Since graduating from Lehigh with an accounting degree in 1981, Barry Rosenstein has forged a larger-than-life business career that has taken him from investment banking to the high-flying corporate raider era of the 1980s to almost unimaginable success as a corporate activist.
But when he was asked, toward the end of his appearance Thursday as this year’s guest lecturer in the Donald M. Gruhn ’49 Distinguished Finance Speaker Series, about the key that helped him attain that success, Rosenstein’s advice was simple and straightforward.
“Business is just about people. It’s less about numbers,” Rosenstein, founder and managing partner of the multi-billion dollar hedge fund JANA Partners LLC, told the crowd of several hundred students, faculty, staff and alumni at Zoellner Arts Center’s Baker Hall. “If I have any talent at all, I think it’s a talent for interacting with people, getting along with people, getting people to want to do things. I think it’s in large part because I’m really sincere about what I’m talking about or asking someone for.”
In an hour-long talk that was by turns humorous, poignant, insightful and informative, Rosenstein candidly recounted the ups and downs of his career and told business students on the verge of starting their careers at a time of economic uncertainty that there are no glib answers.
“Your career and your destiny are mostly one big crapshoot, and if you have the right attitude, a little bit of luck, and a lot of working your [butt] off, you might just end up OK,” Rosenstein said. “While I haven’t learned too much in my 50 years, I have learned one thing, and that’s that most people don’t know anything for sure. And a corollary to that is: Whatever plans you do make, count on it, they won’t happen. Even the smartest people are often wrong. Business people, economists, politicians, talking heads—most of the time, they’re just guessing.”
Rosenstein drew on experiences from his own life to illustrate his point. When he arrived at Lehigh in 1977, Rosenstein recalled, “I was convinced that everyone here was a lot smarter than I was. My parents had taken out a second mortgage on our house and I had various jobs to pay tuition. I lived in constant fear that I was going to fail out. So I just worked my tail off.”
It paid off, as he wound up passing the CPA exam his senior year, graduating Phi Beta Kappa, and landing a $22,000-a-year job with PriceWaterhouse in New York that he only took so he could gain the one-year working experience required for CPA certification.
Rosenstein went on to earn his MBA at the Wharton School of the University of Pennsylvania. His Ivy League graduate work, however, helped him appreciate Lehigh even more, he said to the audience’s obvious delight.
“When I was at Lehigh, I worked a helluva lot harder than I ever did at Wharton,” he said. “So you’re getting a good education here.”
‘I didn’t know how I was going to feed my family’
Rosenstein recounted anecdotes from his career as he rose from an investment banking associate with Merrill Lynch & Co. to working on corporate takeovers with Asher Edelman, the legendary corporate raider who served as the inspiration for Gordon Gekko in Oliver Stone’s Academy Award-winning film, Wall Street.
But when the economy took a sharp downturn heading into the 1990s, Rosenstein found himself on his own, “running out of money with no paycheck coming in … I didn’t know how I was going to feed my family.”
He found the answer in San Francisco, moving his family there in 1991 and landing a job in a boutique investment banking firm, where he engineered the stunningly successful investment in Copart Inc., a California-based company that auctions cars that have been classified as “totaled” by insurance companies. Rosenstein managed to raise $7 million to invest in the company, which had plans to go national. It did, successfully went public a year later, and today enjoys a $3 billion market cap, Rosenstein said.
Following the Copart success, Rosenstein founded his own private equity firm, but the results were less than overwhelming, and as a new decade once again dawned, he found himself back in a familiar place.
“As recently as 2000, I didn’t know where my next paycheck was going to come from, I started living off savings, wondering where or how I was going to make my way. So I started over again. At that time, the environment was very similar to what exists today. We were coming out of a recession, a bear market. Public companies were trading at steep discounts to what their ultimate pay cap values were. And I saw an opportunity to create a hedge fund—even though I didn’t know the first thing about running a hedge fund—to accumulate positions in companies and try to close that arbitrage. In other words, force the companies to sell out to somebody else or restructure to realize the full value.”
“There was only one problem: I had no capital to do it.”
Potential investors were skeptical of the whole notion of corporate activism, but Rosenstein managed to raise $17 million to start the fledgling hedge fund.
“One of the interesting things with starting a number of businesses and succeeding and failing and succeeding and failing was you really get to know what you’re good at and, more important, what you’re not good at,” Rosenstein said. “One of the things I made a point of doing as I was building my current business is that I brought in people who were really good at the things that I just wasn’t good at or had no experience in or had no interest in doing. And it’s made all the difference in the world. … I like to say every single person I hire is a lot smarter than me. And that’s just fine.”
From that $17 million initial investment, JANA has consistently bested relevant benchmarks, and reached a peak value of $8 billion. Then, two years ago, “the economic tsunami of our lifetime hits,” Rosenstein said.
“Fortunately, we made some decisions that I think strengthened us and put us in a position to survive and actually thrive,” he said. “And it looks like things are coming back now.”
Rosenstein was introduced by Donald M. Gruhn ’49, who endowed the lecture series. Rosenstein was the second annual guest lecturer in the series. Gruhn, in turn, was introduced by Paul R. Brown, dean of the College of Business and Economics, which is celebrating its 100th anniversary this year.
Earlier in the afternoon, Rosenstein met in Lehigh’s state-of-the-art Financial Services Laboratory (FSL) in Rauch Business Center with three students: Jordan Giallanzo ’10, a finance and marketing double major with a minor in Chinese, who is president of Lehigh’s Investment Management Group; Neil Bellanca ’10, an accounting major who is a Gruhn Scholar; and Adam Taplinger ’10, an accounting and finance major who is a Tauck Scholar.
Brown and Anne Anderson, the Joseph P. and Amy M. Perella Chair and director of the FSL, joined the students for an informal discussion.
“Having alumni who will come back reaffirms how special Lehigh is,” Giallanzo said after the meeting, while Taplinger agreed it was “a great opportunity.”
Bellanca was struck by a technique Rosenstein used at the outset of his career, calling potential employers after 5 p.m.—when their secretaries would likely have gone home, leaving the executives to perhaps pick up their own phone.
“You want to be modest, but at some time you’ve got to put yourself out there,” Bellanca said.
Photos by Theo Anderson
Story by Jack Croft
Posted on Friday, October 09, 2009