Entrepreneur Lessons: What we Can Learn from Bill Ackman
Sometimes, even an apology can’t repair the damage. In 2015, Bill Ackman’s fund invested a large sum of money in Valeant Pharmaceuticals (VRX) with his investment thesis based on the company's strong record of acquisitions, which he felt could continue.
“The story is not that well understood by Wall Street,” he noted, as quoted by Fortune. “They’re incredibly talented at getting deals done."
Believing Valeant could do between $7 billion and $20 billion worth of acquisition a year, Ackman said, "We think these are very reasonable assumptions.”
“Valeant is a very early-stage Berkshire."
The stock would soar as high as $247.75, valuing the trade at nearly $5.1 billion, which many of us would have taken at that point. However, Ackman held, seeing further upside potential. When it then fell to $219, he wouldn’t sell. When it fell to $189, he wouldn’t sell.
Instead, he held until it became one of the worst investing disasters in hedge fund history. It’s now at less than $10, valuing his position at $300 million. By his own admission this year, it was “one very big mistake.”
He even tried to apologize.
"While I and the rest of the Pershing Square team have suffered significant losses from this failed investment as we are collectively the largest investors in the funds, it is much more painful to lose our shareholders' money, and for this I deeply and profoundly apologize," he said, as quoted by CNBC.
But it was too late. His reputation was damaged. He wanted to be right so badly about this trade that it cost him – and his clients – a great deal of money. He forgot to stay grounded, I believe.
While we could easily talk about his failure to use good money management, there’s an entrepreneurial lesson in here that we can learn from.
No. 1 – If you want to Succeed, Leave the Ego at Home
The first lesson is to never have an ego. You’re not perfect. None of us are. If we make a mistake, we learn from it. We move on from it. We move to the next opportunity.
As a business owner, we want the world, but we have to remember we are not the world. Know when to lead a group, but also know when to follow. Be aware of how you portray yourself to others, too. Don’t appear to be egotistical because it can -- and will -- destroy relationships.
Have a balanced perspective on life. Perhaps even volunteer your time because it can actually change how you see things.
No. 2 – Know when to walk away
Ackman knew very well to walk away as the stock crumbled. He chose not to. He chose not to abide by standard stop loss money management strategies.
As business owners, we have to remember that not everything will work out as we hope. That’s life. Chasing goals and new ideas are great. But you must be able to manage the downside, too.
If something isn’t working out well, know when to fold your cards, and walk away. Learn from the error and do your best not to repeat it. The only way to be successful in business is to accept risk. Know how to manage risk. If you win more than you lose, that’s great. But be prepared.
No. 3 – Don’t Get Married to Opportunity
Flexibility is the key to success. When facts change in what you believed to be a great opportunity it’s important that you be able to change your position if need be and act accordingly. If Ackman followed this advice, he wouldn’t be in the position he is now.
No. 4 – Listen More, Talk Less
Some people love to talk. They talk so much they don’t hear what any one else has to say, including advice on poor decisions.
As we all know, you can’t learn anything new while you’re talking yet some entrepreneurs fail to even listen to that.
Building a successful business is about building relationships. One of the most important parts of a good relationship is strong, effective communication. That won’t happen unless both parties can talk freely without one dominating. Actually listen. Never assume what the other person thinks or feels. Ask for feedback.
If you can accomplish these simple goals as an entrepreneur, the stronger you become.