The billion-dollar grudge

After seven years of litigation, investor Bill Ackman uttered a very heart-felt expletive into his phone only to have the guy on the other end of it come back and bite him in the wallet.

In researching this week’s newsletter, I discovered the formula for what may be the world’s most expensive grudge:

(1 scammy company + 2 rival billionaires)/a heart-felt profanity = a billion-dollar loss

But before we get to Bill Ackman and Carl Icahn calling each other names live on CNBC, I will admit to being disappointed when I got to the end of Danzy Senna’s novel “Colored Television.”

Not because I disliked the book. On the contrary, I enjoyed it a great deal. The perspective it offered on both art and marriage resonated with me at a very deep level.

However … there is one character who does something that is absolutely and unambiguously wrong. Not criminal, but clearly unethical, and to make it worse, this character clearly benefits from the scummy behavior. I’m not going to be more specific than that because I don’t want to give away any plot points, but I wanted this character to suffer a comeuppance.

And it doesn’t happen. At least not in a direct way. Just desserts go unserved.

While I wouldn’t say the protagonist takes this with a smile, she doesn’t actively prosecute her grudge, either. She accepts what has occurred with grace and resolve.

The protagonist finds her own slice of happiness not by prevailing over the low-down, no-good charlatan who does her dirty, but by opting out of that world. She wins because she remains true to her art and her family.

I get it. And on an intellectual level, I agree with it, but on an emotional level … I had a visceral desire for that creep to get what he had coming.

I suspect this is more than just a matter of personal taste. There is a collective expectation that if you see a villain doing some villainous shit in a story, that character is probably going to get his (or hers) by the time the credits roll.

This reflects our cultural attitudes on fairness and justice. However, I believe it also speaks to a deeper tendency shared among humans: We value fairness. And while we may understand that the real world isn’t always fair, it doesn’t keep us from wanting to see justice served in fictional stories.

Thankfully, the participants in this week’s grudge match aren’t nearly as mature as Jane Gibson, the protagonist of Senna’s novel.

Principals: Carl Icahn and Bill Ackman

They are both incredibly rich men, and as rich men sometimes do, they went head-to-head in a fairly public battle of wills. Someone less sophisticated than myself might be inclined to dub this a “pissing contest.”

What was most noteworthy about this particular engagement was the amount of money that started this particular grudge: something like $4.5 million. That’s a lot to most people, but to these two? A rounding error.

The grudge that was left after the resolution, though? That wound up costing Bill $1 billion.

Explain this to me like I’m a kindergartner …

Bill and Carl spent seven years arguing over the ownership of a specific $10 bill. In 2011, their parents got together and agreed the $10 bill belonged to Bill. Then, Carl — who was several years older than Bill — called to say he was now ready to be friends with Bill. Bill offered a very profane instruction to Carl.

Several years later, Bill had gotten richer and had generally forgotten about this. Carl, however, had not. And when Bill bought a whole bunch of milkshakes, Carl saw the opportunity to stick it to Bill, and boy did he ever do that. Bill wound up having to pay a bajillion dollars for all of those milkshakes.

OK, let’s talk like adults …

In 2004, Bill Ackman sued Carl Icahn for $4.5 million. He argued that Icahn had refused to honor a provision included in a previous deal between the two.

The case dragged on for seven years. Ackman finally collected after Icahn ran out of options to appeal. Icahn wound up paying something like $10 million to cover interest and legal fees.

• Two Wall Street titans and a seven-year tiff | The New York Times, Nov. 26, 2011

After this was done, the two spoke on the phone. According to Icahn, Ackman asked to be friends. According to Ackman, it was Icahn who wanted to be friends, saying he would invest with Ackman. Ackman replied, “Forget you, Carl.”

Except he used a different F word.

The following year, Ackman publicly shorted the stock of a company called Herbalife. Ackman had a big elaborate presentation in which he stated Herbalife was a pyramid scheme. He called it a scam.

“I gave this sort of epic presentation laying out all the facts,” Ackman recalled in a 2024 interview with Lex Friedman. “Stock got completely crushed, and we were on our way.”

After dropping 20 percent that first month, the stock price not only stabilized, it rebounded. Icahn had quietly accumulated a significant amount of Herbalife stock.

“His motivations here were not really principally driven by thinking Herbalife was a good company,” Ackman said. “He thought it was a good way to hurt me.”

In other words, Icahn had a grudge.

In January 2013, both were on the phone for a live interview on CNBC. They spent nearly half an hour relitigating their previous disagreement and calling each other names. It’s truly hilarious.

Ackman said Icahn is a guy you can’t trust. Icahn said that after having dinner with Ackman, he couldn’t decide if Ackman was the most sanctimonious person he ever met or the most arrogant. Icahn on several occasions told the CNBC host he had no idea who he is.

That was the last of the public fireworks though the impasse over Herbalife dragged on.

Ultimately, Ackman said his fund lost $1 billion on the Herbalife investment while Icahn’s fund made $1 billion.

Explain this to me in business terms …

Well, that’s going to take some time. If you’re interested in the full timeline, you can click here.

So the bad guy won?

Kind of. While Icahn wound up having to fork over something like $10 million in that initial lawsuit, he made a bundle by propping up the stock price of Herbalife, which may indeed have been a pyramid scheme.

However …

It’s worth noting that Ackman’s criticism in Herbalife was rooted primarily in self interest as opposed to social reform. He saw an opportunity to make his investors a great deal of money, and any consumer protection or social good that would result from the regulation or collapse of the company was a biproduct of Ackman’s financial goal.

Honestly, Ackman is really hard to root for. He comes off like a hall monitor who’s set up a situation where his fund will profit from his tattling, and I can not deny that I found it satisfying to see him on the receiving end of a financial wedgie.

Is there a movie about this?

Yup. The documentary “Betting on Zero” was released in 2016, and it focuses on Ackman’s investment in Herbalife. I watched it on Tubi, which is free. The conflict with Icahn is explored, but it’s not the focus.

The movie does a great job of explaining the issues with Herbalife’s business model, but as hard as Ackman tries to position himself as a moral figure, he’s never quite able to do it.

So what did we learn from all that? Well, first of all, shorting stocks is a dangerous investment strategy. Secondly, you should probably be judicious about swearing at the uber rich.

During Ackman’s 2024 interview with Lex Friedman, he was asked if he had second thoughts about having done so:

Friedman: Is there any part of you that regrets saying, ‘(Forget) you,’ on that phone call to Carl Icahn?

Ackman: No. I generally have no regrets because I’m very happy with where I am now. I feel like it’s a but like you step on the butterfly in the forest and the world changes because every action has a reaction. If you’re happy with who you are, where you are in life, every decision you’ve made – good or bad – got you to precisely where you are. I wouldn’t change anything.

I see his point, but still …