Confidence Game - Christine Richard [15]
After high school, Ackman followed in his sister Jeanne’s footsteps, entering the freshman class at Harvard in 1984. After graduation, Ackman worked for two years in his family’s commercial-mortgage business, then called Ackman Brothers & Singer, before returning to Harvard to attend business school.
Harvard did nothing to soften Ackman’s sharp edge. As the co-captain of the Harvard Business School’s rowing team in the early 1990s, Ackman defended the team’s controversial decision to row with dollar signs painted on their oars and on the back of their shirts. “I think it’s a snobbish, superficial symbol that represents wealth and greed and is a very narrow interpretation of what business represents,” Eve Stacey, the Harvard women’s team captain, said of the dollar signs in an interview with the Wall Street Journal.
“Let’s face up to what Harvard Business School represents,” Ackman argued in a commentary in the Harbus News, the student newspaper, after spectators booed the Harvard Business School team at the Head of the Charles races. “We spend 90 percent of our studies at HBS pursuing the maximization of the dollar.”
At Harvard, Ackman met David Berkowitz, an MIT-educated engineer. Ackman told Berkowitz that he found his comments in class insightful and convinced his classmate to work with him in picking stocks. He urged Berkowitz to read Margin of Safety: Risk Averse Value Investing Strategies for the Thoughtful Investor by Seth Klarman, who graduated from Harvard Business School a decade before Ackman and went on to run his own highly successful hedge fund called the Baupost Group.
“Being a value investor usually means standing apart from the crowd, challenging conventional wisdom, and opposing the prevailing investment winds,” Klarman wrote. “It can be a lonely undertaking.”
Despite having no professional money-management experience, the pair began scouting for investors even before graduation. It took a healthy amount of gumption for Ackman, then 26 years old, and Berkowitz, 32, to ask millionaires and billionaires to trust them with a piece of their fortunes.
The first potential investor they tried was Marty Peretz, the editor-in-chief of the New Republic magazine, who had been Ackman’s thesis adviser when he was an undergraduate at Harvard. Ackman and Berkowitz drove from Boston to Peretz’s summer house on Cape Cod to pitch him the idea, and Peretz became their first investor with a $250,000 commitment. Ackman and Berkowitz got $500,000 from the father of a Harvard Business School classmate. Ackman’s future mother-in-law, Marilyn Herskovitz, who sold high-end real estate in Manhattan, recommended the pair to a client who ended up investing $1 million. “One investor,” Ackman says, “sold meat balls to Pizza Hut.”
Ackman’s father, Larry, who urged his son to get experience before starting a fund, initially refused to invest. Just before they launched the fund, Ackman’s father relented and wrote a check.
They set up shop in a windowless office in the Helmsley Building, which they leased from brokerage firm Furman Selz, and Ackman wasted no time getting to know influential investors. When Bernard Selz, the financier and philanthropist, got into the elevator one day with Ackman and Berkowitz, Ackman immediately introduced himself. “You should call me sometime,” Selz said politely before stepping off the elevator. As soon as Ackman got back to his office, he was on the phone with Selz’s secretary setting up an appointment.
The two fund managers drew the spotlight in the mid-1990s when they participated in the bidding for the public company that owned the mortgage on New York’s landmark Rockefeller Center. It was a heady time for Ackman, then just 28 years old. There was the morning Ackman and Jerry Speyer, a founding partner of real estate giant Tishman Speyer, emerged from an all-night strategy session in a diner to grab a predawn copy of the New York Times and read that their supposed partner in the deal, Mitsubishi