BEDMINSTER TOWNSHIP, NJ - NOVEMBER 20: (L to R) President-elect Donald Trump and investor Wilbur Ross pose for a photo following their meeting at Trump International Golf Club, November 20, 2016 in Bedminster Township, New Jersey. Trump and his transition team are in the process of filling cabinet and other high level positions for the new administration. (Photo by Drew Angerer/Getty Images)
President Donald Trump (left) and Wilbur Ross, his choice for commerce secretary © Getty

Wednesday’s Senate hearings to approve the nomination of Wilbur Ross as US commerce secretary gave the most revealing insight yet into the infant Trump administration’s economic plans. All the tweets and growls about trade wars came into focus in one line, delivered in a disarming mumble. With no more menace than an amiable dentist telling you the root canal won’t hurt a bit, he said: “When you start out with your adversary understanding that he or she is going to have to make concessions, that’s a pretty good background to begin.”

So all this stuff about tariffs and walls and protectionism turns out to be pure gamesmanship. A way to set up the looming haggles with the rest of the world. Mr Ross called it “preconditioning other countries with whom we will be negotiating that change is coming”. You might call this a classic move from The Art of Wilbur: Negotiating 101 — like putting the opposition in awkward chairs, or cranking up the heat, or having your meetings in the dead of night, like Carl Icahn, Mr Trump’s special adviser on regulatory reform.

Mr Trump was flattering when he told his cabinet on the eve of his inauguration that they had the “highest IQ of any cabinet ever”. But they could well be the most fearsome negotiating team ever. Britain’s Brexit team should ask for a masterclass. Rex Tillerson, the next secretary of state, comes hardened from his years at ExxonMobil. Steven Mnuchin, the incoming Treasury secretary, has thrived in both the apocalyptic world of post-2008 bank restructuring and as a producer in Hollywood.

Even in such company, Mr Ross stands out. He is one of the few to whom Mr Trump may defer when it comes to negotiation. In his career as an investment banker at NM Rothschild and then running his own business, WL Ross & Co, he has shown repeatedly how he can dive into an industrial dung heap and emerge with a fistful of dollars and not a speck on his silk tie.

He came to Mr Trump’s attention in 1990, when the latter’s new Taj Mahal casino in Atlantic City was groaning under high-interest junk bond debt. Mr Ross, acting on behalf of the creditors, struck a deal that gave them half of Mr Trump’s equity in return for less onerous borrowing terms. This kept Mr Trump afloat during a very dark time. Mr Trump was speaking from experience when he announced he wanted Mr Ross in his cabinet: “He is one of the greatest negotiators I have ever met.”

Working on his own account, Mr Ross’s most famous deal was his purchase of an ailing group of US steelmakers in 2002, shortly before President George W Bush imposed tariffs on imports of steel. Mr Ross used the protection to fix the operations, cut debt and draft new contracts with workers. He was able to take the company public in 2003 and sell it two years later to the Indian steel mogul Lakshmi Mittal.

He has pulled off similar tricks, mostly successfully in coal mining, textiles and banking, immersing himself again and again in new industries and the minutiae of the laws, trade rules and contracts that govern them.

As a student at Harvard Business School, Mr Ross was mentored by Georges Doriot, a pioneering advocate for venture capital, who said: “People who do well in life understand things that other people don’t understand.”

For bothering to understand things that most people don’t, Mr Ross deserves more credit than he gets. He is often easily dismissed as a vulture or someone who buys low and sells high. But what he has done is hard. The devil in restructuring is in the grinding detail of voluminous contracts and difficult, often highly emotional negotiations.

In bankruptcy talks, most people in the room are profoundly upset. They never imagined they would be there, staring at the rubble of their business, their careers, their investments and perhaps the interests of thousands of people waiting to hear if they will still have a job in the morning. A friend who began his career in restructuring was once told by the chief financial officer of a troubled company to empty the minibar in the hotel room where negotiations were to take place, as he feared the chief executive would otherwise start drinking and not stop.

Mr Ross figured out a way to thrive in these settings, to clear up the mess and get paid for it. If he seems quiet and purposeful, that is how you win in a room where everyone else is about to burst into tears.

Excess leverage is built into the mindset of Washington. It is there in those looming debt and budget deficit numbers. America’s trade deficit seems to be a fundamental affront to Mr Ross’s sense of how business should be done. It is telling that in his Senate hearing, he spoke of China as a “vendor”, one to be managed and forced to agree to new terms by its customer — the US.

The first step in such negotiations is to get everyone to admit to the problem, perhaps even to create an exaggerated sense of it, so that no one thinks it can be ignored until tomorrow. Travelling discreetly in Mr Trump’s noisy wake, Mr Ross has been doing just that, and the real talks have yet to begin.

The writer is author of ‘What They Teach You at Harvard Business School’ and an advisor at Banco Santander

Letter in response to this article:

Note to Ross: China is an ancient, proud civilisation / From Paul Drexler

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