DealBook Conference 2015 - Activist Investing (Icahn with Andrew Ross Sorkin)

It's my pleasure right now to introduce a guy who also doesn't really need an introduction. Carl Icahn is here. And when you have a conversation about the long term, he is the one person that you want to hear from in an odd way from the other side, though he may think he's on their side. So we'll see. Carl Icahn. Mr. Icahn, thank you for coming and being our cleanup batter, if you will. You know, we've had this conversation all day now about the long term, the short term, buybacks, dividends, the pressure that corporations feel from activists and the role that activism has played in some of those decisions. And I wanted to get your take, just straight up and down, as to whether you think you are contributing to short-term behavior or long-term behavior.

Well, I think that activism—activists aren't all the same. There are many different types and many different kinds. From my way of looking at it, over the years, one of the reasons I came is Andrew called me up and said, "You know, they all talk about short-termism and short-termists, and you've held all of your stocks so long, you ought to come and talk about it at the DealBook." And I generally don't do this, but I made a list. I'll just read it very quickly because nobody wants to hear me reading anything, but... You look at the companies that we bought over the years, I'm surprised myself about the long-termism that we do. So ACF, I owned 31 years. I hate to admit that I have these stocks this long, 31 years.

And then I looked at American Railcar Industries, 23 years. Federal-Mogul, PSC Metals, 17 years. Federal-Mogul, 14 years. Viskase, 14 years. XO, 14 years. Vector, 13 years. American Casino, 11 years. National Energy, 11 years. WestPoint, 11. And it goes on and on. And many activists are not short-term oriented. I can't say all of them are. It depends. I mean, if you have partnerships and people want to get returns, I guess you have to be somewhat short-term oriented. But the real money that I made over the years is holding companies for seven, eight, nine years and keeping them. I look back. We bought casinos. And you got to buy them when nobody wants them, really. I mean, that's the real secret.

You buy things—it sounds very simple, but it's very hard to do. When everybody hates it, you buy them. And then when everybody wants them, you sell it to them. And that's what we do. And we go in and we clean up a company. There are many companies in the country that are very well run, but many are terribly run. And you don't have corporate democracy, you still don't. So you have people that run companies, that aren't bad people, but shouldn't be running the companies, they're way over their heads, or they have different agendas. So if you think about it, if you—this is corporate America—if you, your uncle left you a vineyard, a beautiful vineyard, beautiful apple orchards, beautiful farm.

He left you the vineyard, said, "Congratulations, that's great, you're gonna be on the vineyard, you're gonna enjoy yourself, have all this money rolling in." And then eight months later, you see your friend, you see Andrew, you say, "What happened? How you doing?" "Terrible, terrible." I say, "What's the matter?" He said, "Oh, the vineyard's okay, it's nice, but the manager, the guy that manages it, he plays golf all day, he has a plane that he rents for himself and his parties for his girlfriends, and he really doesn't do any work, and he sells little pieces here and there, and he won't give me any money." I said, "What, are you crazy? Get the police and kick them off." But that's corporate America for a lot of it.

You go to corporations and this is how they act and they believe that they own these companies and they don't really care. And the reason I made so much money over the years is that you hold these people accountable. And it's amazing. And some of these boards are good. You know, the boards are buddies with, usually buddies with the CEO, but a lot of them listen to us after you get there for a year or two. And the reasons we make all this money—not, 'I'm a brilliant stock picker,' I don't think anybody is. I think that we get in, we find that there's problems, and it doesn't always work. And it doesn't work for, you have to wait many years at times. But the problem with our country, and I think we're going to pay a price for it sooner than we think, is that many of our companies are not run well.

Now, that is not to say that many of the companies we own don't have good managers and that there are many other good managers and good boards around. But if you ask me the future and what we think here, you know, I just had the opportunity to listen to Stanley for a few minutes, because I got here a little early, and I was listening to him, watching him on the TV there, so I could hear him real well. And I think a lot of what he says is right on, that there are going to be real problems, that we're walking into a minefield with what's going on with the Fed. I mean, we can go on and on about this, but I think we've got problems.

I want to get to the Fed, but just come back to me on activism for one second, which is when you look at that list, do you consider that the activist list? Meaning, are all of those activists, are those, are those situations where in each case you consider those an activist investment or those straight-up investments? And the reason I ask is, you know, for example, right now you're going after AIG. We can talk about it. But one of the things you want to do is break that company up. I assume that you want to own that company only for the period of which it would be that it would get broken up and then you'd want to leave, no?

Not necessarily, sometimes, a lot of times. But you talk about activist, let's go for the first one, I still own it, 31 years, ACF. Let me tell you a little story about ACF. I don't mind, you can listen a few minutes, have your drinks a few minutes later for something, but I'll tell you the fast little story here. So I was a kid, you know, 31 years ago compared to today. And I see this ACF and I'm a workaholic and I keep working on companies. I see this company sells for 30 bucks and I'm looking at the rail cars they own and I look at all the stuff that they got, they don't make any money. And I look at the, you know, I'm an old Graham and Dodd guy, I still am. And you look and say, 'This is so cheap.'

So I take all the money. By that time I had, you know, you know, I had a fair amount of money. I mean, nothing like today, I guess, but enough to, you know, put in four or 500 million or borrow it or whatever I did. And I bought a lot of the stock. So now we're going in and we're saying, 'You know, this is so cheap, it's 30 bucks, and they got all these assets. They're not making any money, but what the hell?' So I finally get control of the company. I get the company. And now I go in, and you know, I'm a good math guy. I don't believe in micromanaging. So I meet the CEO, and he says, 'Oh, Mr. Icahn, we'd love to have you. I mean, we had, after a bitter fight, we still love to have you aboard.'

You know, boom, boom, boom. I said, great, let's be friends. So they manufactured rail cars, I won't bore you with the details, and they had a lot of companies. And in the rail car business, the secret is very simple, that you make rail cars, but the government wants to incentivize you. So the government says, okay, in other words, you can depreciate the rail car, over five, six, seven years, but you can keep it for 40 years. So you get this great depreciation. So it's great tax incentive. So the secret is you gotta make money though to use the tax benefits, right? So these guys kept buying companies and every company they bought, they lost money. So that's what was the real problem. So now I go and they got 12 floors on 3rd Avenue when real estate was pretty good.

I was at an early age. And I say, 'Okay, you're the guys that lease the rail cars. You're the guys that do all the darn work.' And that's a true story, and it's sort of amazing, but it still applies a lot to today, maybe not as much. Well, pretty much as much. You're gonna listen to this; it's hard to believe, I know. So I go in, and I—you know, a good math guy, who's a good numbers guy, who's a good poker player—I'm going to go understand what they do. So they said, 'Mr. Icahn, go to the 12th floor.' We go to the 12th floor, and I write on a yellow pad, and they're trying to explain it, and you do this. And these guys do this, these guys do that. I go to the seventh floor, new guy. Spend the whole day, go home.

Take a look at my yellow pad. I can't figure out what the hell they do. So I go back the next day, and I'm on the seventh floor, ninth floor, eighth floor, blah, blah, blah. And I say, 'I'm not an idiot. I can't figure out what the hell they do.' It's like razzle-dazzle. This guy does that. And I start asking, 'Well, why do you need him to do that?' 'Oh, this is very arcane stuff. You're not going to understand it.' I say, 'Okay, fine.' So finally, I say to him, 'I'm going to St. Louis. I want to see the guy who's the COO. I want to see the guy that manages the stuff, that makes the rail cars.' They go, 'Don't go, Mr. Icahn. Don't go.' So I say, 'Well, why should I go?' He said, 'They're scared of you.' I said, 'What do you mean, scared?'

I said, 'What did I do?' He said, 'Nah, they depend on us. They depend on us, and we tell them what to do, and they're very worried that you might do something with us.' I said, 'Well, I'm not threatening to do anything, but I'd like to see it.' They go, 'But don't go.' So I go back—eighth floor, ninth floor, seventh floor, boom, boom, boom, boom—go back home, can't figure out what the hell's going on. So I said, 'Screw these guys.' So I called a guy, his name is Joe, in St. Louis. I said, 'Look, Joe, I want to come see you.' He said, 'Of course, Mr. Icahn, I'd love to see you.' I said, 'Do me a favor, don't tell the CEO I'm coming. I just want to come myself and talk to you, but don't get nervous about anything.' He said, 'Why should I be nervous?'

I said, 'Right.' This guy, Joe, is like a John Wayne character. He was a captain in the Marines, a tough guy. I was scared of him. And I'm sitting there looking at him, we're talking and we're laughing, and he's showing me stuff I understand. What he does, he goes this, that, boom, boom, bah. So I said, 'I want to have a drink with you.' So we go out and have a drink. And sitting there having a martini, the two of us, I said, 'Joe, let me ask you something. I don't want you to think that I intend to do anything, because I don't want you to be nervous.' 'Why should I be nervous?' I said, 'I just want to tell you, I can't... I wouldn't know how many of those guys in New York you need to support your operation here, because I honestly can't figure out what they do.'

And he says, 'I'll tell you what you should do. I'll tell you how many supports I need. I need minus 30.' So I go, I say, 'Joe, what the hell does that mean, minus 30?' 'Because you don't have the balls to do what I'll tell you to do,' just like that. I said, 'What's that?' 'Get rid of all of them tomorrow. Get rid of all of them. And I'll need 30 people less that have to support them with the numbers that they don't need from me.' So I go and I say, 'Hey, it's unbelievable, I can't believe this.' Now today, I would have done it immediately, get rid of it all—a bunch of 12 floors—but then I still was wondering, you know, maybe this guy Joe's a little crazy, you know, how can I get rid of 12 floors of people?

So I figured, how do I do that? And meanwhile, I knew the guy who owned the building, and he says, 'You know, Carl, I could use the lease if you get out, and I don't think these people do anything, I watch them.' And I go, I said, 'Bullshit, he's a real estate guy, what the hell does he know?' So I now go, and I figure, what the hell do I do? So there's a consultant around, and, you know, consultants are okay sometimes, you know, not too often, but sometimes. But I brought these guys in, nice guys, Columbia University, those days, and they were the great leasing experts of the world. You know, leasing, they do this for all these companies. I call them in, three guys come in, and one is a professor at Columbia, and he says, 'Mr. Icahn, we understand your problem.'

Very arcane. I said, 'Yeah, I heard that word before. Really arcane.' So I say, 'I want to know what they do.' 'Don't worry about it. Three weeks we'll be back, it's a quarter of a million dollars.' I said, 'Okay, I'll pay you a quarter of a million, come back in three weeks.' They come back in three weeks. Now this is sort of hard to believe, but it typifies America, but people don't believe it. Comes back in three weeks with a book like this, big book, you know, boom, boom, boom, yellow graphs, red graphs, green graph. I say, 'Hey, I ain't going to read this book.' I said, 'And I'm colorblind anyway.' So I say, 'All I want you to do, here's a yellow pad. I did very well in school. I'm a numbers guy. Tell me what they do.'

And I said, 'Here's your quarter of a million bucks,' and I give it to him. And he looks at me, he smiles, he says, 'You know something? You've been square with us, Mr. Icahn. You seem like a good guy. So I'm gonna tell you something. We don't know what they do either.' And I'm not joking. I am not joking. But here's the funniest thing. I mean, it's really sort of funny. I said, 'Screw it.' I called Joe up. You know, he comes over. He said, 'Great, great, do it.' You know, I gave him their severance. Nobody was mad. Got rid of the whole 12 floors. Sold the lease for $10 million. That was a lot then. If you shut down a grocery store, let's say you bought a grocery store and shut it down, you'd hear from somebody.

Somebody didn't get the apples right. Somebody, the pears were rotten or something. If you had a flower shop, the roses wilted. It was like out of a science fiction movie. It's like they never existed. I never got a letter, I never got anybody calling me. It's—they left. It was—it was like an E—one of those bombs, you know, it just hit the thing and, you know, kills all the people and—and the building stays. And—but, but I follow—I follow those principles. A lot of what I do, very many companies—there are very many companies where, and it's nobody's fault really, but it's just the CEO doesn't care. He's making a lot of money. And today it's very dangerous because a lot of these mediocre companies are borrowing money and they're borrowing money very cheaply.

And that's what theoretically makes the earnings that I think are very questionable.

But there's an argument to be made that some of these CEOs are borrowing the money to pursue buybacks and dividends and other financial engineering initiatives because they're worried that otherwise, if they don't, you're coming.

Yeah, I know. I know they say that. But that's not true, okay? They buy it back because they have options, okay? And they want their stock up, and that's all they really care about, and that's human nature. They know they're not very good at what they do. They really do know this, and they don't even wanna do it. They're out there, they're all scratch golfers, these guys. And they really—and by the way, even if I was coming, they're right with me. They're saying, 'Great, let's just keep buying the stock back.' You know, there are companies out there, many of them, by the way, that are going at 30 times earnings because they keep increasing earnings because they're buying back stock. I mean, each one is a little bit of a different story, but they're buying back stock, buying it back at very low interest rates, and inflating earnings by—they're not in any way,

showing you the real, real earnings. Okay, then, then, then they're looking—you look at, you look at a lot of these, for instance, that they're not depreciating correctly. They're going in, and if you look at a lot of companies—I mean, Valeant's a perfect example, but you have other ones, too. I mean, Valeant's a ridiculous example, right? I mean, Valeant, and the analysts let them get away with it. They go in and they say, 'Well, we're not gonna care about GAAP earnings. We're not gonna care about GAAP earnings.' Okay, nobody cares. Good. Okay, so Valeant goes and buys a company that has a product, a compound—it's a good compound, but it's going off patent in three years. So we don't care about that.

We don't have to amortize that because we're so good, we'll buy other companies. But by the way, when they buy the other companies, it's not research and development, they're not expensed. So we'll buy these other companies, so we're great. And the analysts are, 'Genius, you're geniuses, and go ahead and do it.' So the earnings are so overstated because it's just—take a lot of companies, take intangible assets, you know, goodwill. You don't amortize it when you give guidance. So earnings are way overstated in this country. You mentioned Valeant. Did you listen to Bill Ackman's phone call last week? No, I didn't listen to him, but I can imagine, I know what he said. I'm not mad at Ackman anymore.

We're not gonna get into that. We're friends, we're friends. I mean, in quotes, 'we're friends.' I disagree with him completely. I disagree with him completely on Herbalife.

I'm not in Valeant. Well, I don't want to say I'm not completely in it, but I'm not going to tell you where I am with it, but that's not the issue. The issue really is, the issue really is—and I don't even want to use Valeant. I'm using a concept. Valeant—they're picking on Valeant in a way because a lot of companies are doing the same damn thing. A lot of companies overstating earnings in this country. And you can just look at it and you know. I mean, this is what I do for a living. I mean, I know a lot of these companies just overstating earnings. One day, there's gonna be a day of comeuppance, okay? And it's gonna be a very tough day, or a week. I agree a lot with what Stanley said, but you don't know when.

You have real problems. I mean, not to go back to a thing, but I was reading something today while I was working that—what is it, AllianceBernstein says that these ETFs are very unsafe, and they are. They are. These ETFs, according to what Buffett said about the derivatives, they're weapons of mass destruction because what stands behind an ETF are bonds that don't trade. If you ask Larry Fink—and he's a good guy and I like him and we're friends—but if you ask Larry Fink, if he doesn't think they're unsafe, is he gonna guarantee liquidity? So when people wanna get out of the ETF and they wanna sell the bonds that are behind them, who the hell's gonna buy those bonds? Is Larry Fink gonna buy them?

Okay, that's my whole point. BlackRock's not gonna buy them. But I'm not gonna get into it.

Between Bill Ackman and Larry Fink, these are great friends.

Hey, I never said anything bad about Ackman. But I'm not saying anything bad about Fink. Fink does what he does and he does a great job. He sells that stuff and it's a great job he does and he does just what he should be doing. His job is to make money for BlackRock and he does it. But I will tell you that these ETFs, it's not just ETFs.

The whole system is really on a precipice to some extent. Let me just go back to activism for one last second. And I'm going to take you out of it. I'm going to put it actually on Bill Ackman, which is to say that there are activists that are sometimes right and sometimes wrong. And I'm going to use Bill in that he has had great success at certain times. But Herbalife has obviously turned out, at least thus far, not to be that same success. And if you were to look at, for example, JCPenney,

You could see real damage that took place as a result of that. Do you worry about making the wrong decision yourself? Yeah, I, I think that we all make wrong decisions. However, I think in a certain way over the years I learned this, that if you're conservative somewhat and you have capital—that's why I really, frankly, got out of the hedge fund business. I did it for a while, and actually, I was a good guy. I got paid for being really ethical because in '08, when everybody wanted money, I didn't have to give it to them because, you know, I had three-year money. So I did it. I said, 'Okay.' I sort of made a deal with people. I bought them all out. It was the best buy, one of the best buys I ever made.

I spent about a billion and a half, just anybody who wanted money, I gave it to them. And then the problem with the business and being an activist, it really doesn't go together. I don't believe—and I mean, I got good friends that are activists that make a lot of money, but the problem is if you don't have permanent capital, relatively permanent capital, you get caught in this kind of quagmire where you're gonna hit cycles. I mean, look, we're losing money in Chesapeake, for instance. Not a lot, because we made money the first time, but Transocean, we're losing a lot of money. Actually, the energy, we did well, because CVI worked out for us. But my point to you is that, in a strange way, some of these companies, I know it sounds completely anti-intuitive to you, and you're not gonna believe me,

But I don't really mind them going down because I know in my mind that I'm going to buy more of them. I'm waiting to buy more of all these companies. And I know it sounds anti-intuitive, but I've done that all my life. When these companies go down, I have the money and the buying power to do it. Then you can laugh and say, 'Well, what if it really gets a depression?' But I tell you, I was a big buyer in '08 and '09 of a lot of companies.

You have mentioned AIG. It's in the news. You do want to break up that company. You're going to see the CEO, I believe, on Thursday. The CEO was on television— "He's coming to see me." "He's coming to see you. You don't go to see him. What is that conversation going to be like? Just sort of bring us inside the room. What happens?"

Which, we're really very friendly. I could make you laugh at my expense. That's okay. Because, I'll tell you this, it's sort of funny. You know, I have these CEOs—in this case, I'm only gonna, I'm only gonna meet him in my office. But there was one, I think, and he was laughing, when we were going after Family Dollar. So this guy comes in from Tennessee, come up to have dinner in my apartment, and we come in there, and there, I knew we would never, you know, he, in my mind—and it's not a secret—wasn't the guy to run this company, but he was coming up just to schmooze a little. And he comes up, and he's a nice guy, but he's laughing. He comes up, and he says—and we have a terrace, and I make a martini—

And I said, "Have a martini." He said, "You know, I'd love to have"—he really did it. He says, "I'd love to have a martini. I'd love to, but I must keep my wits about me for this meeting." I said, "It's not gonna help you."

I want to turn the conversation briefly towards politics. I mentioned earlier Al Gore was here, and I mentioned the idea that Donald Trump believes that you should be his Treasury Secretary should he win the presidency. Officially, do you want the job? No.

I know he says that, but there's no way I would ever do that. And it's a joke, maybe. I don't know if he's joking or not. I think he's serious. No, I'm certainly not. I'm not ever going to be secretary of anything in Washington. I mean, I deal with Washington a lot, and we're very involved with Washington now. And by the way, I have to tell you something, that Washington has tremendous gridlock, and we all know that, and there's a law that it's almost absurd, it's almost complete no-brainer not to pass in the next month, which is—and it can be passed, and it's really closer than people think, and I've been working on this assiduously for the last three weeks, talking to Schumer, you know, talking to Paul Ryan, talking to all these guys.

About? About repatriation. In other words, we need a law that allows these companies before they're moving out like Pfizer. So you're against inversions? We definitely, there shouldn't be inversions because we gotta keep these companies in the country. Against is not the right word, it's just ridiculous. But I don't blame guys for doing them. In other words, Warren Buffett said it. He said, "Look, I have a fiduciary obligation to my company. If the law allows these, then people are gonna do them, and I don't blame them for doing them." But what you have to do, and it's so simple, is to change the law. The only ones that don't really want to do it, it seems to me, because I've spent the last literally week on the phone talking to all these guys, senators and congressmen, on the Ways and Means Committee, in the House, and on the Finance Committee.

Everyone to a man says we definitely should do this. Now what you do is pass a law and you say this money that these companies made over there, they're right not to pay taxes on them. Because you know what? Because they made widgets over in another country. And they pay tax in that country. Why do you think they pay double tax?

You think there's a realistic chance?

I'm hoping, I'm hoping, and I'll be proud of myself if we get it done, but I'll be proud of the congressmen and senators that do it. I really do believe that Ryan wants to do it, Schumer wants to do it. I think they all want to do it. The fight is that you have these two in Washington. The problem isn't that these guys aren't—I find a lot of these guys that I talk to on the phone in Washington, I know you're not going to believe this, a lot brighter than some of these CEOs I talk to. So, you know, I really mean that. So it's not that they're not bright. But the trouble is that they're dug in, that the left wing of the Democratic Party is dug in on one ideology, and the right wing of the Republicans are dug in.

And so the argument is, if we do this and pass these inversions, there's money we're never going to get. There are companies that are going to leave, like Pfizer. And as we sit here, they're more and more planning to leave. And it's very, very, very bad for this country if that happens. We're going to lose jobs. And I think we're much more on a precipice economically than other people do. Maybe Stanley, who just talked to you, thinks so. But what I am saying to you is that the left wing of the Democratic Party said, "Why should we forgive those taxes?" And you say to them, "But you're never going to get the taxes. It's not your money. You're never going to get them. They're not going to be repatriated."

And they're going to not only not repatriate it, but leave the country. So it's idiotic. 'Well, we think it's wrong to lower the tax.' And on the Republican side, it's like, 'Hmm, we should take the money back, let them take the money back, and don't charge taxes at all.' So it's really almost—it's almost like in a fantasy world, Alice in Wonderland, these two sides are so dug in against each other. But I think in this case, it would be so bad for the country that if you don't pass this, that what is gonna happen, there's gonna be a lot more Pfizers. Look, Warren Buffett did it, Pfizer did it, there's gonna be a bunch of companies. Like you say, you know, the CEO likes to buy stock back, the CEO also likes to make money for his company because his options will go up, and inversions make your stock go up.

And therefore, there's gonna be a lot of that happening if they don't pass this in the next three weeks or months.

I want to open it up to questions in two seconds. Let me just ask you very quickly: are you supporting Trump, just so we know? Yeah, I'm supporting him.

He's your candidate. When I say he's my candidate, at this point, I don't see who else I would support. I want somebody that's going to shake up Washington, get rid of that problem with the right wing being so crazy and the left wing being so crazy. And I think you need somebody that's not just a politician, but somebody that can go and do it from the outside. So you need somebody like a Trump that can face up to them and fight and get something done.

What do you think about, then, the conventional wisdom that his candidacy, at least early on, there was a view, broadly speaking, that it was not serious? Oh, I think he's very serious.

I don't agree with that at all. I don't know him that well, but I've known him for years and years. He's dead serious. And he thinks he's got a chance to win. I mean, and you don't. And I can't say I'm not really a politician. I don't go to Washington very much. In fact, I don't go at all. But, you know, I talk to him on the phone, you know. So I find my time better spent here. But

I would tell you that Trump is serious. Final question for you. You just started a Super PAC, $150 million, correct? There's an argument in this country about money in Washington and the role that money plays or shouldn't play. And just walk us through your thinking of starting the Super PAC and whether you think philosophically it's a good thing or a bad thing.

I think if a Super PAC discloses what they're doing, a lot of that law that you're talking about was because they weren't disclosing. It was secret. Money was being given in secret. But I see nothing wrong with going in and trying to press your point and trying to get things across in Washington. The trouble is that most of the time these guys in Washington just go out and try to raise money, and they keep working on raising capital. I think if you really want to change the laws, it should be more like in England, where there's a certain amount of money the government pays you. You want to go for a nomination, you want to go run for government, hey, you pass a certain test. I mean, I'm not going to make the law sitting here, and I haven't even thought about that.

Pass certain tasks, do certain things, show certain record, they give you money. And now you don't have to worry. You don't have to worry about kissing somebody's ass to get the money. And this is what really should happen. So that's what I think.

Thank you, Carl. Let's open it up for a handful of questions before we all get a cocktail. It sounds like a cocktail might not help, but we've got a question in the front.

Do you think other financial institutions are open to activism like yourself? Investment banks? I mean, clearly you've urged AIG in your letter last week, but just wondering if other banks, investment banks, asset managers, would be open to your type of letter like you said. About AIG, you mean? Exactly.

Yeah, well, look, I think, to me, I've said it publicly, I think it's self-evident that it should be broken up. And usually when it's self-evident, it's gotten to a point where over the years, you know, I've gotten this reputation, made a lot of money for a lot of these funds, and they listen to you. They do. And I can get an audience where some people can't, on the one hand. On the other hand, I'd love to hear, and that's why I'm waiting, I haven't answered what Hancock said today, what Peter Hancock said today, because, you know, he reached out to Carl and to say, 'I want to come up and see you.' So I'm saying I might as well hear what he has to say. I can't, frankly, I can't understand why you can't do it.

I think what he said today, I don't think made a lot of sense, but I don't want to really criticize it. Look, you have to have an open mind to these things. And he might have things to tell me that will turn, you know, turn my opinion and change it. So I want to hear what he has to say.

We're going to try to go around rapid-fire, if you will.

Thanks for coming today. So earlier in May, you made an investment in Lyft. You made a $100 million investment. And earlier in this conference, we had Chris Sacca and Peter Thiel talking about Uber and how great it is. And they claim there's only room for one. And you say there's really room for two. So I wanted to hear your commentary on that.

I can't quite hear what the question was. You have a stake in Lyft?

Apparently?

Yes. And Chris Sacca was here earlier today, one of the early venture investors in Uber. Yeah. Peter Thiel was also here. He's an investor in Lyft. The question, I think, is whether you think that there's an opportunity for two of these companies to coexist, sort of in an AT&T-Verizon-like model, or whether this is a winner-take-all, network-effect business where only an Uber could win the game. Is that fair?

Yeah, well, obviously, I wouldn't have put $100 million in Lyft if I thought only one could exist. So I think it's sort of self-evident that I wasn't just giving $100 million away because Zimmer's a nice guy, you know? You know, so, uh, but, but I will say, as an old arbitrageur, it's almost, I think, completely absurd that, uh, Uber sells for 55 billion and Lyft sells for two billion. Now, you can say two billion is too low, it was too high, you know, and none of them were worth anything. But if somebody's willing to pay 55 billion, in the old days, I would short that and buy Lyft. But I can't short Uber, you know, so I just buy Lyft. And I think, uh, I think that it has a very good shot, yeah.

I think so. All the way in the back. You got a cheap seat, so there you go.

Thank you. Mr. Icahn, I have a question regarding disclosures and for short positions. The New York Stock Exchange has proposed that the SEC make hedge funds disclose their short positions as they do longs. How do you feel about that?

Whether they should disclose what they're short is like... Yep. I haven't really thought about it. I believe in disclosure, but then you can't really... I have to see exactly what they put out. I never gave it any thought, really. Yes, sir.

Mr. Icahn, you mentioned earlier about Valeant. And Valeant has been criticized for being unethical, buying companies with product and then firing all the employees and then boosting the stock, boosting the price of their medications up to 5,000%. Do you have any feelings about it with investing, whether the company that you invest in is ethical or not?

Yeah, look, I certainly come from the old school where your handshake was your word, it sounds corny, and you don't have that as much today. But to get back to Valiant, I want to make it clear, I'm not here to criticize Valiant, or is that my purpose of bringing that up? My purpose of bringing it up is that many companies today, if you really studied the earnings, They don't even amortize intangible assets. There are many assets that aren't amortized. So I think earnings are overstated. And the S&P is really going, when I did a lot of, I did a fair amount of work on it, going at 23 times earnings, not 17, which is way too high, especially when you have zero rate interest rates. So I am... You know, I'm not telling you the market's going down tomorrow and go shorter tomorrow or even next week or even next month or even maybe next year.

But you have a real problem in this country. The earnings aren't there, even though you have low interest rates. I wasn't out to criticize Valeant. I was more out to criticize the way they report earnings. The earnings, many of them, are overstated, as Valeant, in my opinion, is.

Okay, we're going to sneak in two more questions. You, sir, you've been very patient over there. Carl, I'm going to do this to you so you can get your microphone a little closer to you. Okay. Okay.

Hi, John Ostrich. So earlier today, Larry Fink was here, and he said that they are very engaged with the companies in their portfolio, in terms of—they just don't do it publicly. And so I wanted to ask what the difference is in the two processes from your point of view. Why is it that it seems like there's less, fewer changes by asset managers as opposed to activists? And does it have something to do with a different process? Does it have something to do with the way a security analyst looks at things as opposed to maybe a private equity investor? Is it something about long-term strategy versus operating strategy in the short term?

Well, look, as I say, I like Fink. He's a good guy. But I do not think you could in any way categorize him as an activist who really—I know he disagrees with this, but I don't think they do very much. They're an index fund. Their job is to raise money for the index. There's a bit of a different agenda here. They're dealing with companies that give them money and buy their funds. So when they give them money and buy their funds, why are they going to throw them out? So why should there be a threat? Now, they say they do look at it and they do study it, but I have to tell you, I don't think they ever voted for me, and I've sued them so much. But to make another point, I think a lot of these other funds are becoming much more

much more oriented toward activism, meaning—I can't tell you—a lot of these funds call us up and say, 'You ought to be looking at this company or that company,' you know, because these funds are overweighted or underweighted against the index funds, which is helping the activism somewhat.

Hi, my name is Narelle. I'm a student at the City University of New York. I wanted to just ask you if you have a few quick tips or advice for students from non-targets that are trying to break into the industry and kind of stand out from the crowd.

You want to get into the industry? Yeah. Good idea, bad idea? No, I don't think it's a bad idea, but I think things are going to be difficult. It's just me saying it. I think it's going to be tough over the next few years. I think the public... I'm trying not to be pessimistic for next week or next year, but the public, I think... is going to have a great problem in what they're doing. You've got these bubbles that are forming, that have formed, these bonds that you have, high-yield bonds, junk bonds. To me, if there's a problem, they are going to go over a cliff. And the government, rightly so, is saying, hey, we're not going to play with you with this too big to fail stuff. So they're too big to fail with the Volcker Rule, which is good.

They should have that. So there's nobody to catch this. There's nobody to catch those falling knives. So I think the public's going to become extremely disillusioned in the next few years. But I'm not going to tell you don't go into the business. I mean, if you can get into one of these top investment banking firms, I mean, they get paid for giving opinions. They get paid for raising money. I don't know why they get paid, but they get paid, you know? And we try not to pay them too much, but, you know, so it's a great business if you can do it. The risk-reward's greatly in your favor. Hey, look, if you can run a hedge fund, it's great risk-reward. You take no risk, so maybe you take risk if you invest some of your money.

But so you really, in a way, we were talking about this inequality of income. Now, you know, maybe I'm serving my own purposes, but if you want to make a lot of money, take risks. You know, that's what a capitalistic system is about. But don't get paid all this money for what you're doing is managing money. And frankly, I'd like you to show me somebody that really knows how to pick stocks. I never met anybody that can. You know, I think over years, you go find companies, you nurture them, you like them, and you almost hope they go down because the Graham and Dodd model shows you this is selling cheap. But today, and then ironically, my son came in the business the last 10 years. He worked pretty hard, and he introduced me to Apple, which I think is the greatest company in the world.

But that's a Graham and Dodd company in a very strange way because you're buying Apple at eight times earnings or nine times earnings. So if you find those and nurture them and wait and have patience, you should make money, but today you get these guys making millions and millions of bucks for running money. And I, I hate to say it because they're all my friends, but you listen to them, I don't think they know what the hell they're talking about, you know.

On that note, um, Carl Icahn, everybody. Thank you very, very much. Thank you. Okay, really appreciate you being here. Uh, let me just say thank you for a wonderful day. Thank you, everybody, for your wonderful questions. Um, this is a conversation about the long term. It's a longer conversation. I hope we get the chance to do it.