In last weeks’ podcast I talked with Michael Parekh about the cautionary flags being waved by Bill Gurley, a top venture Capitalist at Benchmark. Michael Parekh has seen a few cycles as a Goldman Sachs partner who created their internet franchise. We ended the show talking about the Bill Ackman IPO (his permanent capital) and what it meant for markets.
Put simply, permanent capital is:
capital that does not require replacement but is in continuous existence
You can’t blame Ackman for wanting it. I am sure over the years he has faced redemptions at exactly the wrong time (at least for him). That Herbalife trade that has been so public likely cost him a few investors even though if he has held it like he says, the trade is becoming a huge win.
Not in the podcast, Michael explained to me this week on one of our routine walks that the quest for permanent capital began with Warren Buffet. Warren used the insurance industry as his permanent capital. The non stop premium payments were perfect for his ability to invest the way he did and obviously his investment success on top made this circle of capital of life the best ever.
Whether you manage $1 million or $1 trillion of other people’s money, this should be your goal.
Enjoy the podcast: