finance and Investing in Under an Hour
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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.
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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.
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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…

Read the full transcript at .

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39 comments

Big Think 12/03/2022 - 7:00 Chiều

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Younes Mdarhri Alaoui 12/03/2022 - 7:00 Chiều

tldr; invest your money in coca cola

Reply
theloyalistspeaks 12/03/2022 - 7:00 Chiều

Remember Valeant Pharmaceuticals?

Reply
Jake Baker 12/03/2022 - 7:00 Chiều

I will not be bought into silence.
Especially after torture of me but most importantly my son!

Reply
I Got Wood 12/03/2022 - 7:00 Chiều

In one hour? How many hours before Warren Buffett accepts my brilliance and dedication

Reply
Ira Cramer 12/03/2022 - 7:00 Chiều

So many bots in the comments section very difficult to trust here I was a victim of scam but was lucky.

Reply
Kurmot 12/03/2022 - 7:00 Chiều

more like "everything you need to know about accounting" lmao

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Ray Woodard 12/03/2022 - 7:00 Chiều

Thank you so much! I’m in my 40’s and I’m kicking myself for not learning this earlier.

Reply
Nicolas philiacline 12/03/2022 - 7:00 Chiều

I ventured into creating a new income source some months back and decided to try something else, what I have found most profitable so far is Options trading and ETFs because with these two I make close to $ 17k monthly it's great and I'm still trying out other sources.

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John Scott. 12/03/2022 - 7:00 Chiều

Nice video I was able to get huge income stream in 2020 during the COVID-19 pandemic investing with a professional broker expert Mrs Mary Callahan Erdoes, and now in 2022 I’m still doing massively well in profits

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Dick Grayson 12/03/2022 - 7:00 Chiều

This is accounting, not finance.

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Theresa Jones 12/03/2022 - 7:00 Chiều

Great video and some nice tips! This is a scary time for new investors but the best thing you can do is not to make decisions based on emotions. This could actually be a good time to buy more of your high conviction stocks or crypto on a discount. Wealth is created during bear markets, not bull markets. If your portfolio is really effecting your mental health then delete the app and go for a walk. Let the market do its thing and have a long time horizon. I buy and just trade long term more than ever, I have made over 16` btc from day trading with Ruby Benally in few weeks this is one of the best medium to backup your assets incase it goes bearish

Reply
Williams Smith 12/03/2022 - 7:00 Chiều

Let's not forget that the biggest payouts in the markets don't come from great performances but rather it's great promotions. Stay invested, diversification for streams of incomes is very important

Reply
COUCH ARMY (NEWS) 12/03/2022 - 7:00 Chiều

Watch every day new and exclusive videos about the situation in the world on the COUCH ARMY channel

Reply
Will 12/03/2022 - 7:00 Chiều

Awesome video, terrible sound effects

Reply
Neih Gnot 12/03/2022 - 7:00 Chiều

Lol to this day the comment about him having lipstick on still slays me… or rather the comment that used to be upvoted near the top scolding and calling that comment childish.

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Brayan MJ 12/03/2022 - 7:00 Chiều

What they don’t teach in school

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Paul M. McKinney 12/03/2022 - 7:00 Chiều

This economy crisis is just a time that differentiate the wise from the other, the wise will invest right now either in stock or cryptocurrency just to hold some shares of something.

Reply
tyson Efford 12/03/2022 - 7:00 Chiều

outstanding lessons, thank you keep it up.

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Jessica Williams 12/03/2022 - 7:00 Chiều

Message to all Investors!
This gonna be our year, with your believe, Ms Galia is the first.

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Chris Millson 12/03/2022 - 7:00 Chiều

If you stay invested and ignore the market's ups and downs, you'll make a lot of money in the long run; however, a severe market correction causes a lot of margin calls and sell-offs, driving the market even lower. People get greedy in this bull market, and it's extremely irresistible (fear of missing out) to buy more stocks with borrowed money or money they don't have. In the United States, people even bought stocks using their home equity line.

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gem thomas 12/03/2022 - 7:00 Chiều

@7 min 28% is deceptive. Its 4% margin per stand.

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Keep Left Unless Overtaking 12/03/2022 - 7:00 Chiều

9

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Investing Education 12/03/2022 - 7:00 Chiều

Clarity from a legend

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cm brn 12/03/2022 - 7:00 Chiều

I didn't know that selling Lemonade is so complicated.

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Junior Betanco 12/03/2022 - 7:00 Chiều

Thank you. Excellent video. Good job.

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Rômulo Magalhães 12/03/2022 - 7:00 Chiều

"Fraud" man. I recently knew that Bill Ackman lost US4 bi investing on the fraud enterprise, a big pharm (Valeant Pharmaceuticals), which lost 97% stock price: and what of moral and ethics, and feeling may be I learn with this man? I`m sorry… nothing.

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Royal Highness 12/03/2022 - 7:00 Chiều

I'm learning more on the internet than I'm learning in school

Reply
عبدالله العامر 12/03/2022 - 7:00 Chiều

شكرا

Reply
Louis Clifford 12/03/2022 - 7:00 Chiều

I came here to learn how to invest after listening to a guy on radio talk about the importance of investing and how he made $460,000 in 4 months from $160k, somehow this video has helped shed light on some things, but I'm still confused, I'm a newbie and I'm open to ideas.

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Kushy Glowy 12/03/2022 - 7:00 Chiều

Video saved

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SK 12/03/2022 - 7:00 Chiều

Great Vid!

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Iam Just 12/03/2022 - 7:00 Chiều

I don’t get the whole idea of not selling stock because of taxes, I personally think that paying 22% tax from $100 gain is much better than paying 15% from $10 gain. Try to convince me

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Mason Adams 12/03/2022 - 7:00 Chiều

6:47 The first year's revenue is suppose to be 800 not 850. The company sold 800 cups for $1.00 = $800 Revenue.

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I LOVE ENGLISH 12/03/2022 - 7:00 Chiều

Why do you make the friend you borrow money from, so ugly?

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Larry Ron Hartfield 12/03/2022 - 7:00 Chiều

investing passively should be a priority. The best way to find that balance between saving and living is by investing..what i can say to early investors is diversification and solid management. i grew to over half a million from having a diversified portfolio that spread across stocks, grade bonds, coins and etfs.. thanks to having an adviser, ever grateful to Rita Wildrin Mora..

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Julius X5 12/03/2022 - 7:00 Chiều

I like this class

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Gregory Owens 12/03/2022 - 7:00 Chiều

very interesting

Reply
Leonard Abba 12/03/2022 - 7:00 Chiều

If you don't find a means of multiplying money, you will wake up one day to realise that the money you thought you had, has finished. Investment is key.

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