Billionaires often see what others miss. Yet Robert Rosenkranz embraces a philosophy of life that's hardly a secret.
Rosenkranz, 83, applies his knowledge of Stoicism to understand and navigate the world around him. Guided by Stoic philosophers such as Marcus Aurelius and Seneca, he puts their principles into practice.
Rosenkranz made an early fortune in private equity. Currently chairman of Delphi Capital Management, he spent 31 years as chief executive of its parent company, Delphi Financial Group.
Even though he's a self-described "natural born Stoic," he spent most of his life without deep knowledge of this philosophy. In his 60s, however, he learned how Stoics lived and what they believed.
"Once I started reading the Stoics about 15 years ago, it gave me a kind of framework," Rosenkranz told IBD. "I recognized it was so resonant to my life."
Live Life Like A Stoic, Says Robert Rosenkranz
Stoic principles include using reason to govern emotions, managing time wisely and attaining virtue by contributing to the greater good. The ability to focus on what's essential — and doing it well — affords more peace of mind than expending time and effort on what's not necessary.
The principles are easy to grasp but often hard to follow. For example, the Stoics sought to distinguish facts from interpretations.
"I find separating facts from impressions can be difficult to apply," Rosenkranz said. "You come to a conclusion and think it's right. But you want to step back and ask, 'Are there any other conclusions that are plausible?'"
The act of stepping back breeds humility: You realize that your perceptions are just one of many possible interpretations. It also spurs more accurate, logical, fact-based analysis.
Rosenkranz spent two years writing a memoir that elucidates Stoic philosophy. In his book, "The Stoic Capitalist," he also highlights pivotal moments in his eventful life — from his childhood to his career as a financier and philanthropist.
Bet Big On Your Future Like Rosenkranz
Decades before his interest in the Stoics, Rosenkranz was already acting like one. He just didn't know it.
At 35, he had a lucrative job as a partner at an investment firm. In a meeting with Joe Mailman, a wealthy business titan, he explored launching a private equity firm with Mailman's backing.
Rejecting a conventional arrangement, Rosenkranz offered to risk all his liquid net worth — $400,000 — and forgo any carried interest in exchange for 50% of the profits. He also agreed to absorb 50% of the losses.
"My suggestion would make our interests symmetrical: heads we both win, tails we both lose," he writes in his book.
Rosenkranz calls his proposal the most courageous business decision he's ever made. Given his highly leveraged position, he figured he had a one-in-three chance of losing the $400,000.
On the other hand, he set similar odds of great success. With the $4 million stake that Mailman would initially provide, Rosenkranz thought he had a one-in-three chance of generating $100 million in profit.
They agreed to the deal and it changed Rosenkranz's life. "There was a huge amount of fear," he recalled.
Overcome Fear Like Rosenkranz
To overcome that fear, he embodied the Stoics. He favored rationality over emotion — and mustered the courage to take action informed by reason.
His negotiation with Mailman followed the Stoics' blueprint. Rather than get flustered when the discussion took an unpredictable turn, he says he was able to "separate people from the problem."
Adopting a rational mindset, he sought to forge an agreement built on mutual gain. Listening attentively to Mailman helped him find a win-win solution.
Turn Anger Into Graciousness
Regulating your emotions, especially negative ones, requires discipline. That doesn't come naturally to many people.
"Robert seems to be aware of the need for keeping a cool head in business and thinking things through," said Donald J. Robertson, author of "How To Think Like Socrates." "The Stoics understood the need to maintain their calm and manage high pressure situations."
The ability to replace his anger with rational detachment came in handy during a high-stakes business meeting. In 1990, a bank executive reneged on his promise to buy back a troubled loan that Rosenkranz's firm had taken on.
Rosenkranz refused the bank's request to modify the loan terms. That led to a meeting with the bank's chief executive, who threatened to harm Rosenkranz's reputation if he didn't consent to the bank's attempt at loan modification.
"I was being bullied by the bank and I was so pissed," he recalled.
Rather than react emotionally, Rosenkranz regrouped. "I excused myself to the men's room," he said. "I needed to physically remove myself" from the meeting to calm down.
Returning a few minutes later, he realized he needed to capitulate. So he gracefully thanked the CEO for explaining the situation.
"I managed to act gracious in defeat, and I must acknowledge that he was correspondingly gracious in victory," he wrote. "I experienced him as a bully, but as Marcus Aurelius would have reminded me, 'Everything is just an impression.'"
Prioritize Reputation Over Saving Money
Upholding his reputation proved valuable at other points in his career. Prior to the October 1987 stock market crash, he had agreed to pay $220 million to buy insurer Reliance Standard Life of which $20 million was equity.
"Every deal announced before the crash was abandoned or renegotiated after the crash," he said. "I could've renegotiated a 5% or 10% reduction in purchase price."
Instead, he decided to honor the original terms. "I'd rather be known as someone who keeps my word in a negotiation," he said. "That's more valuable in the long run than saving a few bucks."
He shifted from private equity deals to focus on the insurance business, taking the CEO role and renaming the company Delphi. In late 2011, Japanese conglomerate Tokio Marine acquired Delphi's equity for $2.7 billion.
Control Your Emotions
Reflecting on his career, Rosenkranz credits his efforts to control his emotions as a key to his success. He lists three of the "biggest negative emotions" as anger, fear and jealousy. "You have to contain them or it can lead to bad outcomes," he warned.
When launching Rosenkranz & Co. in 1978 after his fateful meeting with Mailman, he knew exactly what kind of organizational culture he wanted to cultivate in leading his new firm.
In a previous job with Rand Corp., Rosenkranz admired how the California-based think tank operated.
"It was a model of open decision-making and reasoning," he said. "We were dealing with nuclear war and these momentous issues. There was no room for bureaucracy, thoughtlessness or corporate politics."
Value All Ideas
Rosenkranz often began meetings at his private equity firm by reminding staffers of his ground rule: No idea would be criticized. "I encouraged more junior people to speak up," he said.
He also refined his interview process to recruit top talent. When hiring investment managers, for instance, he liked to ask, "What was the last stock you purchased for your own account?"
Their response helped him assess to what extent they were thoughtful in investing their own money. This shed light on how they'd invest his firm's money.
Robert Rosenkranz's Keys:
- Built private equity firm and then grew an insurance business before selling for $2.7 billion.
- Overcame: Temptation to let fiery emotions overcome his pragmatic reasoning in key business negotiations.
- Lesson: "Stoics use reason to regulate emotions. We all react emotionally. We're not trying to deny that or suppress emotions, but it's your responsibility to decide whether acting on emotion will serve your interests or not."
