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CNBC Exclusive: CNBC's Scott Wapner Interviews Carl Icahn and Bill Ackman from CNBC Institutional Investor Delivering Alpha Conference in NYC



WHERE: CNBC'S "Closing Bell"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Carl Icahn, Icahn Enterprises Chairman and Bill Ackman, Pershing Square Capital Management Managing Partner, live from the CNBC Institutional Investor Delivering Alpha conference in New York City on Wednesday, July 16th.

Following are links to the video of the interview on, and

Mandatory credit: CNBC Institutional Investor Delivering Alpha conference.

SCOTT WAPNER: It's great to have you back. Last year was fun. We're going to try to live up to last year. Get you to tell a few stories, talk about some stocks, talk about activist investing. What really makes you tick in what has become a rather controversial style of investing in today's market.

I do want to begin, however, with the insider trading investigation, and the news which broke about a month or so ago. We spoke shortly after that on the telephone. You told me at that time you had never met Phil Mickelson, said you had never given inside information to anybody, and you were proud of your record which you characterized as unblemished in the 40 or 50 years of doing this.

Where do we stand today? There's been a lot of science since then, where does this stand?

CARL ICAHN: I would say everything I told you is correct. I have to admit I'm getting a little tired of my friends, if that's the operative word, sending me emails asking for free golf lessons, and, you know, I don't play golf. I don't know Mickelson, but it seems, you know, that's the sort of jokes I keep getting that. And I would just say to you that I really don't want to discuss it any further at this time, and I think I would stand by what you just said.

And I may give Phil Mickelson a call. I've never spoken to him, never seen him. I may give him a call. He owns a few golf courses. So I'll call up and say, Look, I've got information for you, Phil. The information is I'll give you free use of my golf courses and see what he says. But I tell you this, I had never met the guy. So these things happen, I guess.

SCOTT WAPNER: You're not going to talk about it?

CARL ICAHN: No, I don't want to talk about it at this time.

SCOTT WAPNER: Do you feel as though, Carl, activism in general, unrelated to this, just in general, as it's really become prolific over the last year and a half certainly, and further obviously, that it's in the cross hairs, that more people are criticizing it, criticizing your style and that of other activist investors?

CARL ICAHN: I don't know what you mean by criticizing. In what way?

SCOTT WAPNER: Well, you know the criticism that's out there from -- whether it's Marty Lipton, Larry Fink in some respects, that you guys are only in this for short-term gain; that you're not in it for the long-term; that you're not in it for the best interests of the company over the long haul.

CARL ICAHN: That's completely nonsense. Because look at our record, IEP Icahn over the years. I've helped companies -- ACF. You can walk one of those railcars out of the store, all the way to Ohio. I bought it in the mid '80s, we made it flourish, we made it work.

I owned a lot of stocks 10 years, 15 years, 7 years. So, you know, you can't argue with nonsense. You know, in the PR machine, they used to say, you know, Icahn loses money for shareholders. Even they can't say that anymore because we made billions and billions of dollars over the last decade, over the last 20 years. They can't say that anymore. So now they're saying this. I can only speak for myself on that point.

But in a general point, you have a Germany -- and this country isn't Germany, and it may sound corny, but I do love the country. I'm not sure I love a lot of the people. But I love the country.

From my point of view, we're going to lose this because these companies we have, with many exceptions, there are many good companies and many good CEOs, we generally don't bother them too much.

But the problem you have is the wrong guys are running these companies, because it's sort of -- and I don't want to go into the metaphor, I've said it too many times, have the fraternity friend that works his way up, and then they like them, and boom, boom, boom, and he finally gets -- and he's a survivor and he finally moves up the ladder, the guy below him he knows to keep a little dumber than him. And he finally gets to be CEO, so the guy below him is always a little dumber. So we're going to have morons running the companies soon. And we're sort of almost there with many companies.

It's amazing how bad these boards are and these companies are when we get into it. Some of the boards interestingly want to help, they want to do something. But it's a sociological thing. They're friends for years, for years with the CEO, they don't want to stand up and say anything. But after we get off for a while and it happens repeatedly, some come around.

And look at Forest. It took three years, three and a half years for us to get this going. But you could have put that stock at 35 six months ago. Today even I was surprised, we got 100. Put a new CEO in, got $100 a share for it. I got real friendly, and I started to respect Howard Solomon, who is the CEO. We had dinner a fair amount. It's funny -- and I know this sounds completely strange, and you might not even believe it -- but I have dinner with a lot of these guys afterwards. We've come to sort of respect each other. Not bad guys.

SCOTT WAPNER: Some of them multiple dinners, I think, or at least one with Tim Cook. So even though you're arguing for change and for Apple to do some things, you're still having dinner with the guy.

CARL ICAHN: Yeah, I have dinner with these guys a lot. But in my opinion, he's doing a good job. We're not here to discuss that, but there are a lot of them that aren't. They shouldn't be doing it, they shouldn't be there. That's why we make so much money.

SCOTT WAPNER: You've maintained to me privately, and I think you've said publicly, your record speaks for itself. If you want to criticize activism and how it works and what the end result is, merely look at our record, because we've done pretty darned good in the style of how we've done it. But is there more to it than that, Carl? Is it disruptive to the companies themselves in a negative way?

Should Apple, for example, or any company, let's say they're sitting on a lot of cash, they're worried about the fundamentals of their business, shouldn't Apple be more worried about the product in its pipeline and things of that nature, rather than an activist investor shaking a big stick at them?

CARL ICAHN: I don't even understand the question. And don't take that the wrong way. I really don't understand it.

Look, Apple is a great company, has great products. Hopefully they will be coming out with more great products. I certainly don't know more than you, or anybody else out here. I talked to Tim Cook once, was impressed with him. I obviously believe, and still do, that they should give out that money. They should bring it back, repay, trade it, or even borrow very cheaply. But I say give it back, buy back stock, so the shareholders who like the company would benefit. And if they followed that advice, they would have made more money. But they did follow the advice to some extent. And I think they bought a lot of stock back.

I had dinner with Tim once, I was very impressed with him. I hope that the products that are coming on, they haven't had a really great new product for five years or so. They have this guy Ive who was there when Steve Jobs was there. So, therefore, I'm not here to push Apple.

SCOTT WAPNER: And my question, Carl, is not so Apple-specific as more to the idea of short-termism versus long-termism.

And Marty Lipton, for example, who has called you a bully, among other things, said you're only interested in short-term gain and your own interest and not those of the shareholders, despite what you say. I only bring up Apple as --

CARL ICAHN: It's like saying I don't like this basketball player, because he's too short. And the guy says, I'm 6 foot 9. And you say he's too short. How can he say I'm short-termism when I've had these companies for 7, 10, 15, 20 years. And he keeps saying it. It's a mantra. It's like no matter what you say, it's -- it's like a religion zealot that keeps saying my God is right. Well, how do you prove it, something like that.

It's absurd to dignify it, because it's just not true. You give them the facts and they keep saying it, well, what the hell can you say? They stop saying we don't have shareholders. Even they can't say that when we make billions and billions of dollars.

But then ask yourself why I do it. I think I'm a smart guy. I'm certainly not a great manager. But you look at our companies. They've all flourished, most of them. What does that tell you. Not that I'm a great manager. It tells you how bad and dysfunctional the system is that I can come in and look for a good guy to run it. And when you find a good guy, you make companies more productive.

You can say, Well, they have too much overhead. And oh, it's bad to go in and shake the tree, so to speak. But what good does it do to have five guys doing the job one person should do. What good does that do for society. You give them a welfare state. You can't have that. I mean, even the people who work there don't like it. And the CEOs are playing golf.

I don't know Phil Mickelson. Tell him to talk to these guys, you know, seriously. They're all out there playing golf and then we come along -- I used to joke, the only way you can get one of these guys off the golf course is for me to file a 13D. Because when I file it, get them on the phone, good, glad you called. When you first call, golf, yous wouldn't know it. The secretary would say -- this is back 10, 15 years -- we laugh. Secretary says, Icahn? Icahn who? You know, just tell them Carl Icahn is calling.

I call them myself sometimes, just, please, I try to be very pleasant, say, Do me a favor. Oh, he won't be back for a week. He's not to be disturbed. Actually, you can disturb him. Yes, I know how to get him. Ten minutes later the phone rings, he's on the phone when I call. Okay?

Because that's the only way you can get these guys, literally, off the golf course on many occasions. And I want to make very clear there are very good guys around.

SCOTT WAPNER: Plenty that you like, right?

CARL ICAHN: There are guys that I think do a damned good job. There are plenty of them.

SCOTT WAPNER: You looked at me kind of funny when I said "plenty."

CARL ICAHN: I didn't hear what you said, and you mumble sometimes.


SCOTT WAPNER: I said there are plenty of CEOs that you like. Right?

CARL ICAHN: Yes, yes.

SCOTT WAPNER: You looked at me funny.

CARL ICAHN: I thought you said there aren't any. Forget it. There are plenty that I like and think do good jobs, and I respect them. And sometimes you need the CEO by the way, as we did at CBI, so we had a guy at CBI and look how well we've done there. We kept the CEO after the fight.

We met him, and I really liked him and I think he's a very capable guy. And in that case, I think the board was at fault. We did stuff that he said I never could have gotten this through the board, like the MOP kind of thing. So there's a lot of unique different situations here.

SCOTT WAPNER: I want to talk more about your style of how you personally do things. Nelson Peltz, your good buddy. You've known him for 40 years you said backstage, right?

CARL ICAHN: I would say definitely I've known him 40 years.

SCOTT WAPNER: On stage, he said of you, Carl is a good friend. We have a very different MO. I don't like to compare myself to anyone else, but we like to get into big companies with great brands, like Heinz, like Pepsi, like Wendy's and get those companies to build those brands the way they should be.

And that's what we're trying to do. We're trying to build them for the long run, not make a quick hit over the weekend. How do you take that?

CARL ICAHN: I think we could break the sentences up of what he said. I hope he's not saying -- because I will give him a call, we're supposed to have dinner. I'll cancel it.

I'm hoping what he's saying is he wants to build it up his way, but not that we want to do a quick hit over the weekend. I hope he's not saying that. I don't think he meant that, because that's complete nonsense.

SCOTT WAPNER: You're not an over the weekend kind of guy?

CARL ICAHN: Over the weekend, I like to go somewhere with my wife. She said I don't travel enough. I don't think that's true. I don't think she means I should travel with her, though.

SCOTT WAPNER: Last spring you caught a lot of people, I think, by surprise. You did what many others have been loathe to do, and that's criticize Warren Buffett. You called out Buffett for standing in his growth or lack thereof in Coca-Cola against the pay structure, and you wrote an op-ed entitled, Why Warren Buffett is Wrong on Coke.

What motivated you?

CARL ICAHN: Look, I made it clear I respect Warren Buffett and I like him. I know him. And I think he was wrong, definitely wrong in saying that, you know, you don't want to upset -- I don't see establishment, so to speak. And you know, the -- and he even said, which is sort of amazing, that there are plenty of things I voted for that I don't agree with.

Well, that's not what a board is supposed to do. And even talking about what Peltz says, I think the board's job isn't necessarily to micromanage. I'm not going to criticize Nelson about the fact that maybe he is so -- and I can't talk about Nelson, because I can't know if this is true.

I see by his record that some of it might be, that he really is an expert on brands. In that unique situation, I think that's fine.

But what a board should be doing is the opposite of what they do. And even what an activist should be doing. Is not micromanage. You can't go to companies -- Einstein, I don't believe, could go in and go to these board meetings and be on these boards that people are on and really understand what the hell they're talking about what they do. These board meetings are a farce, to a large extent.

SCOTT WAPNER: He thought it was a missed opportunity on Buffet's part. Big shareholder Warren Buffett -- by abstaining, even though he disagrees, you would have come out and said this is wrong.

CARL ICAHN: Yeah, and I think he, over the years, has pretty much said what I've said about a lot of these CEOs and a lot of these companies. I don't think he's a great fan of a lot of them. I'm not going to speak for Warren Buffett. That's not a big issue for me, because I do respect Warren.

But I will say to you that in our system, we have a real problem. We have a real problem, in our economic society that what is going on is companies are not productive enough. I'm the living proof of it. If I can make this kind of money, if I can make this kind of money, I am the proof that there is something wrong.

I will be the first to say it. I can go in, and yeah, I'm not going to say -- I'm not a smart guy, and I did well in math and stuff like that.

But if you can't -- if you go into these companies and make the kind of money that we make, we do the strategy, we get in there, there's something wrong. Why isn't the board getting the CEO to either produce or get him out?

In other words, what a board should do -- this is my point. What a board should do is not tell the CEO what to do. They should leave him alone, really leave him alone. But what they should say, if you're not producing, and they could have a lot of ways to gauge that, a lot of parameters.

If you're not coming up -- and you're not doing as well as your peer group, get off the golf course and get to work and stop worrying about what plane you have. I can't tell you how many CEOs, they will spend 20 minutes talking about is the Gulfstream better than the Falcon that we're going to buy. And really, it gets to a point where it's absurd.

SCOTT WAPNER: I think Buffet's point is, look, just because you disagree with somebody in sort of his response to you, why can't you talk it out with them behind the scenes. Why do you have to be such a flame thrower?

I think our style actually would be more effective than the style that might be proposed by Carl, he said. It's a clash of --

CARL ICAHN: Well, I don't know if you say more effective at Coca-Cola, or what he's saying.

But I will certainly tell you -- I'll show you all these companies we've gotten on the boards with. They weren't welcoming me with open arms in the beginning. Maybe later. I didn't get any invitations to get on the board. I don't think they like guys like me on the board, because they don't want to be -- they don't want the bull flag.

SCOTT WAPNER: Buffett says CEOs are terrified of activists.

CARL ICAHN: Why is that bad? If a CEO is doing a good job, he isn't terrified of me. They will even say I've helped them quite a bit, and I'll give you names. I still have dinner with Greg Brown of Motorola. He loves me. Maybe he'll come up and tell you he doesn't. Maybe he'll tell you we don't want this guy on the weekend, pain in the ass. I mean, I don't know what he'll say.

I'm just thinking of him. We liked him. He helped us at Motorola, Greg Brown.

There was a CEO we didn't like. They didn't welcome us on the board, but we got on. But there were many CEOs I like.

Hey, I'm sure you'll bring it up anyway. At Time Warner, we went to Time Warner. We gave them the roadmap of what to do. Finally they did it, and Jeff Bewkes came in and, look, I think he did a very good job. I don't know the company well anymore and I'm not going to opine on whether the Fox deal is better or worse, I'm not going to do that.

But I think Jeff will tell you, if you call him -- I haven't spoken to him. We left the company many years ago. But I think Jeff would tell you that we helped; that what we did helped to change things. I couldn't win any proxy fight there. It was a little more difficult then because you have a dysfunctional system, and a lot of large funds don't want to join.

Now it's interesting. A lot of the large mutual funds are interested in talking to me. Interested in getting together because they want to beat the index funds.

The hedge funds, of course, will always generally be with me. A lot of the funds today, you would be surprised at the calls I get from some of these funds, because they all know -- I hate to say this, but they all know to the extent the company that we're talking about, that I'm right. Nobody argues when you say they've got terrible management, a lot of the companies I'm involved with. Nobody will argue that Family Dollar has a bad -- it's just management is not good there. You look at their record.

SCOTT WAPNER: Peltz is on the board. He told us today he's not satisfied with the way things are going.

CARL ICAHN: How come he's not putting his brand in there and doing all that magic. I'm joking. I think he's a capable guy. I really think he is.

SCOTT WAPNER: You brought up Family Dollar, let's go there. You sort of made your intentions well known with Family Dollar. You threatened to throw the whole board out. Did Nelson call you about that, by the way?

CARL ICAHN: No, he's on the board. He can't talk about it.

SCOTT WAPNER: The prospects of this whole scenario have changed a bit. Dollar General, which you wanted Family Dollar to sell itself to, is having a leadership change, which sort of muddies the water. Right? The Dollar General CEO is leaving. What happens --

CARL ICAHN: We're disappointed obviously in that. Sometimes these things take a long time. You can't -- I mean, Marty Lipton says we're here for a weekend thing, and we just want a fast payoff.

That's not true. We were in Forest for three and a half years. Sometimes it's longer, sometimes it's six, seven years. I do believe there's great synergy between Dollar General and Family Dollar. I think Family Dollar's management is lacking, but it's obviously somewhat disappointing that you have a very good CEO at Dollar General that's leaving, and that might throw a bit of a monkey wrench into a merger or takeover there.

SCOTT WAPNER: Does it impact you holding the stock?

CARL ICAHN: We don't talk about stocks we own or don't own. If we own them, and especially if I have a 13D out, my lawyers will kill me if I start talking to you about what we're going to do with that stock.

I will tell you this. It's very good long-term potential, not with the management. I've said this publicly, but not with the management that you have or with the board that you have.

SCOTT WAPNER: You're still considering the options that are out there regarding Family Dollar and what you think is best, given the change of leadership at Dollar General. Is that fair to say?

CARL ICAHN: Yeah, that's fair to say. We always look at strategies and options. But I will tell you that I do think, and I said it, that Family Dollar is in a good area. It's in a good area with a bad management. And with a bad -- you know, I've said it publicly. The CEO shouldn't be the CEO. And I don't mind saying it. A lot of people do mind saying it.

You know, people really want to be liked, and so do I. But somehow I talk and some people don't like me. I feel sad about it, but ...

[ Laughter ]

SCOTT WAPNER: Let me ask you, you're an outspoken guy, you've been pretty outspoken lately in your nervousness, if you will, about how you feel about the stock market, where we are right now.

Stan Druckenmiller was on this very stage earlier today. He raised the issue of the Fed; that the Fed has put too much punch in the punch bowl for far too long, and we're going to pay a price potentially down the road, that the risks have only increased, that the Fed is growing more and more behind the curve.

What is your thought as you sit here -- and you heard what Stan Druckenmiller has said. You're getting more and more behind the curve. And the Fed's getting more and more behind the curve. And as a result, the risks are increasing.

CARL ICAHN: You know, my son says this. He doesn't give me much credit most of the time. But he says you're a master at being a reductionist, meaning you see a lot of material and you pinpoint something that supports, and that somehow goes click in your brain and it matters.

Now, I'll read you something. I wrote it down, because I figured you'd ask me, and I have no memory. Janet Yellen, when she talked about monetary policy somewhere along the way, she said: Monetary policy ends the effect on financial vulnerability. So much for excessive leverage, et cetera, et cetera, which to me is derivatives. I'm very concerned about derivatives, always have been. Warren Buffett calls those weapons of mass destruction, but we still have them. That's because we have the cycle that we're in.

So she said the effect of the financial vulnerabilities, stuff like that, are not understood.

Now she's saying they're not understood. Don't you worry a little bit? I think Bernanke was great. I think the Feds did a great thing in saving this country, and they did. Like who got us into it, Wall Street got us into it. Let's face it. Let's not pull punches. Wall Street got us in the mess, they pulled us out.

Why they kept some of the management in Wall Street, I sure wouldn't have. If I had been the Secretary of Treasury, you wouldn't have seen the same management in some of these investment banks. Some are very good again, some aren't.

Being that said, if she is saying that, then there's not an argument, right? You have to worry about the excessive printing of money. Because you don't know. It's like having a patient, and the patient is there, may be getting better, but you keep giving them this medicine and you say to the doctors, well, what good is that going to do, maybe it's steroids of some type.

What is it going to do? We don't know what it's going to do. It seems to be making him better and happier, so we're going to keep giving it to him. What if he just blows up and dies. We'll say, well, we don't know.

That's really what she's saying. But we keep doing this, and I really think it's artificial what's going on. What we should be doing, and I get back to the old sore, is worrying about our productivity and who runs these great industries that we have. And who are the CEOs that we entrust them to.

If you look at many of the companies that I'm in, where I went into them and are in now -- I don't mean to pick on one or another, but it's easier because I'm in it.

If you inherited Family Dollar and your uncle gave it to you, you would keep that CEO for three days. Everybody would say that. You wouldn't keep him. He's not a bad guy. I met him, I had dinner with him. Nice guy.

But that's what we should be doing. We should be worrying about who runs the companies rather than just keep printing the money.

If you keep printing the money -- don't get me going on this -- and you keep giving guys money at 3 or 4 percent, even an idiot can take that 3 percent money in the company and has a gross margin of 8 or 9 percent and keep investing it. I'm making 9 and say, Geez, look how good my earnings are. Until one day, all that money is borrowing on a variable rate, which they are. One day, the stock's going up and up and up. And when it goes up, especially these guys, aren't going to be able to meet that challenge. And that's what I'm saying.

SCOTT WAPNER: Are you being more selective as a result in the kind of stocks you're buying and the kind of companies you're involved with now?

CARL ICAHN: Yeah. I have to tell you this, that IEP -- and I've said it before, and it's public, has a great record, which proves -- which proves, and that's one of the reasons I talk about it, that proves that activism works.

Here's my point to you. If you bought that stock in 2000, just proves the activism, you're up -- annualized, as opposed to putting it in the bank. If you bought the hedge fund index at the same moment in time, over those periods of time annualized, you'd be up about 22 percent annually. Hedge fund index, 4 percent. Okay.

Over the last five years, it's even better. You would be up about 36 percent annualized.

But the beauty of what I'm saying is that throughout, we've been extremely hedged. If I didn't have the hedge on, if I didn't have the shorts on, we'd be up, instead of the 22 percent, close to 38 or 40, if we were wrong only.

That proves this works. But it also proves how nervous I am about the market. It's never going to be fully hedged.

At IEP, I try to keep a major hedge on, because I am very nervous. And I think one day, and you don't know when -- and I really mean this, it could be ten years, it could be ten days. I worry about the fact that what Janet Yellen says -- if she doesn't know what effect it's going to have, how the hell do I know? How does anybody out here know? How does any analyst know? And yet we keep doing it, and the economy doesn't seem to be doing all that great.

So you could go on and on with that.

SCOTT WAPNER: Let me ask you about one stock in particular that we haven't spoken about all that recently, that I haven't heard you speak on publicly in quite a while, and that's Herbalife. There's a lot going on around Herbalife. Things have sort of died down behind the scenes of these investigations that have been going on in various corners of this country. You're still in Herbalife.

CARL ICAHN: Let me cut it short a little bit. I'm not on the board, I'm a representative of the board, and I have a confidentiality. I can't really talk about Herbalife. Not because I'm trying to hide anything, but because we're in a quiet period anyway, because earnings are coming out. So it's the worst time for me to talk about Herbalife, and I can't talk about it.

I will say one thing, that we bought -- I'm proud of it. We bought 17 million shares at an average of 37, and we haven't sold one share. That's all I can say. I think we have to drop it there.

SCOTT WAPNER: You know who is on the other side of that, of course.

I wonder what he thinks about sort of where we are now. Why don't we ask him.

Bill Ackman, ladies and gentlemen.


Bill Ackman of Pershing Square. Of course we do have a couple things made up for this event. Everybody obviously knows what happened about 18 months ago live on CNBC, which was quite a moment for everybody involved. We decided to have a couple of shirts made up, one for each of you, Bill and Carl Reunited, and on the back It feels So Good, with Delivering Alpha the logo.

Bill, I will present you with one. And, Carl, one for you as well.


CARL ICAHN: Extra large, I hope.

SCOTT WAPNER: No offense.

Thanks for coming.


SCOTT WAPNER: How in the world did this happen? How are you guys reunited on this stage after what happened on live television nearly 18 months ago?

BILL ACKMAN: What I would say is I respect Carl's story. Actually, he talked about it in our interview. I had a huge head start versus Carl, in terms of -- I grew up in an affluent community, went to great public schools, had a great education. Carl had a little tougher start. And he's done incredibly well over a long period of time, and you have to respect that record.

He had a business dispute ten years ago, it took eight years to work it out. Carl is as persistent as I am. I was a little annoyed with him. Again, the way you sold this to me, you'll have 15 minutes to respond to Carl. I'll call you in your office, everything is fine, and you didn't. You surprised me with Carl. So it's my turn to surprise Carl, I guess, today.

But he was actually thoughtful and supportive of what we're working on with Valeant on the Allergan situation, and that was complementary. And I thought that was big of him.

SCOTT WAPNER: That changed the way you thought?

BILL ACKMAN: Actually, I called him and an assistant picked up, whoever was in the office, and I said, Tell Carl I'm calling to forgive him.

True story.

She said, Oh, I think he'll really like that.


So he called me later that afternoon, and we chatted for 45 minutes.

What we talked about, we moved beyond Herbalife in about 30 seconds. And I listened to Carl's interview. But where we share a lot of commonality is the importance of the shareholders' ability to have a voice in the way a business is being managed.

SCOTT WAPNER: It's funny, I was thinking about how we were going to have this conversation. And in contrasting your styles as to whether, Carl, this was activism old school, new school, or the irony of the whole thing here is that you guys are from the same school when it comes to activism and what you're trying to accomplish.

Is that true, Carl? Would you say that?

CARL ICAHN: Yeah, I do. I think -- and that's one of the reasons I do respect Bill. I was thinking about it, before Bill called and I said, you know, it's almost crazy we're at these loggerheads. Because I heard you say different things about different companies, and you're one of the few guys that really does speak out. There aren't too many that do that. I respect what he said here and there. What the hell am I fighting so much for?

And then you called. I called him back and said, Blessed to forgive. That's how we left it, and that was pretty much it.

SCOTT WAPNER: So what -- Bill, now I guess asking you to be a little introspective here. You watched Carl's career. Before you wanted to be an activist investor, when you were thinking about being a hedge fund manager, you must have known about Carl. Are there things that you have seen over the years and in respect of his style, learned how to deal with companies; how to go into adversarial situations as an activist and come out on the other side a winner?

BILL ACKMAN: I would say we have a different approach. But I think what I respect about Carl is he says what he thinks. There are a lot of people who are not prepared to stand their ground, speak their opinions, say some things that might be uncomfortable for other people to hear. That's important.

And in a word, if you think about the capital markets, a hundred years ago, Andrew Carnegie, JPMorgan, these guys would own 20 percent of U.S. Steel. If the CEO wasn't doing a good job, the owner would step in, replace the CEO, replace the Board. And what happened over 100 years is Andrew Carnegie's heirs -- he didn't have heirs. I guess he gave all his money away, to the mutual fund industry.

The vast majority of capital today is passively managed, extremely passively. Who really owns EPS? I mean, index funds tracking index, and you have this huge separation between the people who put up the capital and people making petitions at the corporate level. And that distance creates risk. Look at Japan. If you could look at the inefficiencies of the Japanese economy, the 20-year recession that they're trying to dig themselves out of, a lot of that has to do with the government structure and cross ownership and the inability for the owners to have a voice.

So if you think about Carl Icahn 1.0, which I watched in the '80s, when I was in college, what happened was, it's really Mike Milken that gave capital to entrepreneurial investors that put them in a position where they could take an underperforming company and threaten it with a change of control.

In that model, Carl was more about him. It was helpful to the other shareholders if he catalyzed change, but sometimes Carl walked away with a profit what he got bought out by a CEO who just wanted to get rid of him.

What changed in Carl Icahn 2.0, and I think what we like about it, and I've been an activist in '92 when he went into the business, is that the only way Carl is successful is if all the other shareholders benefit along with him. And Carl is not going to be successful if the -- if Carl is 9 percent or 5 percent or 6 percent or whatever -- unless he has the support of the other holders, he's not going to succeed.

I think a very good system in a world with a lot of passive investors is one in which there are at least a few the entrepreneurial investors, prepared to say what they think, prepared to propose a change in management, change in strategy, change in cost structure, capital structure. And it's like supporting a trial balloon. Carl's problem is other people's problems. They're louder when they pop. But the point I would make is, he needs the backing of the institution, the retail investors, in order to succeed.

And now without Carl, there is no proposal. I think you can agree or disagree with his ideas, but I think it's a very healthy thing for the capital market, for the so-called shareholder activists, and we were able to convince the shareholders at the Canadian Pacific to support our management team. If we were unsuccessful, we would have to go home.

So it's a strategy where I think there is very little down side. Because, again, the public -- the major shareholders have to support the activists.

SCOTT WAPNER: Carl, what would you add to that?

CARL ICAHN: Yeah, I think, on a more general level, there's a real problem in our economy related to what Bill just talked about, and he made the point just now about Andrew Carnegie. So Carnegie, if he had a company and the CEO wasn't doing well, it would take two days, you would get rid of him. Today you have CEOs you can't get rid of. Now, what does that mean? So who is really going to suffer by this? The people are going to suffer is the middle class guy or the lower middle class guy. I'll tell you why. The Archie Bunkers of the world are thinking they've still got a pension fund. But I'll tell you these pension funds, most of them are not run well. You think they're run well, but they're not. If you read something like what Dalio said, in his study on pension funds, I read it the other day. If you look at the numbers, they are saying something that's sort of horrendous, I don't want to really quote because I read it a while back. Again, it's my reductionist thing and I read these fast.

But if you look at this, looking ahead 10 years or 20 years, these companies, hedge funds will go bankrupt. They can't make it. Because they're assuming that they can make a 9 percent return and they're only making 4 percent return even in these markets, and these markets are real good.

So the poor guy in the lower middle class believes he has a pension fund doesn't really have one, maybe, because if they go broke, then you have to rely on the government to bail out the pension plan. If you look at the makeup demographically, you're going to have, I believe, a constructive Washington where they're not going to care about bailing out these guys. Now people are voting and -- 20 years from now, those that are voting and electing the senators and the congressmen that have to decide to want to bail them out aren't going to want to bail these guys out.

So you have a real problem, and we're not doing anything about it. Bill made a good point too. You have these ETF index funds. Maybe they give lip service to the fact that they really care about how these companies are run. But basically they're buying the index. They're just buying the S&P. If it goes up and down, they are still getting their god-darn percent. That's why it's a little better today with the mutual funds. But what you really have today are very mediocre management for companies, and that's your real problem.

I was reading the Wall Street Journal over the weekend on a book review. It's interesting. Bill Gates said in that book review, he said he asked Warren Buffett what was the best business book he ever read and he said the name of it was ... I wrote it down, but I'll tell you I can't remember the exactly name. But it's a book that I myself read years ago in the '60s, and it was by a guy named John Brooks. Some people heard of, some didn't.

There was one thing in the book that was really interesting and I remember from years and years back, in the '60s, but it's still true today. It may be said a different way. But anyway, Gates said it was the best book he ever read. It was "Business Adventures" by John Brooks.

He said something like this. I'm taking it out of context. But anyway: It doesn't matter if you have a perfect product and if you have great production. I'm paraphrasing. I can't read my handwriting. And if you have great marketing. But what you need is the right people to run and lead your company.

And that says it all. You need the right person to run a company. You don't need the board to run the company. In fact, it's a negative. The board -- listen, I'm on all these boards. I hate going to board meetings, and I try to put delegates on because the board meetings are something out of Saturday Night Live, for the most part. And again, there's some good boards, but it's sort of Saturday Night Live. Each guy comes up with his little idea. This idea. That idea.

I can tell you a funny story. I don't know if I can use curse words, or maybe you can't because you're on TV. I will use the curse words, so just leave a dash.

SCOTT WAPNER: If you can help it.

CARL ICAHN: If I can help it. So we --

BILL ACKMAN: They actually have Carl on like a three- or four-second delay. I was watching the TV in the back. You can bleep him out. You want to be in the live audience, just to hear it.

CARL ICAHN: Okay. You can bleep it out. I don't want to spend too much time. But this says it all. What I believe. I don't believe in micromanaging. I believe that the board should stay the hell out of it, for the most part, about new ideas, unless you're a Nobel Prize winner in a biotech company or unless you're really extremely knowledgeable in the food company or something like that.

What you want is the board to hold the them accountable.

So one day I had a board, we are going back quite a while, ten years or something. So we had Stratosphere Casino that we bought out of bankruptcy. And the board is there and all that. And one of the members of the board, I'm still friends with this guy, still on the board. He's a powerful guy. He pulls himself out. And he comes, I've got this great idea. He got an idea for a casino. He said, I've got this great idea. We have this room, room like this size. We'll make it into the Copacabana. Sounds like a damned good idea, because we two old guys, hey, the Copacabana used to be fun. Oh, yeah, that's perfect. We've got this empty space.

I said okay. So he goes and gets the architect, they're working on the plan. Now I brought in the CEO, a top meat and potatoes guy because that's what the Stratosphere needed. The Stratosphere was terribly run. It went bankrupt. You know, first of all, it spent too much money. They were trying to be what they're not. So I've got this meat and potatoes guy who's doing a real good job. He's cutting the hell out of the course and making us money.

So I called him up, said, We want to come out and see you, Rich. We have an idea. He said, Okay, Carl, okay, Mr. Icahn. And my buddy on the board comes with the plans and these two architects all dressed up real nice. And he comes out. We put this plan out. We're all smiling, look at this great idea.

I said, Wait a minute. Hold everything. I said, Rich, I promised you when I brought you in -- because I brought him from another casino. I promised you I'm not going to micromanage you, especially when you're doing so well. Tell me the truth. What you think of the idea? Everybody is staring at him. And he said, Dumbest F idea I ever heard.

And I reached over, and I tore up the plan. And that's how you should run a company, let the CEO run it. Don't interfere with him unless he's doing badly. Or obviously unless you have secular changes coming on. When you have secular, when you have major things that you have to do, or raise capital, that's what we do. We raise capital, make sure --

BILL ACKMAN: There is a time, though, when a board needs to get involved.

CARL ICAHN: I know you disagree with this.

BILL ACKMAN: No, no, no. I 100 percent agree with everything you're saying. Find someone and let them run the company. And by the way, David Weinreb runs Howard Hughes Corporation. Has done an unbelievable job. Hunter Harrison running Canadian Pacific. I never call Hunter. If Hunter needs me for anything, I'm available. If David Weinreb needs me, I'm available.

But there is a time -- I'm 100 percent, is a company should offer a 50 percent premium.

CARL ICAHN: Exactly. I just said that.

If one of my guys wanted to make an acquisition and he's the CEO, he ain't doing it without I saying okay. But that's different. That's not really operating. It's -- we have to be in financially. Look, I'll tell you. There is nobody better at finance than us. Made all this money. Hey, how do you borrow the money? Do you do it, where is the future? Now you look ten years away. There's secular change coming in. That's where we come in.

But you don't come in and tell him how to run this company, how to build a factory. Do you want to build it here, you want to build it there, or do you build it at all? We don't tell him. We should go do it. We just do it for $250 million. Took me three minutes. The guy is doing a good job, we're getting him the 250.

SCOTT WAPNER: Bill, you alluded to this a bit ago. You may be after the same thing, but your styles are different. You as well have faced criticism about your style of activism. I know you're not that fond of some of the things that Marty Lipton has said about activism. Maybe he said them specifically about you. He certainly said things about Carl.

What is your response to all of that; your style, how activism is?

BILL ACKMAN: What is interesting is actually for the first seven or eight years of our business, Marty Lipton was incredibly supportive of what we do. I don't know why he's changed or how -- what has changed?

But what I would say is there's not a shareholder that I'm aware of that is critical of -- again, Marty Lipton is not an investor in any of these companies. He runs a legal firm. They give advice to management teams that try to protect themselves from people like me and Carl. So he's got a franchise he's marketing. He's become the spokesperson for legal defense practice. Says call Marty when Carl shows up. Right? I think Marty should be sending royalty checks to Carl. And he --


Look, I think what matters is, the companies we've taken stakes in over time. And again, there are going to be exceptions. J.C. Penney being a very glaring example. But I think our batting average is about 27 for 30, Target Borders, J.C. Penney. Target should get out of the credit card business. The CEO lost his job because of a business that chose to retain instead of exit.

But putting that aside, ultimately, the three resale disappointments. In other cases, we made a fortune not just while we own the stock, but even after we exit it. I think the best test of an activist is not just how the stock does while they own it. So we exited general growth. 140-fold return for shareholders. Stock's up 10 percent, 15 percent since we sold it a few months ago. We want the businesses we own to thrive after we exit. I think it's a very good example.

But again, we're not successful without the support. When I mentioned index funds before, I wasn't critical. I think index funds are an ideal part of a great way for people to invest money very cost-effectively. The problem is that there's no one at an index fund who is going to put forth a proposal on changing management or changing strategy. And, in fact, there's very few people, if any, at big institutions -- you know, when you talk to the big institutions, for example, Allergan, we've had a lot of the major shareholders come to us and say, We're incredibly supportive of this deal. We can't get the board to return our phonecalls. But generally, we're not going to say anything publicly because we manage a lot of 401(k) money. And if we become activists, or perceived to be activists, we're going to lose a huge amount of capital that we manage for these big corporations.

And so the reason why activists are entrepreneurs is because Carl doesn't have to report to anyone and he can say what he thinks. We're a private business. We can speak the truth without fear of, you know, losing 401(k) accounts.

CARL ICAHN: And just to add to that, if you look at IEP, just to prove the point. Really prove it. So I'll just take a few of the companies, I mean, as well as we've done in the market in buying stocks and maybe selling them and getting them taken over.

So back in 2000 we went out and bought four little oil companies that were terribly run, put them together. Six years later those oil companies, we put in 200, 300 million. And IEP was in, we sold it for a billion five. And it wouldn't have been done if -- and I'm serious, if we weren't there. And the same with the casinos. I mean, there's another example. We bought these casinos that were sort of bankrupt, fixed them up and did it. With management. And we're not managers. I want to be the first to say that.

So I take a little grain of salt when the hedge fund guys suddenly come in and say, Oh, we're going to go tell them what to do, or we're going to help them. There may be cases where that's an exception. But I don't buy it. I buy the fact that what you do is bring in a top guy in that area and let him do it. And we've done it many, many times. I mean, we brought in guys in all these companies who have been really good. Look at Chesapeake. There's a perfect example in Chesapeake. They said to us, Oh, it's a mistake. You can't really -- if Aubrey --

We liked Aubrey. I liked Aubrey. He had dinner with him three or four times at my apartment. But he wasn't the guy for a lot of reasons. I'm not going to go into it about Aubrey. Because you can't change the culture, you'll fail. You can't change the culture. And the stock was like 15, 16, 17. We brought in this guy, great guy, Doug Lawler. We brought him in. We don't tell him what to do. He went in. He's cleaned it up. Their stock is up from 15 to 30. And the oil market hasn't changed that much. It's just put in the right person to run it.

That is a simple answer, and that's what we have to do for our society, by the way.

SCOTT WAPNER: Before we go, Bill, news today, more of it, on the aforementioned Allergan. You wrote a new letter telling them, Stop delaying this special meeting. What's going to happen?

Is the deal going to happen? How?

John Paulson was on the stage today. He's a shareholder for Allergan. He said the best thing would be for that deal to happen, thinks it will eventually.

BILL ACKMAN: I've written very few critical letters of board of directors, in 10 years, very few. Could be maybe three.

What is going on in Allergan I think is unprecedented, for a company with a $50 billion market cap, which is Valeant made a 50 percent premium offer for the business. The shareholders are clearly interested in at a minimum negotiating or learning more about this offer. The board has refused to have a meeting with Valeant. Okay. You can say fine, they won't have a meeting. But the response to the Valeant bid was to attack Valeant, call it a house of cards, accuse it of accounting fraud, and without basis.

So my understanding, if I went public and said this company is an accounting fraud, this company is -- you know, the organic growth numbers they are putting out are totally false and I didn't have a factual basis for that to prove those kind of allegations, the SEC would be all over that. Meanwhile, you have a public company, 50 billion market cap, 50 percent or more of their shareholders actually own Valeant stock, including some of their largest holders. T. Rowe Price is a major shareholder of Allergan and a major shareholder of Valeant. And the board of this company is attacking the Valeant currency as a way to defend the company. I just think it's completely inappropriate. Possibly illegal.

What they should do -- what is unusual about Allergan, which is very dangerous, is they put in place bylaws. The shareholders pushed for a special meeting for this. The special meeting provision is important because when a deal comes along and there's no ability, and the board won't respond, it simple takes a poison pill, the shareholders can't do anything until the next annual meeting which is a year away. Right?

So the shareholders asked for a special meeting provision. It was put in place, and what did Allergan do? They said, well, number one, instead of a 10 percent vote to call a special meeting, you need a 25 percent vote. And by the way, we put in a pill at 10 percent. And in order to get the 25 percent, we require to get to all the shareholders, which is going to take you a couple months. And by the way, we'll only allow you to hold this meeting, not within 90 days of the anniversary of the annual meeting, we can delay for 120 days, you have to fill out a whole long, lengthy document in order to make a proposal, make it incredibly difficult for people to call meetings. You can only call one a year. You can only call between October and February. Right?

Well, what are they afraid of? Valeant made an offer to acquire the company. They said, Look, we're actually willing to pay a little bit more. We're willing to negotiate a deal if the board will come to the table now. But the deal that's() a share in cash, but 44 percent of the combined companies are to be owned by Allergan. How can the board say the deal grossly undervalued the company if they don't analyze Valeant? Instead what they've done is attack the company.

The good news is the shareholders have been very supportive. 90 percent of the stock has changed hands. A lot of the investors don't believe the company is worth where the stock is trading today, unless the deal happens and they're not risk ().

So ultimately I think the transaction happens and the right thing for the board to do, sit down with Valeant, ask -- if they have any questions about the company's accounting, bring in their accountants, have them meet with Valeant's auditors, ask the CFO questions, ask for support for the organic growth numbers. If there's any doubt about the business, they should do that kind of due diligence.

SCOTT WAPNER: We'll make that the last word. Except for one thing. This Herbalife story. Who is going to win?

BILL ACKMAN: It's not about winning.


It's not about winning. I would love to find a way to get Carl out of the stock. 17 million shares at $32 a share, he can get out a very nice profit. I would love for him to walk away with a profit. That would be a great outcome for Carl, and that would be wonderful for us.

So, you know, Carl, maybe we should have a conversation.

SCOTT WAPNER: Maybe you will. Well, I can speak on behalf of everybody here. This has been wonderful. Guys, thank you so much.

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