The Stoic Path to Wealth, with Billionaire Investor and Philanthropist Robert Rosenkrantz

Summary

Afford Anything Podcast: "The Stoic Path to Wealth" with Robert Rosenkranz

Release Date: May 16, 2025
Host: Paula Pant
Guest: Robert Rosenkranz, Billionaire Investor, Entrepreneur, and Philanthropist
Podcast Network: Cumulus Podcast Network

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Introduction

In the enlightening episode titled "The Stoic Path to Wealth," Paula Pant welcomes Robert Rosenkranz, an 82-year-old billionaire investor, entrepreneur, and philanthropist. Rosenkranz attributes his substantial financial success and personal fulfillment to the principles of stoicism—a philosophy that emphasizes rationality, emotional regulation, and making deliberate, informed decisions. This conversation delves deep into how stoic philosophy has been instrumental in Rosenkranz’s journey from a financially insecure childhood to becoming a formidable figure in the world of private equity and philanthropy.

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Early Life and Embracing Stoicism

Robert Rosenkranz's upbringing was marked by financial instability. Growing up in the Upper West Side, his family lived paycheck to paycheck. His father faced unemployment for two years, and his mother worked as a clerk at a drugstore. This environment instilled in him a profound sense of financial insecurity and the realization that obstacles are inherent in life.

Key Insight:

"One of the stoic principles, really that the book develops, and that's a key part of stoic philosophy, is that the obstacle is the way." [00:35]

At the tender age of seven, Rosenkranz adopted an internal locus of control, deciding to take full responsibility for his life. This early embrace of stoicism fostered self-reliance and critical thinking, setting the foundation for his future endeavors.

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First Investment and Lessons in Luck

By age fourteen, Rosenkranz ventured into the stock market, driven by his interest in biographies and the potential to replicate the successes he admired. His first significant investment was in a Canadian stock promoted by a free newsletter. The stock tripled in value, leading his parents to believe he possessed a prodigious talent for stock trading.

However, his optimism was short-lived. Rosenkranz later discovered that the newsletter was running a pump-and-dump scheme. After confronting the newsletter's author, he sold the stock, resulting in no profit and personal disappointment.

Notable Quote:

"A negotiation is not a contest for one person to win. It's a problem for two people to solve." [02:27]

Lesson Learned:
Luck plays a significant role in financial markets. While his initial success was partly due to chance, the subsequent honest confrontation taught him the value of face-to-face communication and skepticism towards seemingly lucrative opportunities.

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Major Setbacks and the Stoic Approach

Rosenkranz's first major loss occurred with Ivy Hill Communications, a company specializing in record album jackets. The advent of the Sony Walkman led to a decline in the company's business. Faced with mounting losses and pressure from banks to inject more capital, Rosenkranz leveraged stoic principles to navigate the crisis.

Key Insight:

"The stoic idea of trying to remove yourself from the psychology and consider what each of the parties really wanted in this situation and apply some of the negotiating principles really saved the day." [11:49]

Instead of succumbing to panic or regret, he focused on rational problem-solving, ultimately deciding to sell the company back to its original purchasers at a loss. This decision, while painful, was aligned with his stoic belief in accepting what cannot be controlled and focusing on future actions.

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Negotiation Principles and Risk Management

Negotiation has been a cornerstone of Rosenkranz's success. Drawing from the book "Getting to Yes," he emphasizes that effective negotiation is about collaborative problem-solving rather than adversarial competition.

Notable Quote:

"Don’t confuse brains with a bull market." [08:25]

In his pivotal negotiation with Joe Mailman—a wealthy business partner—Rosenkranz demonstrated remarkable courage and stoic calm. Instead of accepting the conventional private equity structure that favored managers regardless of outcomes, he proposed absorbing 50% of the losses and taking 50% of the profits. This alignment of interests underscored his commitment to fairness and risk-sharing, ultimately leading to a monumental $100 million success following an initial $100,000 loss.

Key Insight:
Stoicism not only aids in emotional regulation but also enhances strategic decision-making by fostering a calm and rational approach to risk and negotiation.

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Business Philosophy and Strategic Focus

Rosenkranz built his net worth through a combination of frugality, strategic investments, and a keen understanding of market dynamics. After graduating from Yale and Harvard Law, he joined Oppenheimer and Company, where he honed his skills in private buyouts—an early form of what is now known as private equity.

Notable Quote:

"Make sure you know more about the situation than the other party does." [80:20]

His strategy revolved around identifying high-potential opportunities with significant upside while managing risks meticulously. This approach allowed him to capitalize on opportunities that others might overlook, leveraging his informational advantage to make informed investment decisions.

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Hiring, Delegation, and Organizational Management

Rosenkranz underscores the importance of building a competent team and delegating responsibilities to maintain focus on strategic priorities. He believes that high-quality businesses often require less specialized talent to operate efficiently, allowing leaders to concentrate on scaling and optimizing core operations.

Key Insight:

"The quality of a business is inversely related to the quality of the people that it takes to run it." [81:18]

His rigorous interview process ensures that he recruits individuals who not only possess the necessary skills but also align with the company’s values and strategic goals. By delegating day-to-day operations to trusted team members, he minimizes distractions and maintains clarity of purpose.

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Investment Philosophy: Private vs. Public Equity

While Rosenkranz acknowledges the merits of passive investing through low-fee ETFs for the average investor, his passion lies in private equity. He advocates for investing in businesses where one holds an informational advantage, thereby reducing the asymmetry of information that often plagues public markets.

Notable Quote:

"Avoid those kind of situations. Try to be involved in activities, business activities and other activities where you're the person who knows more than the counterparty." [34:31]

Rosenkranz emphasizes the importance of quantitative risk assessment and maintaining a margin of safety. He advises investors to focus on opportunities where the potential rewards justify the risks, ensuring that even in unfavorable outcomes, the consequences are manageable.

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Philanthropy and Pursuit of Longevity

Beyond his financial ventures, Rosenkranz is deeply committed to philanthropy, particularly in the field of longevity research. He funds scientific projects aimed at extending health spans and understanding the biological mechanisms of aging. His philanthropic efforts are a reflection of stoic principles, aiming to benefit society and contribute to meaningful advancements.

Notable Quote:

"I love the process. And I think that that is again, the secret of a well lived life is to find something to do that brings out your creativity, that encourages you to be the best you can, to encourage you to be always curious, always wanting to learn, always wanting to improve." [66:50]

His dedication to longevity research underscores his belief in continuous improvement and the pursuit of knowledge, aligning with his stoic philosophy of lifelong learning and personal growth.

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Motivation and the Concept of Retirement

At 82, Rosenkranz defies conventional notions of retirement. He finds motivation not in financial gain but in the enjoyment of the process, creativity, and contributing to society. For him, retirement signifies the end of active contribution, which he resists by remaining engaged in his passions and philanthropic endeavors.

Key Insight:

"If you're doing something that you're enjoying that's satisfying, where you're growing, where you're learning, why not keep doing it?" [73:40]

He urges listeners to seek continuous engagement and purpose beyond traditional career milestones, fostering a fulfilling and dynamic life regardless of age.

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Conclusion and Key Takeaways

The conversation between Paula Pant and Robert Rosenkranz encapsulates profound insights into wealth building, decision-making, and personal fulfillment through the lens of stoic philosophy. Rosenkranz’s experiences offer valuable lessons for investors, entrepreneurs, and anyone seeking to navigate life’s challenges with resilience and rationality.

Three Key Takeaways:

1. Invest Where You Have an Informational Advantage
   Rosenkranz emphasizes the importance of possessing more knowledge about an investment or business opportunity than the counterparty. This informational edge allows for more informed and confident decision-making, reducing risks associated with asymmetry.

   "You want to be on the right side of that asymmetry, not on the wrong side." [80:20]

2. High-Quality Businesses Often Require Less Specialized Talent to Run
   Contrary to popular belief, Rosenkranz points out that businesses requiring minimal specialized talent—such as laundromats or self-storage facilities—can be superior investments. These businesses are easier to manage, more predictable, and often offer substantial residual income with lower operational complexities.

   "The quality of a business is inversely related to the quality of the people that it takes to run it." [81:18]

3. Focus on Present and Future Possibilities, Not on Sunk Costs
   Adhering to stoic principles, Rosenkranz advises disregarding past investments or decisions that are no longer viable. Instead, concentrate on present and future opportunities, making clear and rational choices based on current information and future potential.

   "What's under your control is what you do in the future. So the sunk cost really should be disregarded completely." [83:24]

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Final Thoughts

Robert Rosenkranz's journey underscores the transformative power of stoicism in achieving wealth and personal fulfillment. By embracing rationality, managing emotions, and making informed decisions, Rosenkranz has navigated the complexities of business and life with resilience and wisdom. His story serves as an inspiration for those seeking to build a life of purpose, stability, and continuous growth.

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For more insights and detailed discussions, consider listening to the full episode of "The Stoic Path to Wealth" on the Afford Anything podcast.

Transcript

[Paula Pant]

He lost 100,000 on his first deal and made 100 million on his second. He was able to do that because he says he was born a natural stoic. And in today's episode, we're going to learn what that means and why it matters to any goal that you want to achieve. Welcome to the Afford Anything podcast, the show that knows you can afford anything, but not everything. Every choice carries a trade off. This show covers five pillars. Financial, psychology, increasing your income, investing, real estate, and entrepreneurship.

[Robert Rosenkranz]

It's double I fired.

[Paula Pant]

I'm your host, Paula Pant. I trained in economic reporting at Columbia. And today's guest is Robert Rosenkrantz, an 82 year old billionaire, investor, entrepreneur and philanthropist who says that stoicism and the stoic philosophy is a major part of what got him to where he is. Robert came from a family that lived paycheck to paycheck. His dad was unemployed for two years and his mom worked as a clerk at the drugstore. Growing up, he felt the financial insecurity of never knowing if they were going to cut off the electricity, cut off the telephone line. And it was through that that he learned to be stoic and he learned that the obstacle is the way. By the time he was 14, he began buying stock investments. And by the time he was 35, he had built a net worth of $400,000. That's the equivalent in today's dollars with inflation of about 4 million. It was at that time that he made a extremely high stakes business decision that would change everything. In this upcoming conversation, he shares his story. He talks about his journey from a poor childhood to a billionaire. He discusses his approach to risk negotiation and decision making. And he discusses his book, the Stoic Capitalist and why stoicism has been such an integral part of this path. Here he is. Robert Rosenkranz.

[Robert Rosenkranz]

Welcome.

Hi, Paula. Nice to be here.

I'm so glad that you've joined us. In your wallet right now, do you have a copy of the negotiation card from Getting to?

Yes, I believe I do.

Ooh, can we see it?

Here you go.

Wow.

[Unknown]

Wow.

[Robert Rosenkranz]

And this has been in here for what, the last 35 years?

I think longer than that.

Longer than that. Copyright 1988. Wow. All right, so tell me about why this negotiation checklist is so important that it's lived in your wallet for over 35 years.

One of the skills that I think people need in order to thrive, and one of those skills is negotiation. And the best book I've read about negotiation is this one called Getting to Yes, it's by a Harvard professor. And it has ideas that are very important. And the main thought really is that a negotiation is not a contest for one person to win. It's a problem for two people to solve. And the checklist gives you things to remember. So, for example, people, be hard on the problem. Be soft on the people. Don't let your emotions control what you're doing in a negotiation. The other person is likely to get emotional, but you should be calm. You should keep in mind the things that are maybe most important to you. But realize that for the negotiation to succeed, you've got to meet their needs as well.

Right. And you did that with great success when you negotiated with Joe Mailman, which is a story that I'm going to get to later. But first, before I do, particularly with having this card in your wallet, at moments when you need to do, you literally step out of the room and review what's on there.

Well, I mean, I've been doing this so long, I don't really need refreshers. But occasionally, if I'm going into a really important negotiation, I'll take a look at the card as a refresher on keeping everything top of mind.

Wow. And I imagine just by virtue of keeping it in your wallet, it's a reminder to broadly keep these skills top of mind.

Exactly.

Wow. So let's go back. You grew up in the Upper west side, but before, it was nice.

Exactly.

Back when it was like more like west side Story than like today's Upper west side.

Exactly.

And your father was unemployed for two years and your mom was a clerk at a convenience store, is that right?

Drugstore.

Clerk at a drugstore. So tell me about that childhood.

Well, one of the stoic principles, really that the book develops, and that's a key part of stoic philosophy, is that the obstacle is the way. So I felt as a child that I couldn't really rely on my parents. Their financial insecurity was clear to me and they made no effort to hide it. They were in panic about are they going to cut off electricity? Are they going to cut off our telephone? I mean, that could be an obstacle. But for me, it became the way to self reliance to realize that I would have to take full responsibility for my own life. And I came to that realization at age 7. A lot of people never come to it, but to me, it's a very, very important principle. Another thing I took from what you might consider a childhood obstacle is my mother was a communist. I mean, she was always quoting Karl Marx and the ideas just Seemed wrong to me. Again, the obstacle is bad ideas, but the way is critical thinking of not just accepting what's thrown at you from your parents, from your teachers, from the surrounding society, but thinking critically about things.

What was it at the age of seven that made you have such a strong internal locus of control and decide that you were going to take responsibility for improving your lot in life?

Well, I could see that my parents weren't succeeding either in the inner realm of psychology or the outer realm of coping with the material world. But I also was made to feel that I had the potential for academic excellence and that that could be my road to a better and more fulfilled life than I saw my parents leading.

And so it was around seven years after that, when you were about 14, that was when you made your first stock investment?

Yes.

Tell us about that.

Well, it was really sort of illustrates the principle of the role of luck in human affairs. So I was interested in the stock market because I had become a sort of voracious reader of biographies. And I talk about that as well as biographies as a guide to success in life or to a well lived life once you've achieved a degree of material success. Anyway, I knew that people could make fortunes in the stock market. There was a free newsletter that I got a subscription and it touted this Canadian stock and I bought the stock, I got my parents to buy the stock and it tripled in a couple of weeks. And I had nothing to do that summer. So I just walked into the offices of the newsletter and this guy was just so bemused by the idea that some 13 year old kid was following this letter, which was just a pump and dump kind of operation. He said, you know son, it'd be a good idea for you to sell that stock. And I sold it and then collapsed. And my parents had this idea that I was some sort of stock market prodigy as a result of this thing, which was just pure luck.

So I'm curious about that because number one, it was wonderful that when you actually went to go visit the offices of this pump and dump newsletter, that the guy was so honest with you in person. I think that speaks to the value of face to face communication.

Yeah.

What was it that made you believe him?

Oh, I was just naive. He was a good writer and he was, he wrote in a very compelling way about the company and what it was doing. And then the following summer, I believe, because I had a, quote, track record, my father's brothers all put up some money for me to trade the stock market, which I did with some degree of success as a 14 year old.

Yeah, yeah. So you were managing a portfolio at the age of 14?

I went into the brokerage office every single day like a regular job. And I was, quote, reading the tape, which is what one did in those days.

This is back when stocks were sold in 3/8, 1/8, 2/8.

Yes, exactly.

Yeah. I would imagine as a 14 year old who is managing not just your own money, but now the money of your parents, your uncles, you know, your extended family, that that would create some fear.

Well, I think what it created was overconfidence. I was doing pretty well and the broker said to me, don't confuse brains with a bull market. So clearly cautioning me against a feeling of overconfidence. But frankly, I, I didn't really experience fear, although I should have because it was a lot of money for a middle class family. It was about $3,000 and in today's purchasing power that would be about $50,000. So a lot of money for a not middle class family to entrust to a 14 year old.

Right.

So it was really a vote of confidence from them that I really appreciated.

When was your first major loss?

The first significant loss was the first deal I did when I went out on my own. We bought a company called Ivy Hill Communications, which was a printer of record album jackets. And they were the leading company in its field. All the big record companies used them. And then the Sony Walkman came out and the business collapsed. And I tell a story about how I was able to navigate that loss. It was a very painful and psychologically difficult situation to get through. But the stoic idea of trying to remove yourself from the psychology and consider what each of the parties really wanted in this situation and apply some of the negotiating principles really saved the day in that case. The other thing, the other lesson of that one was again, the role of luck. Knowing that you can get bad luck in any situation and building in, trying to build in a margin of safety, trying to say even if risks I haven't imagined fill against me, am I doing something where I have the resilience to be able to survive?

Hmm. You've mentioned stoicism several times, and it occurs to me that several of our listeners might not be acquainted with it. So can you, for a listener who is wondering, what exactly is Stoic philosophy and why is this a recurring theme throughout the story of your life? Can you address that?

Sure. Well, Stoic philosophy really comes out of ancient Greece and Rome. The first thing that I read was Meditations by Marcus Aurelius, who was a Roman emperor, and he was a profound student of Stoicism, probably the most philosophically grounded leader of all time. But the Stoic ideas, which I'll try to summarize them briefly. So the most important is to value rationality as our highest human attribute, to use reason to regulate emotions. Emotional responses are absolutely natural part of being human. But whether you act on those emotions or whether you think before you act, that's a matter that you can take responsibility for. And the Stoics would argue, always think before you act, and think particularly will your actions serve your interests. As an example, getting angry is very natural, but acting angry can really poison relationships that matter to you, can sort of set you back in a lot of different ways. Another Stoic idea that recurs is distinguishing between things you can change and things you can't, and not waste a lot of time and emotional energy on things that are beyond your control. Another idea is to value time as our most limited resource, to be really, really conscious of the use of time. Another idea is actually for peace of mind. Do less, but do it with greater concentration. Decide what's really important, really focus on it, and don't clutter up your mind or your life with non essentials. And the final principle, which I've certainly tried to live by, is live for the benefit of society, act for the benefit of society. And those would be some of the major Stoic ideas that have helped me cope as a child and helped me succeed as an adult.

How old were you when you read Marcus Aurelius?

I read him quite late in life, but I realized that I was a natural born Stoic. And the psychological offshoot of stoicism is cognitive behavioral theory. And when I started to study those two things, I realized that this was actually the way I was behaving right from age 7. And. And it became the impetus, really, for writing this book because it gave me a kind of a intellectual armature to pin the stories to.

You were an only child, but you had 44 first cousins, most of whom didn't succeed in any materially meaningful way. What do you think it was about you? And you keep referencing, Starting at age 7, what was it about you that was different from all of your cousins?

Well, I mean, I was certainly blessed with very good academic mind. I was able to succeed in mathematics and reading and pretty much all the academic disciplines. And it was something that was recognized very early on. I had a first grade teacher who felt like I was not going to be challenged enough in the public schools. And this actually let me take a step back. My father, when he was unemployed, had plenty of time for me. And the time he would spend would frequently be giving me math puzzles and logic puzzles and verbal puzzles and things that were designed to sort of challenge my mind. And I had that childhood concept that learning was fun, that using your mind was fun. And in that first grade, teacher sort of saw me as an exceptionally able kid. And she went to my parents and said, I'm not going to be challenged enough in public schools. You really should find a private school for Robert. And I said, look, there's no way we can afford to do that. This teacher took it on herself to get me a full tuition scholarship at a private day school in New York. So I was pretty damn lucky.

There's a popular meme going around the Internet right now that says all of us kids who were described as gifted children when we were young are now anxious adults. So how do you make that transition from being a gifted child to being a functional adult rather than one that's mired in anxiety and can sometimes get caught in their own way?

It's quite easy. Read the Stoic Capitalist. Seriously. I think one of the teachings of stoicism is that anxiety about the future or fear of bad outcomes can be debilitating, can be an obstacle to being your best self and living your best life, and sort of makes the point that the anticipation of a bad result is frequently a lot worse than the bad result itself. So I think stoic philosophy sort of helps in that regard.

Are the principles of this philosophy something that you constantly remind yourself of, or is it embedded now? I mean, is it something that you regularly, physically pull out and read?

Well, first of all, it was very natural for me. So it's just my natural way of being. Somebody, let's say, goes back on their word in a negotiation. I'm not going to say you went back on your word and get angry. I would say something like, well, I can appreciate that you might have changed your mind, but let's remember why the previous agreement really worked for both of us. You know, that kind of thing, really just expressing things in a kind of a cool, calm way as opposed to taking the bait of getting angry.

What I'm hearing is stoicism leads to diplomacy.

Yeah, I would say. And actually, the author of the book was a professional diplomat. I mean, he, Marcus Aurelius, a Harvard Law School professor. He was a consultant to the State Department and was very much involved in, like, hostage negotiations and things of that nature.

Oh, you're talking about Fisher and Ury.

Exactly, exactly.

I thought you were discussing Marcus Aurelius because he was also a diplomat, wasn't he?

Well, he had to be pretty diplomatic. You could get a lot done by military power, but most of what he did was really persuading people to do what needed to be done.

On the topic of persuasion, so we've been talking through your story. We've led up to you being 14, managing finances for your family to the tune of what would today be the equivalent of around $50,000. Take us through. By the time you were 35, you had a total net worth of $400,000, which was a lot back then.

More or less the equivalent of 4 million today.

Yeah. Take us through how you went from being a kid that came from a family that lived paycheck to paycheck to having a net worth of 400,000, today's equivalent of 4 million by 35.

I went to Yale as an undergraduate. I was the youngest in my class of 62. I was 19 when I graduated. I went to Harvard Law School, practiced law as a tax lawyer for two years. And then in this public service idea, I went to the Rand Corporation in Santa Monica, which was the leading think tank on national security issues. And I began my serious career as a financier or potential capitalist. After that, I joined a firm called Oppenheimer and Company. I was hired by Leon Levy, who was a senior partner there. I became his protege, and I was doing well there. I was quite frugal in my personal habits, so blessed with a wife who had put me under no pressure at all to spend more than I felt comfortable with. And so I was able to save a fair amount of money. I was able to take better advantage of investment opportunities that came my way than some of my peers. And that's kind of how I was able to accumulate, which in those days was a reasonable amount of savings.

Were you investing in public equities primarily?

No, we were doing primarily private things. We were pioneers, really, in private buyouts.

With your own personal money.

My personal money was really both in the stock market and in some of these early deals that we did at Oppenheimer that were the sort of precursors of what became the whole private equity industry. We call them leveraged buyouts. And we didn't know it was a. A business. We just thought it was. There were deal opportunities out there that we could take advantage of. And I had $400,000 of liquid assets, but I also owned small pieces of private companies, which was Part of what made me perhaps more courageous and my willingness to risk my liquid assets.

Right.

And I do tell the story of what I think is the most courageous business decision I've made in my life, which was to take the entirety of all my liquid assets and put them at risk in a business that I was being encouraged to launch.

Right. And that was the inflection point, negotiation that really changed your life.

Yes.

That's the reason that I bring up the fact that you had 400,000 at the age of 35. Up until that point, your life story, at least to me, sounds like a fairly relatable story of a person who rose above the circumstances of their birth and built a portfolio of what is today's equivalent of a few million dollars, $4 million of liquid assets. It feels relatable up until you're 35. And 35 is the inflection point when everything changes and, and the stakes get so much higher and everything gets so much bigger. And it started with this conversation that you had a face to face negotiation with Joe Mailman. Can you take us to that moment?

So Joe Mailman was the wealthiest man I knew at the time. And I, a few years earlier, he was about 40 years my senior, but we became real friends. And. And we had one business transaction. He put up about $3.5 million for a buyout of a supermarket chain. And he got his money back very quickly, maybe 18 months or two years. And he still owned 20% of that, which was probably worth $10 million. You can multiply all these numbers by 10 to get today's purchasing power. So he had done very well, but he wasn't happy because he felt like he had put up most of the money. Oppenheimer and company got most of the rewards, and I had done most of the work. So he approached me to leave Oppenheimer and start a business of my own. To do these kind of transactions, he and his friends would put up $4 million, and I would do the work. And the conventional arrangements that were common at the time for this kind of structure is that the person doing the work gets a 20% override or carry. And that still remains true today. That's the basic formula for private equity firms that the investor gives a 20% override to the people doing the work. And Joe pushed back against that. He said, I trust you, Bob, I like you. But this structure really creates a kind of heads you win, tails I lose. Just doesn't feel right. And I said, joe, I think you're right. It doesn't really align our interests properly. And then I made an offer that astonished him. I said, look, you know, I have about $400,000 of liquid assets in the world. I'll put them all at risk in this firm, and I don't want any carried interest. What I'll agree to is I'll absorb 50% of the losses and I want 50% of the profits. It reflected an incredible amount of courage because if the Firm had lost 20% of its money, I would have been wiped out. But he realized immediately that I was going to do everything possible to reduce risk to a minimum. And he agreed to those terms. The first deal we lost $100,000. The second one we made $100 million. So it averaged out.

Going into that conversation, had you been planning on putting up literally your entire liquid net worth or was that a spur of the moment decision?

It wasn't exactly spur of the moment because I knew this was the most important negotiation of my life. So I was thinking through, like, what if he says this, what if he says that? What am I listening for? What are his needs in this negotiation that I'm going to have to try to satisfy his needs? Well, and that turned out to be this psychological feeling about risk. And for me, the biggest interest was I thought this was an opportunity of a lifetime and I was willing to take a lot of risk to maximize my gain from that opportunity.

Not exactly spur of the moment, but not exactly pre planned. It was. You were sort of visualizing the many iterations that this conversation could take.

Yes, exactly.

And you were ready for that. By the way, just for the sake of the audience, many people might not recognize the name Joe Mailman. The mailman name is on a lot of institutions now.

Yeah. Joe was a very generous philanthropist and philanthropy has always been part of my idea of a well lived life. He was a pawn broker in Utica, N.Y. came from a working class background very much similar to my own, and went from being a pawn broker to buying failed industrial companies and selling off the equipment, to getting big tax loss companies to ultimately became the number two shareholder in Hess Oil. And his philanthropies included the Mailman School, Public Health and the mailman clinics. And I think the School of Public Health is at Columbia and there's mailman clinics in Florida that are state of the art on, I believe, eye care. So he was to me, a somewhat heroic figure and a good friend.

Yeah, and absolutely one of the exactly the type of person who you would want to engage in a partnership with. But as you said, if that company lost 20%, you'd be completely wiped out.

Well, I think again, and I make this point, that fear is one of the most powerful emotions. If we allow our fear of an undesired outcome to really consume us and control our behavior, that's not going to lead generally to very good outcomes. So what do you do about fear? You don't deny that a bad outcome is possible? It has to be possible. But what is it actually going to be? Try to think of it in the most rational terms you can. So in my case, well, if I lost that $400,000, that was 100% of my liquid assets. But I did have some private stakes in some companies that I thought would eventually turn into cash. And I thought in the worst case, I could always get a job similar to the position I was leaving at Oppenheimer. So the worst case is not being destitute, living under a bridge. My family's starving. And the worst case is I get another job and try again. So thinking about fear, really thinking hard about what is that bad outcome and what does it look like, can make you more rational in dealing with that fear emotion and make it less paralyzing.

You mentioned that your business partner, Joe, his primary objective was that he wanted risk management. He didn't like the conventional structure in which the manager gets paid no matter what. And so the manager is incentivized to take these huge swings because they're going to make money whether the deal wins or loses. Right. And so his objective was risk management. And meanwhile, you're putting up all of your liquid assets. So somewhere in your mind, you're, like, taking a stoic approach to fear. How do you meld the two? Because I think a lot of people who are listening to this have a hard time disentangling the work of being a good risk manager, the logistical work of being a good risk manager, with the emotional work of managing your fear.

I think the predominant thing you have to do in managing risk is to try to be as mathematical and quantitative as you can be about the relationships between the risk and the reward. I was dealing in a kind of transaction where 100 to 1 reward was possible, and I actually achieved that in that first deal that Joe Mailman participated in. So I was dealing with a situation where the rewards were exceptionally large, and those kind of situations come along extremely rarely. So you have to assess the risk in that kind of situation differently than you would assess the risk in something that's maybe not so favorable, just moderately favorable, and really be as quantitative and Analytic as you can about it. So part of the idea with risk is you want to be paid enough. You want to risk enough that if you're right, you're going to be paid well for the time and effort and energy and opportunity cost of doing the thing. You don't want to risk so much that if you're wrong, you cannot live with the consequences. And sometimes it's a function of just how often you get to place a particular bet. If I told you, for example, you could go to Las Vegas and the correct odds for roulette are 36 to 1, but you're going to get 100 to 1, how much do you bet? Well, the right answer. You're certainly not going to bet your whole net worth on it.

Right.

But if I told you you could make that bet one time, your response should be very different than if I told you you could make that bet a hundred times. So it becomes a very sophisticated mathematical construct. But you really want to be thinking about risk in rational terms and not let the emotion of greed or the emotion of fear dominate your decision making.

How do you do that in the context of incomplete information or two parties having asymmetric information?

Well, your information is always incomplete. So I think in any situation at all, you have to realize that there are some. There's an element of luck, there's an element of risk that can fill against you. Risk that you've thought about, maybe risk that you have haven't thought about. So just build that into your thinking. Well, if somebody knows more about the situation than you do, you're obviously at a disadvantage. And in general, you should try to avoid situations where you're dealing with a counterparty that has more information than you do. I mean, if you're buying a car from somebody they know more about whether it's a clunker than you do.

Right.

Beware when you buy a used car, if you're buying a company, the seller usually knows more about it than the buyer. Now, you can compensate for that if you really do a lot of diligence and a lot of work and think it through, which in my early deals I was absolutely able to do. But the situation evolved where a lot of companies are sold in auctions where the banker quite deliberately gives the minimum amount of information to the buyer. That kind of has been a change in the leveraged buyout business or private equity business. That's very much favored sellers and very much disfavored buyers. That very asymmetry that you talk about.

Right. So from the buyer side what's the response then? Because you can't avoid buying. But you know that you have this. This asymmetry. Yeah, you see this in real estate too, with when you go to buy houses at auction.

Well, you better build in the idea that there's going to be some bad luck. You know, if you buy a house at auction.

Right.

Be prepared to pay a lot less for it than you might pay in a situation where you have the opportunity to be more deliberate. For most people, they're going to be a lot better off just buying indices, stock indices, than trying to invest, let's say, in funds, where the manager is going to take a big piece of the gains, where it's not very transparent, where they can't really tell what they're doing.

I think where I'm going with this question is you talked about the importance of quantifying risk as much as possible, but quantification becomes difficult when you're dealing with incomplete information. So those are the two squares I'm trying to circle. How do you quantify risk when you don't quite know what the inputs are?

Well, I think I'd say that the best advice I would give is avoid those kind of situations. Try to be involved in activities, business activities and other activities where you're the person who knows more than the counterparty. I think it's a very good point, asymmetry of information. But by being aware of it, you want to be on the right side of that asymmetry, not on the wrong side. Buy a new car. Sell a used car.

[Unknown]

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[Robert Rosenkranz]

This episode is brought to you by Progressive Insurance. You chose to hit play on this podcast today. Smart Choice Progressive loves to help people make smart choices. That's why they offer a tool called Auto Quote Explorer that allows you to compare your Progressive Car Insurance quote with rates from other companies so you save time on the research and can enjoy savings when you choose the best rate for you. Give it a try after this [e-mail] Progressive Casualty Insurance Company and affiliates not available in all states or situations. Prices vary based on how you buy. Where the story left off. You were 35. You just created this business partnership that really became the inflection point that changed your life and your trajectory. And the first deal, you lost a hundred thousand. Tell us about how that felt, how you managed that.

Well, I referred to that earlier. It was this Ivy Hill record company. Its business was under a lot of pressure because Sony Walkman came out and people were getting their music on cassettes and no longer needed record albums. So the company's business was shrinking. The banks wanted us to put more money into the business and to have more of my own money and more of my partner's money. At risk in a business that had diminished prospects seemed like a really bad idea. Stonewalling the bank seemed like a bad idea because it would hurt my reputation, my ability to finance other businesses, other companies, and what was I going to do? And I hit on a solution of basically selling the company back to the original purchasers. They put in only about 12% of the original proceeds they got. Part of that went to us to give us some of our money back. Part of it went to the bank or went into the company to give the bank a feeling of greater comfort. And nobody was really happy. I wasn't happy with the loss. They weren't happy putting as much back as they had to. The bank wasn't happy getting less additional capital in this business. But we got it done and were able to close the chapter on it and everybody felt okay at the end of the day. Also, we bought the business at a low enough price that even though a risk that we didn't even anticipate at all filled against us, we were still able to get an okay outcome. So that was that story.

But for you at that time, it sounds like the deal was manageable. It was handleable, but it wasn't optimal and you had a lot personally on the line. And this goes back to stoicism how did you manage your thoughts, your emotions? How did you manage at that time before you hit on that next deal, the one that made 100 million?

Well, I had already closed on the successful deal while we were working through the unsuccessful one. So that was sort of helpful. But the bigger point, I'd say was that you shouldn't judge your decisions simply by how they come out. You should judge them based on whether they were the right decisions on the information you had at the time. And so the fact that I made a bad deal because of an unforeseen risk didn't really bother me. If I had ignored information that was available or if I had analyzed it badly, then I would have felt much more like beating myself up about it or seeing what I could learn from it. I mean, there's nothing wrong with making mistakes. We should all make mistakes. The question is, when you've made a mistake, is there something in it that you can learn from? And in this particular case, the learning was really the importance of having a margin of safety. But I didn't feel like I had to beat myself up because I didn't think it was a mistake at the time it was made. The decision to go ahead with this acquisition was a decision that I felt was the right decision based on information that was available at the time.

Tell us about the big deal, the hundred million dollar deal.

Well, that one was a company in the lawn and garden products business, which is a business I liked a lot. It also had a range of other businesses associated with it that I didn't like at all. I was lucky enough to get a blueprint of how to sell the pieces I didn't like. And that became one of the first, what's become known as industry rollups. So we were selling organic gardening materials like topsoil, Pete humus, potting soil and the like. Very bulky, very low value product. But we were the dominant company doing it in the Middle West. And once I owned that business free and clear, I was able to use the cash flow from that company to buy up all similar businesses in other regions. So we became a kind of a monopoly. If a Kmart or one of the big garden chains wanted to run a weekly special on key spring weekend, we were the only game in town for them. So it became a very profitable and valuable company. Once we had put all these pieces together, ultimately we sold it to the folks who bought Scott because we felt that there was a huge amount of synergy in, in putting those companies together. We had actually tried to buy Scott ourselves. Failed. And I realized that the company was worth a lot more to them than it was to us, and that was our exit from it.

Managing that sounds like it took a lot of time. It took a lot of effort. And then in the meantime, you're also looking for additional deals. But it strikes me that one of the principles of stoicism is to stay uncluttered, to focus only on the things that matter. And yet when there's this plethora of different inputs coming at you all the time, both in terms of managing the assets you have, as well as looking for additional assets, it's a recipe for a lot of clutter and a lot of distraction. How are you, in that context, able to stay true to the stoic philosophy of focusing on only the few things that matter while also staying open to opportunities?

Again, very good question. And the book does deal with this in a way, because time management is really absolutely critical. And in business it's not that hard to prioritize. I say just simply count the zeros. What unit would make a meaningful change for you at that particular time? And if something is below that threshold, don't give it any time at all. If a meeting is not essential, don't do it. Focus on those opportunities which really seem to have enough zeros attached to them to be able to move the needle for you at that time in a meaningful way. And that's a rule that I've always applied to prioritizing in business. It's pretty easy in a sense.

I can see how that would apply if you're making a decision as to whether or not to acquire some type of an asset. But in the running of a business, when you're making all of these decisions around marketing or around HR in the day to day operations of a business, how do you apply that same framework?

Well, it's a matter of delegation. You should, as a chief executive officer, as the owner of a business, be delegating to other people all the decisions where there are not enough zeros, where it's not going to move the needle that much so that your time is devoted to the biggest strategic picture, one of the biggest strategic opportunities that I might have as an owner of this business. What are the biggest strategic risks that I might be subject to? What are the changes in the environment that I'm going to need to respond to or changes that I can promote that would be in my interests or the interests of my business? You've got to build an organization where the things that are below that level are delegated to other people so that you're not cluttering up your mind with them.

Right. But even the selection of those people and the evaluation of those people, making sure they're hitting their KPIs, making sure that you're giving them the direction that they need and the feedback that they need. Again, it's a lot of input. And then you're also searching for new deals and thinking strategically and trying to grow and reach that next level.

There's a chapter in the book about interviews. It talks about interviewing people who are running for president, and it talks about interviewing people in all kinds of roles. And filling an organization with the right people is an absolutely critical part. So I view the interview as one of the most important things I do, and I prepare for them very carefully. I read work product of the person I'm interviewing. I think about questions that will reveal the qualities that I think are important in that particular role. I'm taking that interview process and that hiring process extremely seriously as one of the most important things I do. But of course you make mistakes. And if somebody in a key role in your world is requiring a lot more supervision than you think they should, that is using a lot more of your time than you think is appropriate, you've got to take action. You can't allow your time to be absorbed by doing the job that you've delegated. You're going to have to find somebody else for that role.

This is partially a logistical question, but partially a stoicism question. How do you think about sunk costs?

They're sunk.

I guess what I mean by that is when is it simply an investment that hasn't yet paid off versus when is it? They're sunk and it's time to cut?

Look, one of the core bits of stoic wisdom is what's under your control, what's not the past. What you've sunk is not in your control anymore. What's under your control is what you do in the future. So the sunk cost really should be disregarded completely. It's just, where am I now? Is this a good use of time? Is this a good use of money going forward? Period, Full stop.

Is there an emotional component to managing that, like you mentioned earlier, that you do heavy due diligence on your investments? Is there an emotional component to actually taking that, learning about sunk costs and putting it into practice?

Well, sure, because if you put a lot of time and effort into something that is not working, there's an emotional cost of accepting failure. Let's say cutting and running, saying done. I mean, you can't deny that there's an emotional drain in having a failed enterprise or a failed project that you've put a lot into. So of course you're going to feel badly about it. But the stoic idea is to use reason to regulate that emotion. And if you're doing that successfully, you're really trying to minimize the emotional effect on your decision making and really think the past is the past. You have no control over that. The only thing you have control over is today and tomorrow. And is this a good or bad thing to be continuing to spend time on? Is it a good or bad thing to continue to support financially?

Sometimes when you cut something, whether that's a project or an employee, you then actually end up kind of restarting from zero. You're hiring again, so then you're training a new person so you're starting from zero. Or when you sell a home that you've owned for a while that you know very, very well, and now you're doing diligence on a brand new investment property that you don't quite know as well. So sometimes making that transition almost feels like a step back because now you're restarting from square one again. Is there ever a point where it's. Or how do you assess when it's worth taking that step back?

It's very tricky. One of the interview questions that I ask of people that I'm looking at for very senior management positions is tell me a story about somebody who did an excellent job in your company in an important role, but was a complete jerk with their colleagues. And that requires exactly the kind of thinking that you're talking about, because letting somebody go who's doing a good job and an important role is really hard. But having somebody who's a complete jerk with all of their colleagues is also very harmful to an organization. So how a manager deals with a situation like that and the story they tell about it, that's an interview question that I really like a lot because it gets at something very important in management.

Which is what exactly?

Which is the willingness to take some short term pain for the longer term good of an organization.

What are some of your other favorite interview questions when you hire?

Well, if I'm hiring somebody in an investment role, I ask them what was the last stock they bought for their own account. And if they don't have a thoughtful answer, if they're not thoughtful about how they invest their own money, I don't want to bet that they're going to be thoughtful about investing mine. Question I sometimes ask of people, let's say, in an executive assistant role, would be tell me about a demand that a former employer made that you found unreasonable. It's a good one because gives you a sense of what their sense of reasonableness is. And then how did you deal with it? They thought it was unreasonable to ask them to work after 5 o' clock for 15 minutes. It's probably not somebody you want to hire in the first place. If they dealt with it by suing the guy, you know, that wouldn't be quite a good answer either. So those are a couple of examples. And there's a chapter about how to do an interview that develops these ideas and in a lot of different little anecdotal ways.

What do you think, conversely, are bad interview questions or what makes for a bad interview question?

A bad interview question is a question that where you can give a rehearsal first answer, tell me about your prior experience, or why did you leave that job, or things that people know they're going to be asked and will have had scripted answers to.

Right. Tell us about how you think through the selection of a fund manager.

It's very tricky, actually, surprisingly, because investment management is one of very few areas where past performance doesn't really predict future results. That could be true. It could be true because the past performance was simply luck. It could be true because the past performance was achieved on a small scale in a strategy that doesn't translate very well to a large scale that the manager's currently operating on. It could be true because the track record is actually misleading in some ways, maybe because the manager himself has told you what the investments are worth and that's just his judgment. And it looks smooth and even, but not really, when you get down to it. Maybe the track record is completely fraudulent. So you've got a whole raft of reasons that the book explains why past performance might not be a good guide. And then I go into what do I tend to look for in an investment strategy? And what I tend to look for is part of what you said earlier about asymmetry. But I want the asymmetry to be working in my favor. I like strategies that have, quote, a date with destiny so that you make money if something happens, if a company pays its bond when it's due, if a company comes out of bankruptcy at a particular moment, if a deal closes or doesn't, as opposed to if you're just buying a stock and hoping somebody else is going to buy it at a higher price in the future, but there's no specific time when something's going to happen or not happen. I like repeatable processes. People who are going to make money because they're doing something that's repeatable and can be done over and over again, like picking up a bid ask spread in a stock trading operation. I like things where the manager is being proactive, in effect forcing the management of a company to do things that will create value for the shareholders. So those would be some of the things I would like.

What elements of conventional wisdom do you dislike or in which ways are you contrarian?

So I think for the average investor, probably the best thing an average investor can do is buy ETFs which have very low fees, represent ownership of the entire market and just stick with them and maybe have a mix of 60% equity ones and 40% more debt ones or 70, 30, something like that, and not try to time the market, not get involved in funds that have very high fees associated with them. Just keep it simple. I'd say for most people that's going to be better than anything else they can do.

I very much see that in the public equities market. What interests me is that you decided to build a career in private equity. I often hear that from people who've they've spent their career in private equity. A lot of us understand the value of John Bogle passively managed buy and hold index fund investing like the stats around it are quite clear and quite compelling. But when do you make the decision to go into when and how would a person make a decision to start buying private businesses?

Well, I would say when I started and leveraged buyouts of private equity, it was a very small area. There was not very many organizations, not a lot of capital and there were lots and lots of opportunities. Today private equity is so big that I would regard it simply as public equity with higher fears, less transparency and I would stay away as a regular investor.

Who then should go into private equity? I'm using should in air quotes. For whom is it a good idea?

For the manager.

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[Unknown]

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[Robert Rosenkranz]

At netsuite.

[Unknown]

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[Robert Rosenkranz]

L A.

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[Unknown]

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[Robert Rosenkranz]

What about at the boots on the ground level? Let's say somebody's listening to this and they want to buy the laundromat down the street. So deal making, but at a very, very main street level.

Well, a small business has the same thought processes that you would have in buying a larger business. And in the Laundromat example, you can look at the historic financial results and decide, is this a pretty good profit relative to the amount that you're investing? Is it competitive? Is somebody going to open a bigger and better one right down the block? Or do you have a nice location that seems reasonably protected? I mean, most small businesses are by nature very competitive. It's not hard to open a restaurant and it's very hard to succeed in the restaurant business. Laundromat is a kind of interesting example because it's, it's very mechanical in a way. It doesn't require the same remotely the same level of talent that it does to run a successful restaurant. It's more like a machine operating a vending machine of any kind. Where I like that business because it's so predictable and it requires relatively little in the way of special talent. I sometimes say the quality of a business is inversely related to the quality of the people that it takes to run it.

Expand on that a little.

Well, laundromat's pretty easy. Restaurant's pretty hard. I like the laundromat business better. Running a storage facility like a self storage, that's pretty easy compared to running a home for older people. That can go wrong in a business that requires talented folks at a lot of different levels. A business that, I mean, putting dirt in bags, which was the first really major fortune I made, that was a pretty simple business, but it happened to have the advantage of being simple and a kind of a quasi monopoly. So that was an unusual and very attractive combination. And it had social trends in its favor, trends against chemicals, trends in favor of organics. So. But putting topsoil in a bag is not a hard, hard thing to do.

Where does the economic moat come from then for dealing with businesses that don't require a lot of talent? Is there a moat? Does it matter?

Well, in my lawn garden case, the moat was that it can't be shipped economically. Very far. So each regional business was kind of a quasi monopoly because it was uneconomic for anybody too far away to ship into your market.

In the case of, let's say that a laundromat for, for the average person who's listening right now, they want to buy a laundromat, they want to buy a car wash, they want to buy a vending machine. Does it matter that there's no economic moat?

It's an issue. I mean, it's something you should be aware of. I'm reluctant to give advice to people sort of randomly about small businesses, but I would say the things to think about are the track record of businesses like this. Frequently the better things you can do in small business or franchises because you do have the backing of a big company, you have a formula that you're following, you can see if that formula has succeeded and what it's. I mean, there's a real track record to go on. You had McDonald's franchises early in the game, or Starbucks franchises or what have you. Those are small businesses. But you had the analytic framework of a large company helping you. And that's probably one of the better things. One of the better ways to enter small business is through some kind of franchise.

Where do you see the world of business going?

The most important developments right now that pretty much everybody should be thinking about is artificial intelligence. I think of the skills. If somebody doesn't know how to use AI, they should learn. And I think that's almost a universal truth. And I think the application of artificial intelligence to maximizing the efficiency of time, maximizing the efficiency of people, maximizing the information that goes into decision making is absolutely revolutionary. And I would encourage almost everybody listening if they don't feel like they've incorporated artificial intelligence into their own lives, figure out how to do it.

Actually, do you mind if I ask how old you are?

I'm 82.

82. And you're still publishing books, you're still working on podcasts, you're involved in lots of projects. What keeps you motivated, you don't need the money. What keeps you motivated to continue working?

I love the process. And I think that that is again, the secret of a well lived life is to find something to do that brings out your creativity, that encourages you to be the best you can, to encourage you to be always curious, always wanting to learn, always wanting to improve. And if you find something like that in life that's just so important, you go with it and why stop? Another thing that the book talks about, the final chapter Is maybe you can make more time. And I've gotten passionately interested in the subject of longevity. Not so much extending lifespans, but extending health spans and science around the basic question of why do we age in the first instance? What's going on at a cellular molecular level that over time makes ourselves vulnerable to disease or less fit for their special purposes. And by being in contact with top longevity scientists and knowing what they're doing and what they think about for themselves, I've adopted a lot of their strategies. So I may be 82 chronologically, but biologically I'm more like 70, and I'm getting younger and working on it.

All right, so tell me about some of the things you're doing then.

Well, the most important, really are diet and exercise. And we all know that those are really important. But it takes a certain stoic wisdom to act on that knowledge. If you're beset by corrosive emotions, if you're frustrated, if you're stressed, if you're anxious, it's very hard to make the daily choices that, you know, you should make about diet and about exercise. So those are the two really most important things. I don't want to be talking to people about supplements or drugs to take, but I will recommend a book that I talk about a little bit by David Sinclair called Longevity why We Age. Why We Age and why we don't have to.

My dad mailed me a copy of that book. Yeah, Literally mailed it. It's the only book he's ever mailed me.

It has enough science in it that you can kind of believe what he's saying, because this. He's a very good scientist. He's not a great businessman, but he's a really good scientist. And if your dad sent you the book, read it.

Yeah. I'm sure you heard of Brian Johnson. Don't Die. What do you think of all of that? Because he's getting blood transfusions from his.

Son, It's a little weird, but I think people in the sciences are very glad that there's somebody out there who's doing all of this, because the idea of he's kind of an extreme, experimenting on himself in a way that people would be very reluctant to experiment on others.

Right.

So he's. I think from a science point of view, I'm glad he's out there, and I'm glad he's doing it. I've met him at some of these conferences. He does look kind of weird.

But he also didn't start down this road until he was in his 40s. He lived a pretty unhealthy lifestyle until his 40s and. And then flipped. It's remarkable to see how far he's come in such a short time.

One of the things I'm doing as a philanthropist is funding scientific research projects in longevity. So one of the projects that we're doing is trying to extend the lifespan of a worm. There's a particular kind of worm that. Whose normal lifespan is 15 days. And our goal, or the goal of this investigator was to get them to live for a year. Well, we're 250 days into it and 64% of the worms are still alive. So this is the longest extension of lifespan that's ever been accomplished for any organism. And they're the Brian Johnson of worms. Because what the investigator is doing is absolutely everything that's been thought to possibly work.

Wow. Is there a place for further reading on this? Where can we go to learn more about these worms?

Well, this is a study which hasn't been published yet and there's no place yet, but eventually I think there will be a paper and when it comes out, it's going to be viewed as really groundbreaking. Wow.

And you're participating in the funding of this. What is there an institution or a fund or how. What is the structure?

So we created something or became the lead funder in something called Impetus Grants. And it was a. We're working jointly with the Havolution foundation, which is a Saudi foundation, to give grants for projects that are speculative to the. So that maybe NIH wouldn't want to touch them or they seem too risky. And we had a competition. We had over a thousand applicants. We gave awards to the top 35. And so that's sort of the biggest philanthropy that I've done in this health extension field.

Wow.

But the book talks a lot about philanthropy all the way through because stoic idea of acting for the benefit of society. To me that means as a philanthropist, not just writing checks to established organizations, but trying to bring into being the things that you think society needs, where you can apply your own entrepreneurial abilities, your own organizational skills, whatever, to bring them about. And this health research is one, another one that I'm really proud of is open to debate, which is one we talked about earlier. It's a podcast, a very popular podcast and an NPR radio program that really presents two sides systematically of almost every contentious issue that we're facing as a society and creates a kind of contempt free zone for reasoned discussion of those issues.

And that is something that is very needed in today's highly polarized environment. And so again, this goes back to the original question of how do you stay so engaged? I hear from a lot of people in this audience who say, I can't wait to retire. And here we are, you're 82, and retirement doesn't seem to be a word in your vocabulary. How do you spell that exactly? Do you believe in the concept of retirement? What are your thoughts in that arena?

For me, I. I don't like the idea. I mean, I. I think if you're doing something that you're enjoying that's satisfying, where you're growing, where you're learning, why not keep doing it? I think people who look forward to retirement are probably are people whose careers are not giving them that much satisfaction. On the other hand, people will get to a point, let's say, they've sold a company or they've breached a mandatory retirement age, or for whatever reason, they. The principal thing that they've been doing is no longer part of their lives. And I think it's a real challenge for people to create new lives for themselves that do have that element of challenge, that element of excitement, that element of engagement. And it's absolutely doable, but it requires conscious thought, conscious effort. It's not just going to fall into your lap.

Do you mind if I ask your net worth? I know from the back of your book that you're a billionaire, but.

Well, I don't want to go beyond that.

Okay, we'll leave it there. We'll leave it to the order of magnitude that it's at. Is money still a motivator?

I would say money has not been much of a motivator at all. I was motivated to avoid the financial insecurity that my parents had. I was motivated to have enough money to be able to. To live comfortably and spend my time the way I wanted. But the real motivation for me was not the money at all. Money was a way of keeping score. What I really liked was playing the game. And the motivation was really to. The process was a process that I really liked. There's a chapter in the book about buyouts as an elegant pursuit in which I developed these thoughts about the variety of human skills and attributes that you really need to develop in order to be successful in this arena. And it's very broad. It's a quintessentially human range of talents and abilities that one needs to develop. And I found the development and exercise of those satisfying in and of itself. The money was just a way of keeping score. It Wasn't really the motivation beyond a certain point which I reached probably 50 years ago or 40 years ago.

Right. Does stoicism get easier or do you get better at it over time?

I think as you integrate it more into your life and your train of thought and your habits of mind, it gets easier.

So is it more natural for you now? At the beginning of this interview, you talked about how even at the age of seven, you were sort of naturally stoic. Does it feel even more natural to you now at 82?

It does.

And so for a person listening, does that mean that stoicism is a. Whether or not it feels natural in this current moment, does that mean for any listener it would be a kind of a lifetime practice?

I think it should be. I think it enhances your ability to get satisfaction at any stage of your life. It's always good to value your time. It's always good to ask whether acting in a particular way is going to work out well for you or not work out well for you. And think about it before you act. It's always good to prioritize. It's always good to be asking what relationships in my life are working for me, which ones are not? Who do I want to spend more time with, who I want to spend less time with, time with? What might I want to learn that I don't know? I mean, that's a great, great question to ask at age 80 or age 70 or age 30. A lot of these principles really are applicable through your entire life. You know, as you get older, maybe you. You have to think more about health, but it's a good idea to think about it. You know, we all sort of know intellectually that good health is maybe the most valuable thing of all. And yet people do things that are all the time that are harmful to their health. Just having that mindfulness throughout life is going to help you at every stage. So, yes, I think the lessons of stoicism, the lessons of cognitive behavioral psychology, which really involve, again, making decisions that are much more rational, is valuable throughout one's entire life. Let me close by making a reference to David Brooks, who was. I'm going to paraphrase his answer. So will reading the stoic capitalist make you succeed at a large scale? Will it make you live a better and more fulfilled life? Well, I can't say that it will, but buying the book certainly will.

Well, thank you for spending this time with us. Where can people find you if they'd like to hear more?

There's a website for the stoic capitalist and I think they can find me on that.

Perfect. Are you on social media?

I have a Instagram account, Robert Rosenkranz.

Do you personally use it?

I use it for photography. I'm a kind of a serious amateur photographer. And what's on that site are basically photographs that I've taken that I think people would like to see.

Oh, that sounds lovely. All right, well, we will link to both of those in the show notes.

It was really fun talking to you. Thanks so much.

Oh, thank you.

[Unknown]

Thank you.

[Paula Pant]

Robert, what are three key takeaways from this conversation? Key takeaway number 1. Only invest where you have an informational advantage. This is something that I talk about at length anytime I talk about real estate investing, because if you are buying rental properties, you need an informational advantage. And that advantage comes from niching down into one very, very specific geographic location and then becoming an absolute expert in an extremely narrow geographic location. I don't mean one city, I mean one neighborhood or even a couple of blocks inside of that neighborhood. You become backwards and forwards familiar with every home that's been bought or sold in this extremely geographically constrained area. And by doing so, you're able to spot value. And Rosenkrantz discusses the same thing, not as it applies to real estate, but as it applies to lots of other investment or business decisions. Make sure you know more about the situation than the other party does. He warns against putting yourself at a disadvantage where others have insider knowledge that.

[Robert Rosenkranz]

You don't try to be involved in activities, business activities, and other activities where you're the person who knows more than the counterparty. I think it's a very good point, asymmetry of information, but by being aware of it, you want to be on the right side of that asymmetry, not on the wrong side. Buy a new car, Sell a used car.

[Paula Pant]

Focus on opportunities where knowledge gives you the upper hand. And this applies to everything from buying a car to investing in a company. That's key takeaway number one. Key takeaway number two. High quality businesses often require less talent in order to run. And this is a counterintuitive perspective on evaluating business opportunities. So Rosenkranz believes that businesses that require minimal specialized talent to be able to operate effectively are often superior investments as compared to the types of businesses that need exceptional management or exceptional talent.

[Robert Rosenkranz]

The quality of a business is inversely related to the quality of the people that it takes to run it. Laundromat's pretty easy. Restaurant's pretty hard. Running a storage facility like a self storage, that's pretty easy compared to Running a home for older people that can go wrong in a business that requires talented folks at a lot of different levels.

[Paula Pant]

Don't be afraid of quote unquote boring businesses or those common Main street everyday businesses. There can be enormous opportunity in laundromats, in self storage, in pest control, H Vac, in non glamorous everyday Main street companies. I know someone actually recently graduated from business school and he bought a couple of laundromats in Florida. Doing super well, has a great lifestyle. Meanwhile, a bunch of his friends who went to business school with him are all sweating at consulting firms work in the types of jobs that are like if you don't come in on Saturday, then don't bother coming in on Sunday. So sure there are jobs with prestige and panache, but they don't necessarily pay any better, at least not for the first few years. And a lot of people burn out before they really reap the rewards of those. Meanwhile, you could buy a laundromat or a few laundromats. You could buy some storage units, you could buy some rental properties and you could make really good money and build a solid business for yourself and have autonomy while doing the type of stuff that most people overlook. The type of stuff that doesn't necessarily create great cocktail party conversation, but that does lead to great residual income over time. Look for quality businesses and remember that those quality businesses often are the ones that require minimal specialized talent. That's key takeaway number two. Finally, key takeaway number free yourself from any choices that you've made in the past in order to be able to make better choices in the future. Maybe you have a struggling investment or a career path that's not working out, or a relationship that's no longer serving you, no matter what it is. Remember what Robert says about sunk costs.

[Robert Rosenkranz]

One of the core bits of stoic wisdom is what's under your control, what's not the past. What you've sunk is not in your control anymore. What's under your control is what you do in the future. So the sunk costs really should be disregarded completely. It's just, where am I now? Is this a good use of time? Is this a good use of money going forward? Period, Full stop.

[Paula Pant]

Focus only on present and future possibilities, not on what you've already invested so that you can make more clear choices about where to put your time, money and energy as you move forward. Those are three key takeaways from this conversation with Robert Rosenkrantz, the author of the Stoic Capitalist. Thank you so much for tuning in if you enjoyed today's episode, please do three things. First, share this with a friend, a family member, a neighbor, a colleague. Share this with the people in your life. That's the most important thing you can do to spread the message of F II R E. Second, subscribe to our newsletter. Absolutely zero cost to you. Afford anything.com Newsletter that's affordanything.com Newsletter Third, open up your favorite podcast playing app and please leave us up to a five star review and write a few words about what you enjoy about this show. I want to give a shout out to somebody who left a review recently. This review says, quote this is one of the absolute best financial podcasts. I continue to listen to every single episode from the very first. Subjects provide a well balanced approach to maximizing your finances secondary to personal fulfillment. If there is an altruistic podcast that follows a fiduciary standard, this is it. Paula prepares guest interviews with thought provoking questions, challenging views to round out topics about every side and angle. She answers listener questions about every other episode with former financial planner Joe Salsihai and the two form a perfect chemistry of knowledge, wit and mild humor as they peel back the proverbial layers of the onion. These are my favorite for interactive thinking in testing and growing my own knowledge. Other podcasts deep dive into subjects such as crypto, inflation, tax and retirement strategies, real estate, human behaviors, efficient frontier, etc. Not to forget the first Friday of each month that does the same for the monthly macroeconomic view at where we were and what could lie ahead. If you are looking to round out and improve your financial self, I truly believe you found it here. End quote.

[Robert Rosenkranz]

Wow.

[Paula Pant]

Thank you. Thank you to the person who left that review. I'm so honored to hear that this podcast has resonated with you so much. To anyone listening who has not left a review, I encourage you to do so. These reviews are incredibly instrumental in helping us grow our reach. Grow this podcast Bring amazing guests on the show. They're very instrumental in all of it. Thank you to everyone who has left a podcast review in the past and if you haven't done so yet, I strongly encourage you to do so. Just open up your favorite podcast playing app, whether it's Apple Podcasts or Spotify, and please take a moment to write out what you enjoy about this show. Thank you so much for tuning in. I'm so grateful that you're part of the afforder community. This is the Afford Anything podcast. I'm Paula Pant and I'll meet you in the next episode.