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

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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 https://bigthink.com/videos/learn-to-invest-and-start-a-business-in-under-an-hour

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

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  1. Big Think

    Want to get Smarter, Faster™?

    Subscribe for DAILY videos: https://bigth.ink/SmarterFaster

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  2. Joss Boloko

    Can someone explain 10:25How did the shareholder made money since we assume the price of a share has not changed

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  3. lukas baral

    Its weird he says avoid companies that are rapidly gaining competitors (high barrier as he says) and then proceeds to lose 400m in netflix. Its good to know even fund managers don't know what they are doing at times.

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  4. kl

    400 mil

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  5. L Noah

    This is a good vid, the only part I disagree with is
    the part where he says invest in Coca Cola, uh,
    Coca Cola is poison.

    And the … Don't invest in start up companies,
    some start up companies
    are REALLY AWESOME and Deserve to be analyzed for profit.

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  6. ibrahim

    I am actually agnostic to a coins market cap but often find opportunities in the small-cap space. But so far my broker, Mr Sam helped me find investments that have significant long-term growth potential and that are valued attractively relative to that growth potential.

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  7. Jame Rabo

    Mr Sam’s 4 week course is very well done. Even if your knowledge about technical analysis and the market is extensive, you will still learn new things. He is extremely good at explaining concepts and has the ability to explain complicated notions in a simple matter.

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  8. Lämbda

    Hey look it's the guy who just lost 400 million in NFLX stock

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  9. sara curling

    liked this video, very informative!

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  10. John Doe

    He forgot to mention losing 400 million in a few months

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  11. Ahmed Anssaien

    38:33 Someone like Madoff? /s

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  12. Mongst Yt

    FOR PERSONAL PURPOSES

    0:12 Bill Ackman
    0:23 Lemonade Stand Example

    Starting A Business (1:03)

    1:17 Form A Corporation

    • 1,000 shares of stock, Investor invests for 500 shares

    2:18 The Balance Sheet

    Assets = Liabilities + Stockholders Equity

    3:08 Fixed Assets and Inventory

    4:19 The Income Statement 4:38

    5:49 Growing The Business

    8:05 The Statement of Cash Flows (SOCF)

    9:05 Evalutating Value

    10:26 Equity Investor took more risk, e.g. Equity Investor made more returns on investment

    11:08 Debt and Equity 11:58

    13:06 Assessing Risk

    13:40 Government Bonds (Low Risk investment)

    14:53 Profiting As An Entrepreneur

    17:34, 17:50 Valuation: Determining A Company’s Worth

    19:33 Selling Shares, Board Of Directors

    20:36 Benefit of IPO

    21:03

    21:39 Investing

    22:59 Interest Returns

    24:00 The Importance of Not Losing Investment Money (Avoid Losses)

    24:53 Keys To Successful Investing

    – Don’t Invest In Startups

    + Invest In Public Companies

    + Invest In businesses you understand how they make money

    + Invest at a reasonable price

    + Invest In a company that you can own forever

    27:26 A business you can own forever

    Coca Cola, McDonalds

    28:58

    • A product people need

    • Unique

    • Brand Loyalty

    29:48

    30:23 High barriers to entry

    31:57 Low Reinvestment Cost

    Controlled Company

    33:26 Investing

    34:41 The Psychology of Investing

    35:45

    1. Be Financially Secure

    2. Don’t get spooked by short term fluctuation

    3. Do your own work

    4. Invest at a reasonable price

    36:38

    • Mutual Fund

    38:05

    • A Good Money Manager Can Explain What/Why They Invest In

    + Good Reputation

    + Value Approach

    + 5 Year Track Record

    + Consistent Approach

    • Hedge Fund

    40:25 Recapping

    41:20 This is just an Introduction

    42:27 Invest In Your Future

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  13. Mongst Yt

    Time Stamps
    3:07 Starting a Business

    5:55 Growing the Business

    9:08 Evaluating Value

    11:10 Debt and Equity – Risk and Reward

    21:36 Investing

    24:04 Importance of not losing investment money

    33:28 When to Invest?

    35:45 How to withstand market volatility?

    36:40 Other ways to Invest

    38:02 Mutual Funds

    42:29 Investing in your Future

    It's for personal use

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  14. Tyrese Modro

    This is a Great video. I'm just starting to learn how to make profits in Bitcoin, crypto. I'm wondering if I'd be able to get profits and I traded with Mrs Jansen and verified with more profits, so now I’m grateful Mrs Mia Jansen.

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  15. Josephine Schreier

    i don't understand how "goodwill" is calculated. Could someone give me a definition of goodwill?

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  16. RR Rr

    These are like the Ray Dalio videos. Excellent videos to break things down for those of us who invest but didn’t go to business school. I am looking for a series on how buying into a company early, works. I have several small crowdfunding investments through Republic and StartEngine and 2 have gone public but I don’t understand all of the laws pertaining to when I can sell my shares and when or how I should convert from raw money to certain classes of shares, etc. I do understand markets and options and some about real estate but the whole early investor thing is what I really want to know about – in depth.

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  17. katesperi tania

    HELLO, I'M NEW TO CRYPTO AND FOREX TRADING AND I HAVE BEEN MAKING HUGE LOSES TRADING ON MY OWN BUT RECENTLY I SEE A LOT OF PEOPLE EARNING FROM IT. CAN SOMEONE PLEASE GIVE ME A NEW STRATEGY OR AT LEAST TELL ME WHAT I'M DOING WRONG

    Helpful(0) Unhelpful(0)You have already voted this
  18. 800lb Gorilla

    Who knew I'd get so much information from an online FU.

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  19. John Labry

    Great vid

    Helpful(0) Unhelpful(0)You have already voted this
  20. KMS.

    3:07 Starting a Business
    5:55 Growing the Business
    9:08 Evaluating Value
    11:10 Debt and Equity – Risk and Reward
    21:36 Investing
    24:04 Importance of not losing investment money
    33:28 When to Invest?
    35:45 How to withstand market volatility?
    36:40 Other ways to Invest
    38:02 Mutual Funds
    42:29 Investing in your Future

    Helpful(0) Unhelpful(0)You have already voted this
  21. kiaser Sozez

    14:08 Bill breaks out in to fluent Klingon ! … great video though

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  22. Willard Johnson

    Money is an issue that everyone has for a better and luxurious life, Life was hard for me until I started trading bitcoin with Mr COLINSWILSONFX, and am now earning $18,435 per week.

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  23. katesperi tania

    HELLO, I'M NEW TO CRYPTO AND FOREX TRADING AND I HAVE BEEN MAKING HUGE LOSES TRADING ON MY OWN BUT RECENTLY I SEE A LOT OF PEOPLE EARNING FROM IT. CAN SOMEONE PLEASE GIVE ME A NEW STRATEGY OR AT LEAST TELL ME WHAT I'M DOING

    Helpful(0) Unhelpful(0)You have already voted this
  24. Brian Authur

    I started watching your videos earlier last year as a beginner before giving stocks a trial and I've been able to scale from $120K to $580K, I did get an advisor for supervision and accountability as you recommended. Thanks.

    Helpful(0) Unhelpful(0)You have already voted this
  25. Nancy abrat

    😩😥🥺PLEASE ANY IDEA ON CRYPTO TRADING AND INVESTMENT HERE? .. I HAVE INCURRED SO MUCH LOSSES TRADING ON MY OWN…I TRADE WELL ON DEMO BUT I THINK THE REAL MARKET IS MANIPULATED… CAN ANYONE HELP ME OUT OR AT LEAST TELL ME WHAT I'M DOING WRONG ?

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  26. Marco Polo

    another Hedgie

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  27. Steven paul

    Someone told me that it's the best time to buy Bitcoin, because there will be a huge pump

    Helpful(0) Unhelpful(0)You have already voted this
  28. Timothy Connolly

    Sound effects are not an asset

    Helpful(0) Unhelpful(0)You have already voted this
  29. Shakil Rizvi

    GOOD😀😀😀😀😀😀😀😀

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

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