Podcast Summary: Former Secretary of Commerce Wilbur Ross on Investing, Entrepreneurship, and Trump (#214)

Published on September 10, 2024

Introduction

In episode #214 of 3 Takeaways, host Lynn Thoman engages in a comprehensive conversation with Wilbur Ross, the former U.S. Secretary of Commerce. Ross brings a wealth of experience from both the private sector as the founder and CEO of W.L. Ross & Company, which specialized in distressed assets and companies in bankruptcy, and his tenure in government service. The discussion spans a wide array of topics, including investment strategies, the essence of entrepreneurship, navigating government bureaucracy, insights on China, working under President Donald Trump, and his vision for America's future. The episode culminates with Ross sharing three pivotal takeaways for listeners.

1. Investing: Disciplines and Strategies

Wilbur Ross delves into his investment philosophy, emphasizing the importance of discipline and a structured approach. He remarks:

"Markets, especially the public markets, have a natural upward bias because we have an expanding economy, we have expanding wealth, and so the tendency is for markets over time to go up." [02:29]

Key Points:

• Market Trends: Recognizes the inherent upward trend in public markets due to economic expansion.
• Investment Discipline: Stresses the necessity of having a clear set of disciplines, including familiarity with specific business segments and maintaining conviction in long-term prospects.
• Sticking to the Plan: Highlights the importance of adhering to one's investment strategy without succumbing to short-term market sentiments. He cites Warren Buffett as a paradigm of disciplined investing, noting Buffett's unwavering stance on fair pricing and his readiness to walk away if terms don't align.

Notable Quote:

"The key for a successful investor is to have a set of disciplines... stick to your plan, be disciplined." [02:29]

2. Entrepreneurship: Traits and Resilience

Transitioning to entrepreneurship, Ross identifies the common characteristics that define successful entrepreneurs:

• Self-Confidence: Entrepreneurs often possess higher self-confidence compared to typical executives.
• Headstrong Nature: A belief in one's ability to outperform within a large company by venturing out independently.
• Resilience: The ability to rebound from failures, a trait especially prevalent among serial entrepreneurs.

Ross shares the inspiring story of Harold Snyder, founder of Biocraft Labs, who overcame an initial business failure in the laundromat industry to establish a successful generic drug company. This narrative underscores the importance of leveraging relevant experience and remaining undaunted by setbacks.

Notable Quote:

"Being undauntable is a key characteristic of being an entrepreneur." [04:59]

3. Government Service: Navigating Bureaucracy

Reflecting on his role as Secretary of Commerce, Ross provides an insider's view of the challenges within government structures:

• Risk Aversion: Government officials exhibit a strong intolerance for taking risks due to the lack of economic rewards and the high potential for scrutiny from entities like the Inspector General and Congressional committees.
• Bureaucratic Hurdles: Innovation is stifled as bureaucratic systems resist change, preventing qualified individuals from implementing effective ideas.

Ross contrasts the private sector's reward-driven risk-taking with the public sector's cautious approach, highlighting the systemic obstacles to fostering innovation within government.

Notable Quote:

"The system is structured such that it discourages innovation." [08:10]

4. Insights on China: Competition and Fair Play

Discussing international trade and geopolitical dynamics, Ross shares his perspectives on China:

• Inevitable Growth: Predicts China's continued and eventual matching or surpassing of the U.S. economic stature.
• Level Playing Field: Emphasizes the necessity of fair competition, criticizing China's practices that disrupt uniform trading conditions.
• Trade Policies: Commends the efforts of his successor, Gina Raimondo, in addressing trade imbalances and advocating for equitable policies.

Notable Quote:

"If it's a level playing field... we should be up for competition." [10:13]

5. Working with Donald Trump: Leadership and Communication

Ross recounts his experiences working under President Donald Trump, offering nuanced insights into Trump's leadership style:

• Long-Term Relationship: Had prior interactions with Trump dating back to the 1990s, which facilitated their working relationship.
• Dynamic Communication: Illustrates Trump's method of conveying priorities through metaphors and varied topics, demonstrating his ability to integrate multiple objectives simultaneously.
• Efficiency and Trade Focus: Highlights Trump's emphasis on government efficiency and trade issues, using examples like budget control and negotiations with major corporations such as Boeing.

Notable Anecdote: Ross describes an early meeting where Trump used the metaphor of choosing between two pens—one expensive and one cheap—to underscore the importance of budgetary efficiency, revealing Trump's distinct communication style and focus on fiscal responsibility.

Notable Quote:

"He often speaks in metaphors, and that was a metaphor for reminding me of the importance to get the budget under better control than it had been." [14:22]

6. Optimism for America's Future: Education as a Pillar

Ross expresses a cautiously optimistic outlook for the United States, buoyed by the nation's entrepreneurial spirit and capacity for innovation. However, he raises significant concerns about the state of the education system:

• Educational Deficiencies: Points out that the U.S. ranks around 30th globally in fundamental subjects for young students, which poses a threat to maintaining global leadership.
• Technological Preparedness: Emphasizes the need for an education system that equips students with skills pertinent to an increasingly technological world.
• Self-Inflicted Challenges: Warns that failure to address educational shortcomings could lead to a decline in national dominance, attributing greater concern to internal issues than external threats from nations like China, Russia, or Iran.

Notable Quote:

"Our greatest weakness is that we are not properly educating our people for the world that's becoming ever more technological." [17:11]

7. Three Key Takeaways

Concluding the episode, Ross distills his insights into three actionable takeaways for listeners:

1. Economic and Defense Strength Under Trump:

   • Ross believes that during Trump's administration, both the economy and national defense were robust.
   • Trump’s assertive stance deterred adversarial actions from nations like Iran, China, and Russia.

   Quote:

   "The world was in pretty good shape under Trump... they knew there would be a breaking point where he would really let them have it." [19:18]

2. Critique of Democratic Economic Policies:

   • He criticizes Democratic approaches, particularly Kamala Harris's inclination towards price controls, labeling them as ineffective and inflationary.

   Quote:

   "Price controls have been thoroughly discredited time after time." [19:18]

3. American Resilience and Policy Mistakes:

   • Ross underscores America's inherent resilience and ability to find the right solutions after exploring various options.
   • He warns that policy missteps could impede national progress, emphasizing self-reliance in overcoming challenges.

   Quote:

   "The only way that America can be held back is by itself, if it makes mistakes in policy." [19:18]

Conclusion

In this insightful episode of 3 Takeaways, Wilbur Ross provides valuable perspectives drawn from his extensive experience in both the private sector and government. From disciplined investing and the resilient nature of entrepreneurs to the intricacies of government bureaucracy and international trade dynamics, Ross covers a broad spectrum of topics. His candid reflections on working with President Trump and his concerns about the American education system add depth to the conversation. The episode serves as a rich resource for understanding complex economic and political landscapes, offering listeners actionable insights to navigate their personal and professional lives.

Final Thoughts

For those interested in delving deeper into Wilbur Ross's viewpoints and strategies, his new book, Risks and Returns, is recommended. Additionally, listeners are encouraged to subscribe to the Three Takeaways newsletter and explore previous episodes for continued learning and inspiration.