Practice English Speaking&Listening with: 15. Guest Lecture by Carl Icahn

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Professor Robert Shiller: If we may begin.

Today we have a very special lecture.

I am very pleased to introduce Carl Icahn as our lecturer.

Mr. Icahn has a career that is

really relevant to some of the topics we have talked about in

this course. One theme that we've talked

about in this course is corporate democracy.

We've talked about a book written by Berle and Means

[Adolf A. Berle and Gardiner C.

Means, Modern Corporation and Private Property,

New York: Commerce Clearing House,

1932.] who said that shareholders are

so dispersed that they have really no control over a company

and boards of directors are self-perpetuating.

Well Carl Icahn has made a career of really opposing that

tendency in American business of self-perpetuating boards.

Carl Icahn graduated from Princeton University,

pre-med in 1957. In 1968, he founded Icahn and

Company. This company,

Icahn and Company, has taken substantial

shareholder positions in a number of major corporations,

including: RJR Nabisco, TWA, Texaco,

Phillips Petroleum, Time Warner,

Motorola. And when Icahn and Company

takes a position in a company it then becomes active in the

management of this company and in changing the way they do

business. And they have done this with

enormous success. So, Carl, I'm very pleased that

you could come and do this today.

Mr. Carl Icahn: Good to see

you, Bob. Professor Robert

Shiller: It would be really nice if you can give some clues

to our students here, who many of them are themselves

launching out on careers, of how you got started on this

and what your philosophy is and what you would recommend to

them. Mr.

Carl Icahn: The career you're asking about--I went down

to Wall Street back in--way back in the '60s and I thought I was

really--I had gone to Princeton, a really good school.

I had gotten in there from a tough high school;

I was the first to go from my high school.

Nobody believed I could do it--they never took an Ivy

League--the Ivy League never took anybody from this school I

went to. But anyway, I went;

got in and left there and I thought I was a real smart guy.

Cut it short--went down to Wall Street and worked with Jack

Dreyfus and then I was playing the market in 1961.

That shows how old I am. And in a bull market you make a

great deal of money by doing leverage.

It's a little bit like today with all the leverage that we

had and now might be coming to fruition.

I was borrowing money and bought all these convertibles

and I thought I was a genius and Jack Dreyfus said,

you're going to lose all your money.

I had made a few bucks playing poker and that's how I started

with about eight, ten thousand dollars and I made

all this money by borrowing at 90%.

I would go out and I was making a lot more in two weeks than my

father made in two years. My father said,

well you know, put the money away.

I said, no Dad, I'm really going to make a

fortune here. So, I went out--I remember

once--and bought a Galaxy convertible.

It was a beautiful car. I had a beautiful girlfriend;

she was a model--it was just pretty nice.

What happened? The crash came in 1962.

I was wiped out in one day; I didn't even have the poker

winnings left. I tell you, I can't recall if

the car left first or the girl left first, but it was pretty

close--maybe the same day actually.

After that, I learned you have to learn something and I became

an expert in options. After that, I built a following

and built a big following and a big commission base by just

learning one area very well. Probably, I knew that area

better than almost anyone on Wall Street.

Not to sound too presumptuous, but very few people knew it,

so it doesn't mean very much. But in any event,

I built up a big following and in 1968 bought a seat on the

stock exchange with the help of a one of my uncles.

By that time, I had saved a pretty big amount

of money for those days. Then, I got into arbitrage--but

not merger, bona fide. That's something else you

could--you can still do it today, but it's much tougher

with all these computers. So, I don't do it because I

don't understand the computers; they're beyond me,

so I don't work with them too well.

I'm being a little facetious, but not too facetious.

You could buy different convertible bonds and short the

stocks against them. You had no risk,

but you could make a lot of money and eventually we did real

well with that. What I do today still is pretty

much the same idea. You buy stocks in a company

that is cheap and you look at the asset value of the companies

that you buy the stocks in and it becomes a little more

complex. Basically, you look for the

reason that they're really cheap and the major reason is

often--and usually--very poor management.

In a sense, it's like an arbitrage.

You go in; you buy a lot of stock in a

company; and you then try to make

changes at the company. Today, if you read the

newspapers tomorrow, you'll read--we're trying to do

the same thing at Motorola and if you bother to read The

Wall Street Journal tomorrow--or maybe The

Times, I don't know--you'll see a

little bit of what we're trying to do there.

We're trying to get them to change the structure of the

company. We think the board is a very

poor board there and we're trying to change what happens.

The thing about corporate America--few people that go to

college, like where you are now, and most people in America

don't realize how poorly most of our companies are run in this

country, with many exceptions.

They're really very poor and when you get inside the company

you realize this. The real reason is there's no

accountability; there's no corporate democracy

and I've been saying that, prophesying it,

writing about it. The reason that we can make so

much money when we go into one of these is--I'm not even a

manager; I never took a course in

management and I wouldn't profess to really know much but

I don't micromanage--I put in a very good manager.

They cut the heck out of our costs, but they change the

structure of the companies. This is the problem in America

today, in my opinion--that we are basically undermanaged.

We can't compete because the best and the brightest don't get

to be at the top of the corporate ladder.

I have a sort of a metaphor that's a little facetious,

but not completely, about it.

I call it anti-Darwinian; it's anti-Darwinian in

America's corporations. That means, a guy goes to

college and this is the guy that gets to be the CEO and,

yet, he's in college and he's the kind of guy that was the

president of the fraternity. Now, all these presidents of

fraternities aren't bad guys, but basically the normal guy

that I remember at college was--he's always there at the

fraternity or the eating club. He's always there to be there.

If you have a bad day, you walk over to the club and

you're feeling bad--your girlfriend left you;

you did bad on a test score or whatever--and you go over there;

he's always there. He buys you a drink and you sit

around with him; he commiserates with you;

you play a little pool or whatever and he tells you

whatever it is. Yeah, my girl left me;

yeah well, they're all no good--usual conversation back

and forth. What would happen would

be--you'd like the guy. You can't help but like him;

you used to wonder a little bit, when the hell did he do any

work? But, he was always there for

you. He never made many waves;

he never said anything too obtrusive;

or, he never showed too much intelligence.

But, he was a good guy. He goes--that same guy goes out

into corporate America and politically he's astute.

He knows how to get along with people and he never really rocks

the boat. He never comes up with any

great idea; he's not a threat to his

superior and, as a result,

he moves up the ladder because, really, in corporate America,

there's really very little accountability.

What happens in corporate America--he moves up that

ladder. There's a good show,

"How to Succeed in Business," that was out many years ago that

sort of sums it up. If you say--if a genius has an

idea in corporate America--the genius has an idea;

the next idea is, they give him an idea to

resign. So, he moves along the ladder

and he gets up slowly up to the top.

Now he has two attributes: he's likeable,

he's politically astute and he's a survivor--he's not really

a threat and he gets to the top. These are the attributes of

today's CEOs for the most part, with exceptions.

He doesn't ruffle feathers; he doesn't get the board upset;

and as he moves up the ladder, he finally gets to be number

two to the CEO. Now, the CEO has the same

attributes--where he doesn't want to be threatened and he's a

survivor. The CEO will never let anybody

be number two who's smarter than he is.

So, by definition, the assistant to the CEO is a

little dumber than the CEO; now this guy now is the

assistant. The board likes him;

the CEO eventually retires and they make this guy the CEO--the

fraternity president we're talking about.

Now he's now the head guy--the CEO--and he'll bring in a number

two guy that's a little dumber than he is because he doesn't

want to be threatened. So, by definition,

we'll be run by morons pretty soon.

We're not too far from that right now--from that point in

our economic history. This is a problem that we have.

Now, we've been able to do okay in this country and pretty well

even with the fact that we're badly managed because over the

last twenty years we've had a pretty free ride.

We've gotten from all over the world--the whole global economy

has been booming and we've been able to get cheap goods and

these cheap goods kept us from having inflation.

Very simply put--if you don't have inflation,

it's easy for the Federal Reserve to keep pumping money

into an economy; so, money kept flowing.

You were sort of in a punchbowl. The country was at a party and

we kept drinking from this punchbowl, enjoying ourselves,

and the rest of the world would take our dollars.

They would take our dollars because everybody thought,

oh, America--it's great. It's a little bit like you came

from some town and there's one family in the town that doesn't

do much work--sort of propagates.

We'll all lie around the pool; have fun;

party; eat a lot;

have the big cars and have the good times.

The rest of the town works hard on the farms or wherever they

are and they keep bringing stuff to this rich family's estate.

They give them whatever they want;

they give them food; they give them clothing,

but, you know, anything.

The rich family just gives them IOUs and they keep taking the

IOUs, so the rich family doesn't do anything--just lie around the

pool and have fun and travel or whatever--and everybody's

working. Well, one day a few of these

people are going to say, I don't want your IOUs anymore.

What the hell am I going to take your IOUs?

They're worthless because you lost all your money.

Well, our country--think about it--is a bit in that situation.

We've been giving our IOUs, which are dollar bills,

to the rest of the world and taking their cheap goods.

However, we're reaching a point now where the dollar--as you've

been reading if you're attuned to it--the dollar's devaluating

as we speak. We've got, I believe,

a real problem on our hands in the economy.

The other thing we've done in the last five,

ten years--and I know Bob Shiller's been talking to you

about this--is housing. Housing is like tulip bulbs,

almost. There was a big crisis in

Holland in the 1600s on tulip bulbs--but I like reading about

this crisis, because everybody bought tulip

bulbs--thought it was the greatest until one guy looked

and says, hey what the hell am I doing

with this tulip bulb? And all of a sudden he had a

crisis. Well, I'm not going to get into

the depth of it, but our banks,

because they wanted to make more and more money--and our

investment bank, Wall Street--kept issuing

different paper against mortgages so it made it simple

to give a mortgage. These mortgages were given out

to people that couldn't afford them and today you have what you

call subprime mortgages--subprime paper.

They issued against this paper stuff called mortgage-backed

security. They securitized them and these

things are all floating around now.

There's maybe about three trillion dollars worth of stuff

backed by mortgages out there. Well, as you've seen,

these have produced crisis of confidence and I don't think

we've heard the last of it. The government sort of bailed

out the situation by having JP Morgan take over Bear Stearns

and I'm not going to get into the depth of it here,

but it's a real fascinating story.

In any event, we have problems in our economy

and I think that we are going to see more of these problems in

the next year or so. I think Bob can talk to you

more about what's going to happen in housing,

but a lot of it depends on that because if you can't have your

housing prices go back up, a lot of people that bought

them can't afford to pay the mortgages;

nor will they want to. If they see the homes go down

in value, they're going to just say--they're going to walk away.

Now, if that happens, these homes are the collateral

to the banks for all these mortgages and we're going to

have--and probably do have already--a recession.

That recession could become a lot more acute because

today--I'm not going--I'm going to open it for questions

soon--but today, there are six trillion dollars

more of debt in this economy than I believe it can sustain

because everyone--the middle class went on a borrowing binge

over the last few years to buy these homes and to buy for

any--with the credit cards and go buy anything they felt like

buying. As a result,

I'm not certain that they can pay that six trillion back.

But, even if they can, they're not going to be willing

to go buy more things. As you have that happening and

you have inflation, the earnings of our

corporations will go down. They estimate--I've talked to

one or two very good economists in the last few weeks.

They estimate that earnings of the S&P averages will go

down about 20% in the next year. With that, the stock market is

at, I would say, a precipice;

you don't know which way it's going to go.

With all that said, you have to worry about all

these things and I know you're studying this and you're

learning about it. But, I think there will be

great opportunities ahead for you and the ability for Wall

Street to again securitize and buy a lot of these companies.

If you have capital, you'll be able to buy these

bonds. So, I do tell you that I think

Wall Street is certainly a good area if you're thinking about a

career. I still think it's a very good

area, but I'm not going to tell you if you love to write or you

love to play the cello to go and come to Wall Street.

I do think it's a good career. I think it makes sense.

I think that corporate America is learning from this and I

think we're going to make our top management much more

accountable in the years ahead. There are tremendous abuses in

corporate America today. Your CEO makes 400 times what

the average worker makes and he's just simply not worth it.

The reason you have this is that you have no

accountability--that shareholders simply don't vote;

they don't care about voting and there's a whole reason for

that. You have an interesting

relation with the owners of a lot of our stocks,

which are the mutual funds and institutions that don't like to

vote against these managers. However, someone like me and a

few other activists do get a vote now and we do get a proxy

fight going and we'll see, for instance,

what happens to Motorola--that's what we're

doing as we speak. I think that that will give an

opportunity for young people like yourselves to get into

corporations in our country.

While I think Princeton is the--might be a little better

than Yale--I think Yale is a good school.

I think that all of you are really probably the top,

top, top of the student bodies in this country.

Going ahead in your lives, I think that the corporations

might be a good place to look or Wall Street for that matter

because I think there's going to be a need for bright people.

I think that you'll be able to be rewarded for it in the fact

that there will be accountability again.

Well, when I say "again"--there never really was accountability.

So, I think there will be a true corporate democracy that

will have to evolve so that we can become competitive with the

rest of the world again. With that, I'll just

basically--I think, Bob, just leave it open to

questions and see if anybody has any.

Student: You mentioned in 1962 you kind of blew up.

After that entire debacle ensued, how did you regain your

confidence? I guess, most importantly,

how did you regain--or gain--the confidence of future

investors? Mr.

Carl Icahn: Well, you asked a few questions.

I mean, how did you gain confidence?

I don't think I ever lost confidence in my ability to

understand what was going on. I just learned that you have to

really work at something and understand it and little by

little--I mean, it was sort of interesting.

I'm a sort of an obsessive guy and I work real hard all my

life. I really get into something and

I really delve into it and when I came up with what is a letter

there at that time to people who sold these options--they were

wealthy people across the country.

It was sort of interesting--it's not around

today--but they would sell options, calls on a stock.

So, if you--if you're someone who traded the market,

you'd like to buy an option on XYZ stock and wealthier people

across the country would sell these options--would you give

you right. Today, you have the CBOE;

it's much more computerized. But then, you would do what

these--over-the-counter transactions.

I was really one of the first to come in and say to people

across the country, rather than do it with your

broker who doesn't really understand this business,

rather than sell it, sell it with me.

I was a broker--just sell with me.

Little by little, people actually answered my ad.

I would put out an ad and say, get to see what the true prices

are and what the real value should be for that option if

you're selling through Merrill Lynch or you're selling with H,

in those days--or whoever. I'd get letters from all over

the country and literally I'd stay down on Wall Street until

midnight calling people in California that would write in

for this letter and we built up a big following because I was

really--the rich can be--The only real honest guy in that

business because everybody--I mean,

not that they were dishonest, but you know the brokers didn't

care. They'd get business back from

who you sell it to. I'm not saying that we did

anything criminal or anything, but nobody really cared to get

the right price for these people.

So, by getting them the right price, they would stay with me

as customers for years and years.

So, we built it up and built it up and then I got one assistant;

then I got another assistant and I kept moving up the ladder.

It took a lot of hard work and perseverance and that's really

where it went to. From there, it was arbitrage

and now what I do. What was the second part of

your question--I forgot? Student: How did you

regain confidence in your investors and people who gave

money to you? Did you feel confident that you

could get them to give you money after you had kind of washed

yourself out? Mr.

Carl Icahn: I told you that we had that letter and that we

were able to, after the letter,

have the--I don't know if you heard me because I was sort of

telling you that we put the letter out and we just gave them

a good thing. Student: Thank you.

Mr. Carl Icahn: Okay,

all right. Student: Hi, Mr. Icahn.

How are you? Mr. Carl Icahn: Hi.

Student: I'm Mark Kotter. How are you?

Actually, I have three questions for you,

but I'll start with the first one.

I watched the 60 Minutes special on you recently and they

tried to portray that there had been kind of an evolution in

your career. They showed some bad press from

the80s with the TWA deal and then they showed some good

press recently with the so-called Icahn Uplift and some

of the political--I mean, the corporate activism that

you've been engaged in. In that interview,

you sort of insisted that you hadn't changed at all and I was

just curious if you had changed and you didn't want to tell the

reporter or if the media was giving you a bad rap?

Mr. Carl Icahn: I can't hear

the whole question, but I haven't changed.

I haven't changed at all. They call me a raider;

they call you an activist. I mean, I haven't really--I

think what we do though is very helpful to all investors.

I mean, I think that's the point because when we get into

the companies, the stock goes up for

everybody; so, it really works out,

but I've never changed what I do.

Student: Okay. Actually I have two more

questions. The second question was about

China and there was a special report in the recent Economist

talking about the ravenous appetite that China has for

natural resources right now. I was curious what you thought

the effect that would have on global financial markets and

your investing strategy? Mr.

Carl Icahn: Well, yeah.

I mean, China is a great buyer of all of these commodities.

The trouble with this country is we don't have a lot of that.

We don't have a lot of natural resources to sell them.

Your question really--what this country does?

We make software; we make technology;

we're innovative, but so are they.

So, what we really have to do is become a lot more productive

and we have to make our companies a lot more

competitive. Today, I feel we're losing that

edge. While China is going to

continue to buy things, it doesn't mean they're going

to buy them from us necessarily even though the dollar has gone

down a great deal. Student: Thank you.

This is my last question. New York Times

columnist, David Brooks, gave a great commencement

speech last year at Wake Forest and he said he was a journalist

who led a boring life and observed interesting

lives--people like you. I was curious--he mentioned

that a lot of the great people that he'd met--successful

people--had lots of pictures of dead people on the

walls--meaning that they had conversations.

He said nearly famous people had pictures of themselves on

the wall, truly famous people had pictures of dead people on

the walls. I was curious if you had any

pictures of great historical figures or what historical

figures inspired you or influenced you on a regular

basis? Mr.

Carl Icahn: That's a good question.

Well, one of the greatest philosophers I ever read was

Aristotle and I think his Nicomachean Ethics,

if you read it, makes a great deal of

sense--where you live with this golden mean but at the end use

your intellect. I mean, now you have to really

read him in depth to understand what he's saying.

Then there's a poem by Rudyard Kipling I like,

If; I'm sure a lot of you read it.

If you could keep your head about you when all you are

losing theirs. I read that every once in a

while and the code that we follow that's really important

to be able to meet the triumph and disaster and not let either

of those imposters--treat those imposters just the same--meaning

that if you're doing great, don't think you're a genius.

And if you're doing badly, don't think the world comes to

an end. If you work hard--maybe it

sounds trite--but if you work hard and don't let your ego get

ahead of you, as so many people do when

you're doing well, and don't let yourself become

too despondent if you're not doing well for a while,

then have faith in your own ability and really work hard at

whatever you do; give it everything you have.

If you can do all that, I think the chances are that

you're going to hit a lucky streak because luck comes and

goes. If you have your health,

luck comes and goes and realize when you're doing really well

that it's not just you. Then, when you're not,

it's not just you either. So, I think that kind of thing.

You should read that poem. Student: I like the line

where it's, if you can be in a crowd but not lose the common

touch--that's my favorite line. Mr.

Carl Icahn: That's right. Student: That's a good

one. Mr.

Carl Icahn: That's right. If you can walk in a crowd and

still not lose the--if you can walk with kings and not lose the

common touch. You know it.

I've never walked with kings though, so I don't have to worry

about losing the common touch because I'm not walking with

kings. Student: Hi, Mr. Icahn.

I have two questions. My first question is,

to what extent can investors like us adopt your strategy of

buying cheap and expecting the value of a company to go up?

Mr. Carl Icahn: Well,

I mean, that--I don't consider that being--that's barely a

strategy. I think that when you buy

something, the best is--that sounds simple.

It's not simple to buy, generally, when everybody

thinks you're wrong. The more people that think

you're wrong, the better you're going to do

in the long run. That's how it works because at

the end of the day, when everybody is against you,

everybody sort of stumbles. So, it's very hard to do it

psychologically, but at certain times you're in

between and you're not going to get the benefit of that.

It's the old gray but dark philosophy that you should just

look at value. But, one of the things is when

people have given up on a company--that's the perfect

time. But, it doesn't always work

because you have to be damn sure you're right.

I mean, sometimes everybody is right but generally it's not

true that they're right. Generally, if you look at the

total outlook on a company and if everybody sort of is down on

it, that's one to look at. Student: Thank you.

My second question is: what, in your opinion these

days, do CEOs need to do to be successful?

Do they need more education, experience, industry knowledge?

Mr. Carl Icahn: I think the

answer is that most of them have to leave the company.

To be a little fairer about it, the CEOs of a lot of companies

probably could do a good job, but they're more into building

up. It's like the royal "we."

It's more like the imperial CEO and they build up a huge amount

of people around them and they very rarely get to the nub of

the problem. Some of them are probably okay;

they're probably good guys, but there's no accountability.

It's like you go to school and if you never have tests and

nobody ever bothers you. That's what really happens

until they really hit the bad times.

I guess you could say I'm a bad time;

when I come in, they don't like it too much.

I think that the problem we have today is--very

simplistically--you don't have true elections,

so you can't--it's very hard to get rid of the CEO even though

you theoretically have the vote; it's very hard to use the vote.

I mean, can you imagine in a political race that the senator

is fighting--the incumbent is fighting--for an election and he

can take all the money out of Washington.

He can take it out of the Treasury of the United States

and the other guy can't. It's completely set up and

rigged for the CEO because anybody coming in to fight

them--they sue them to begin with.

They sue you to--they don't sue me anymore too much because they

know I'm not going away, but they sue--they do not let

you have--I could go into all the different shark repellents,

we call them, but it's very,

very difficult to beat off these guys.

I think that's going to change in the next four or five years.

That's what I was telling you. And I think we're going to have

a better corporate democracy, which gives people with real

talent who are really--with a work ethic--a chance to really

make it. Student: Mr.

Icahn, as you've touched upon, we may be in the worst credit

bubble in history, currently.

If you are right, the upcoming debt deflation

will be long and painful. How would you recommend that

investors protect their wealth during this period to take

advantage of upcoming investment opportunities?

Mr. Carl Icahn: Well,

it's hard to recommend how to invest at this time without

knowing how much capital you have.

I would be--again, I've been here at a different

arena. We invest and we look for these

opportunities now, but I feel that you have to be

certainly very careful right now.

You have to be very careful in your investments even though the

markets been going up the last few days.

I would be careful and not have all your money invested in

stocks. I would look at a lot of these

distressed debt--some of the distressed debt that has gone

down. I don't know if you understand

that, but some of the debt that--even bank debt,

which is the highest level, I think, has become very cheap.

So, that kind of stuff is something to look at,

but I'd be very careful in buying equities.

I mean, you certainly could make a fortune buying them.

I mean, I'm certainly not telling you it's not going to

work, but I think it's all risk-reward.

I would be looking at this--at the debt areas.

Student: You mentioned about the U.S.

dollar falling in value recently.

What kind of foreign currency vehicles or trading would you

recommend to kind of hedge a bet against a dollar,

assuming that it continues to fall?

Mr. Carl Icahn: Yeah,

I don't know much about currencies and I really don't

get into something I don't know something about--or generally

don't. I don't play the currency

market, unfortunately, because currency has gone down

so much. I don't necessarily think that

you should do that now because it could theoretically turn in

this country. But, I'm only saying that it

has become one of the manifestations of our

problem--the currency of the dollar has fallen.

You know you can't be that [inaudible]

about everything in Asia either.

Everybody loves Asia now and loves China and loves all these

countries, but you're going to have some global problems too.

So, I don't know that it's time to rush out of the dollar.

Student: Hi, Mr. Icahn. One major criticism that one

CEO against corporate activist that they think activists don't

think long-term interest of the corporation;

they just want to get money and get out.

How do you answer to that? Mr.

Carl Icahn: I would just say that the facts don't bear

that out as far as I'm concerned.

I mean, if you--I own quite a few companies.

Any company we got control of I put literally hundreds of

millions of dollars into them. I mean, I bought a company in

1985--a rail car company--we put hundreds of millions;

we still have the fleet. I bought casinos and energy

companies and over the years kept them;

sold them now, but that's after ten years.

So, any company that we've been able to get control of I

actually kept. Because getting control is a

great thing. If you really believe that

management's not doing well, you can go and clean them up

and put a good guy in, So, we--I know they criticize

you like that, but that's part of the

propaganda machine; but it's just not the facts.

Student: A related question is that,

what do you do when your activist spirit is not

appreciated, as in the case of Motorola when

you asked for a seat on the board but just get declined?

What's your next step? Mr.

Carl Icahn: Alright, you have patience and now it's

a year later and we'll see what happens now.

Motorola is a good example of what I'm talking about.

People don't like it; they don't like the cell phone

business, but I really think that that business,

if you look at Motorola and study it, you're buying that

whole business for nothing. It's not reflected in the stock

price, but they have to do it. As I said publicly,

take that business out of Motorola;

spin it off and give it to the shareholders.

I think, then, you've got a real good value.

What I'm saying is, nobody likes it now,

but hopefully I'm correct on that.

I really think by being an activist and putting pressure on

that board that has done nothing, really--I think

eventually that will happen, hopefully.

Professor Robert Shiller: Maybe we'll have

one or two more questions. Two more questions and then

we'll wrap up. Mr. Carl Icahn: Okay.

Student: Mr. Icahn, why does the United

States have bad corporate governance and which countries

have better models? Mr.

Carl Icahn: Alright, we have bad corporate

governance; it's evolved into this.

I don't think that Washington understands how bad it is;

nobody's really focused on it. The different states--the way

we're structured--the different states want corporations to

register and therefore the rules are such that they protect the

corporation with the poison pills.

I can't get into all these different things--stagnant

boards, poison pills--and I think if you just change some of

that we could be like, for instance,

England is much better. Canada is much better--where

you can--without getting into details;

I'll simplify this--where you can't have fewer elections.

The United States, because of the way that it's

structured in the states--the division between the federal and

the state governments--they have not been able to really curtail

some of the abuses. But I think it will occur

sooner or later, especially if you have a bad

recession. Student: Hi, Mr. Icahn.

You mentioned that you believe that many companies are poorly

managed. Obviously you don't invest in

every company, so I was wondering what factors

you look for in identifying companies that you want to

invest in and that you think are especially poorly managed?

Mr. Carl Icahn: Okay,

we look at a lot of the--we look at a lot of companies.

Obviously, I have a whole group of people here that do that and

I have a bunch of lawyers that look at all the covenants in

these companies and their bylaws and their charters.

But really, some of them become very apparent and when you look

at them you can understand. And you have to see that in

relation to the economy. Some of these companies--it's

just apparent that the value of these companies would be much

better if they were better run or they just simply did certain

things like breaking--like Motorola,

as an example, if they just broke it up.

In some biotech companies that we're involved now,

there's a need for them by the big Pharma.

The big Pharma hasn't really done research for years but then

he married in the biotech area and therefore biotech companies

aren't that well run, but they spent a great deal in

research for the large molecule drugs.

And so, therefore, you look at these and some of

them become quite apparent after you're doing them for years and

years. I've done them a lot of--it's

almost--after you do all the work, it's almost instinct.

The risk could be moderate. Just ask--it's like asking some

real great tennis player, well why did you move here

instead of there? Or a football player--when

you're running down the field, why did you go to this way

instead of that way when you're running down the field?

I don't think he could tell you; it's just sort of instinct why

you do it. That's after a lot of work on

it. Professor Robert

Shiller: Well I think this has been a very enlightening

talk and Carl, I want to thank you very much.

Mr. Carl Icahn: Thank you for

having me.

The Description of 15. Guest Lecture by Carl Icahn