#269 Sam Zell

Transcript from https://podmenti.com/t/8e9e05063e69fb42

No one has ever left a meeting with me wondering what I meant.
When I say something it is clear, candid, and often blunt.
Am I being too subtle is my punchline when I deliver a message that I consider obvious.
I can seem gruff.
I know that.
And I can be impatient.
I have an embedded sense of urgency.
What I can't figure out
Is why so many other people
Don't have that.
But from an early age I realized that I had a fundamentally different perspective from my peers.
And I was willing to trade conformity
For authenticity.
Even when that meant being an outlier.
Which it usually did.
And even if it meant
Being on my own.
In this book, I share the story of how a restless
Curio who grew up in Chicago made it to the Forbes four hundred.
I'll describe the risks that paid off and those that didn't.
And I'll tell you what I learned in the process.
I'll take you inside my world of companies.
I'm probably best known for creating several of the largest companies in commercial real estate.
And for helping establish today's
one trillion dollar public real estate industry
You could say that I'm an investor or an allocator of capital.
But I really am.
is an entrepreneur.
That is an excerpt from the introduction of the book that I'm gonna talk to you about today, which is Am I being too subtle? Straight talk.
From a business rebel and is the autobiography of Sam Zell.
The introduction of this book is perfectly named'cause he named it No B S.
No one's gonna read this book and then after be like, hey, I wonder what Sam Zell really thought. He tells you in very plain language. I wanna jump right into the introduction because something that I found really fascinating.
Is how much he preaches
The gospel of entrepreneurship.
Not only for people running their own companies, but also for teaching the people inside of your companies to think like an entrepreneur.
And so he starts out defining what an entrepreneur is to him. In my definition, an entrepreneur is someone who doesn't just see the problems, but also sees the solutions.
The opportunities.
And what I loved about reading that
Was that that is not a new perspective. The best way to think about how entrepreneurs look at the world, based on what you and I have read in these books, is that they see problems that are just opportunities and workflows. That is a actual that's an old quote. That came came from Henry Kaiser. Henry Kaiser was this entrepreneur, read his biography, did uh did an episode all the way back on Founders Number 66.
But he had built like a hundred different companies over his career. He made the majority of his wealth all the way back in the nineteen forties and nineteen fifties.
And one of Kaiser's talking points that he repeat over and over again is that you shouldn't be see looking at problems as problems. You see you should see every problem as an opportunity. And based on my reading of Sam Zell's philosophy of company building, I think that's very much in alignment with the way uh Henry Kaiser looked. So he says a fundamental part of being an entrepreneur aligns with my tendency to walk out of step with the norm.
I have a saying, so these sayings he's gonna repeat over and over again throughout the book. They're widely known. They're called Samisms. And this is the first time he mentions one of'em. He says, I have a saying, if everyone is going left, look right. Conventional wisdom is nothing to me but a reference point.
And he gives examples throughout the book of multiple decades of this trait working very well for him.
Another way he puts this is that when everyone is going right, then you should look left. So he says I make a point of shutting out the noise, doing what makes sense to me. I want everyone's opinion because there's tremendous value in being a good listener.
But then I determine my own path.
And once I form my opinion, I have to trust my perspective enough to act on it.
That means putting my own money behind it.
My level of commitment is usually high.
And I stay with my decision even when everyone else is telling me that I'm wrong.
Which happens a lot.
And another thing I liked about Sam's philosophy.
Is that he's all about long term partnerships.
In many cases he's doing deals and working with people for twenty, thirty, sometimes forty years.
And so he talks a lot about the importance of having long term, building long term relationships. So he says when you're a repeat player, when your world is your business and your business is your world, it is all about long term relationships. In any negotiation, I believe in leaving a little bit on the table. And in any relationship, I believe in sharing stakes.
I've been doing deals with many of the same people
For decades, because the goal is for us to all come out ahead.
And many of my employees have been with me for twenty or thirty or more years because if I if I do well, they do well.
These long term relationships reflect the most important lesson imparted to me by my father.
He taught me simply how to be.
He often told me that nothing was more important than a man's honor.
than a good name.
Reputation is your most important asset.
Everything you do.
Everything you say is part of the permanent record.
Your name reflects your character.
No matter how successful I got.
I never forgot that lesson.
And so I like the fact that he starts with, Hey, keep yourself to a high standard and then immediately goes into the fact that
I am imperfect and I wasn't even able to to hold myself to the the standard I have. Not that I'm a saint, I've been married three times and I admit
Then when I was younger
My career competed with my role as a husband and father.
And my career often won.
And I have to bring that to your attention because that is a very common mistake and regret.
In these books that you and I go through.
More often than not, they over optimise for their professional life at the detriment of their personal life and then they wind up regretting it when they're older.
In Sam's case he changed his perspective on this, but of course, you know, child like uh the the founder of Ikea had the best quote on this ever,'cause he talks about sacrificing he he missed seeing his three sons growing up as he was building Ikea and he says childhood does not allow itself to be reconquered.
That is the best description of this very common mistake.
And regret that a lot of entrepreneurs have. And so Sam says, Today I have a better perspective, as most of us get over time.
The first thing you see when you walk into my office is a screen with scrolling photos of my wife, my kids, and my grandkids.
I relish my time with each of them.
My life is more balanced now.
And then he goes into what motivated him, why was he drawn to a life of entrepreneurship.
And of course everybody's like, Oh, it's gotta be the money and they say that because done at the highest levels, entrepreneurship brings the most financial rewards.
But the personality types that stay in the game for as long as Sam has, and he's been in the game for fifty years.
usually describe entrepreneurship as a calling and an obsession. And we see that here. In fact, let me read, I'm gonna read my note to you before I read this section.
'Cause as I went went through Sam Zell's quote, I'm like, man, this sounds a lot like Sam Walton. So all the way back on Founders number two thirty four, when I read Sam Walton's autobiography for the second time.
There's just this fantastic quote.
um that I think just hits on the and on the ethos of an entrepreneur. He says the great thing about entre this is Sam Walton speaking now. The great thing about entrepreneurship is you get to spend your time building something you enjoy.
Most people don't get to do this. They're stuck in jobs that they hate.
I had the time of my life. And that is exactly what Sam uh Zell is about to tell us here. I'm not solely motivated by the accumulation of wealth.
There's a line from an old movie called Wheelers and Dealers that says you don't go wheeling and dealing for the money.
You do it for the fun.
It's the exact same word.
that Sam Walton used, right? Money is just a way of keeping the score.
And that's how I see it.
I've always been much more drawn to the experience.
My life is about testing my limits and having fun in the process. Business is not a battle to be waged.
It's a puzzle to be solved. That's a great line. Business is not a battle to be waged, it's a puzzle to be solved. The end goal isn't to accumulate a lot of toys and then kick back.
I wanna pause there. He's gonna go on for a little bit longer, but think about what he's saying there. Once you find your life's work
Extra strategy is death. It's not retirement. The end goal isn't to accumulate a lot of toys and then kick back. He is 75 when he's writing the book.
He is eighty today and he is still working. If I'm being intellectually challenged.
If I'm doing things I've never done before, if I'm using my creativity and resources to solve problems, if I'm constantly learning
Then that is fun.
Really think about that paragraph. That's another way to describe entrepreneurship. I'm being intellectually challenged. I'm doing things I've never done before. I'm using creativity and resources to solve problems, and I'm constantly learning.
And so yes, he's got a lot of dark periods in his career just like anybody else is gonna have. He goes into detail
But he tries to make everything he does fun. I adopted a philosophy I call the eleventh commandment.
Thou shalt not take thyself too seriously.
The Wall Street Journal back in nineteen eighty five did a front str uh front page story on me and quoted me saying, If it ain't fun,
We don't do it.
So then I left myself there is optimized for irreverence.
And keep in mind we're still in the introduction. He's giving us like his overview of the way he looks at life and philosophy.
And he's already we're a couple of pages in, he's already repeating over and over again. He's like, Listen, I'm making my own rules
I'm not just gonna accept what other people tell me or to I'm gonna not gonna act the way other people want me to act.
And so it says one of the biggest raps about me is that I've been known to use profanity. Sometimes my real estate colleagues will make bets on whether or when I'll drop the F bomb.
on stage at a conference. I simply do not buy into many of the made up rules of social convention. I think people often get distracted by these superficialities. For example, I've been wearing jeans to work since the nineteen sixties, long before it was acceptable. Later on the book I laugh.
'Cause he literally says, I mean, he's got a giant personality, jumps off the page, which makes up the you'll learn a lot reading the book, but it also makes it fun. But he like he's like, I I invented business casual and I don't know if that's true. I just think it's funny that he would even say that.
So it says, for example, I've been wearing jeans to work since the nineteen sixties, long before it was acceptable.
The bottom line is, if you're really good at what you do, this is his main point of what this entire paragraph I'm reading to you.
Which is I think is probably true. Uh the bottom line is if you're really good at what you do, you have the freedom to be who you really are.
And I just love founders like this'cause he says, People often ask me, When are you gonna retire? And I re and I answer, retire from what?
I've never worked a day in my life. Everything I've done is because I love doing it, because it was enthralling.
I never stop pushing myself.
Ам севенті фай.
I work out every morning at four forty five in the morning and I'm at the office by six thirty AM and I don't get it home from work until seven at night. Now here I'm gonna pause there.
'Cause there's there's still a lot. There's a two more sentences here that are absolutely fantastic. But he just got done telling us that he's more balanced now, right, with his family life. And look that doesn't seem like he's leaving a lot of time for family.
So imagine what his schedule was when he said that he was unbalanced, that work won out, you know, the fact that he got married and divorced a bunch of times. But he says, I'm seventy five, I work out every morning at four forty five, then I'm off I'm in I'm in the office at six thirty AM and I don't get home from work until seven at night. I have plenty more to do and a lot more to say.
Every day is an adventure. Here's my story. Have fun with it.
So then he goes into the unbelievable story of his father and mother and his older sister escaping
From Poland.
right before the Holocaust.
If you want a great book that it's dedicated to this entire th story similar story.
I did it back on episode one fifty nine. It's Andy Grove's memoir swimming across.
It's a memoir about the first twenty one years of his life.
There's a lot of stories in there that you could take from like the o overcoming
unbelievable odds and actually surviving. Andy Grove was widely considered maybe the best technology CEO of all time, but there's nothing about actual business in that book.
But I think understanding why Andy was the way he was is like reading the book is fundamental to to understanding
who he was as a person and all and how he approached his career for the last fifty years of his life once he actually gets to America.
So Sam Zell's family is Jewish.
His father is seeing all the events that are happening in Germany and Austria at the time, and he's saying we gotta get the hell out of there.
and the rest of his family stays. I think between his
Sam's father and mother, I think they they lose
I wanna say like fourteen or sixteen siblings are killed in the Holocaust.
And I just want to pull out a few highlights here because I think it illustrates how tenuous like just one decision.
The decision by his father changed his entire life. He got out on the last train.
If he did not make this quick decision.
There's a good chance that
Sam is never born.
'Cause his father and mother and his sister die. His train arrived home at two PM. It was a ten minute walk home.
And when he got there he told my mother to pack all that she could carry. They were boarding the four o'clock train out that afternoon.
He made one last effort to beg the family to leave Poland with them. It felt like a race against time, but again they refused.
So my parents and sister started out alone on a near two year odyssey.
The German invaded Poland the next day at dawn.
My father, this is crazy.
My father had caught the last train out.
Before the Nazis bombed the railroad tracks.
My father, mother, and sister traveled after the train on foot.
By bus.
By horse drawn carts.
and by cattle train.
So think about the independence of mind that you have you're like, No, I have to leave now
everybody else, your entire family saying, No, no, stay, stay. You take your
your wife and your baby little girl and you leave.
And then this is the result. Most of all the family was murdered.
their parents and all but two of their brothers and sisters. So I was wrong.
All of their siblings, eighteen children.
I gotta repeat that again. Most of the family was murdered.
their parents, so that would be Sam's grandparents.
All but two of their brothers and sisters and all of their siblings eighteen children.
It took them two years, they finally get to America, and it says every year for the rest of their lives, they celebrated the date of their arrival with the toast to America.
My sister and I grew up keenly aware of how fortunate we were to be in this country.
The no myself there is no one loves America like an exile from a hostile regime loves America.
I just had dinner with the twin founders of this company called Lula. They're trying to build like the stripe for insurance.
And we just had the same conversation'cause their f their sons
My dad I've told you before.
But my grandfather decided when he saw Castro take over Cuba, he's like we gotta he made this a very similar decision. He's like, We gotta get the hell out of there and he did that with no money, no education, and a wife and a and a baby boy, which was my father.
And so even though our families came from a different area than Sam Zell's family family, we completely understand
why their parents would do this, where they celebrate the date of their arrival every year.
So then we get the relationship that Sam had,'cause Sam w was the first one, I'm pretty sure the first one of his family to be born in America.
And then we g he g he spends a lot of time in the book actually talking about
An idea that you and I have spoken about over and over again, and it's the fact that you can always understand the son by the story of his father. That's the story of the father is embedded in the son.
And so Sam just st starts to describe them what the relationship was like. His father dies in the nineteen eighties. I think he dies in like nineteen eighty six. So he's describing this many decades later.
Thirty years after his father died, as a matter of fact, he was very strong-willed and authoritarian. And because I had a strong personality as well, we often clashed.
He continually attempted to rein me in, and I always bristled at being told no.
Consequently, we had a rather contentious relationship, but the difference was he always respected him. He said I had an enormous respect for my father, and that respect was absolute.
And so Sam talks about the fact that
Вот his father had to survive.
He didn't provide Sam a lot of time to be a kid.
This may be the reason why Sam was able to st start businesses. Like he's he builds this like massively successful real estate business when he's still in college. In fact he gets to law school and I think the last year of law school, if I'm not mistaken, he makes the equivalent of like two and a half million dollars
Or maybe like one point five million dollars, like his last
Year of law school?
And part of that is because he had to grow up. His his dad forced him to grow up. And I I was thinking about this, like as I reread my highlights yesterday, I was like, Okay.
Look at it from his dad's perspective. Imagine being in your late thirties.
Your you see that the anti semitism, you see that Hitler's like on the rise.
You escape with your wife and your daughter.
You get to America two years later.
All of your family is dead.
Like how could you not approach the raising of your family in a very serious manner and saying, Hey, there's no time for the there's no time for games. Like you need to go out and build a set of skills to be able to take care of yourself and survive in this very crazy world. So it says he he would tell his his dad was tell his son is like you don't have time for fun.
Like he'd go to like he's like, Hey dad, I want to go see a basketball game. He's like his dad said something that was kind of like humorous looking back at it, he's like, You saw one last week, why did you have to see another one?
So you have plenty of time in your life for fun. Now you have to focus, you have to achieve, you have to be directed, you've got to understand that the world is a hard place.
This was a typical conversation that I had with my father.
And so one of Sam's Samisms is that we we suffer from knowing the numbers.
And he talks a lot about how like s other sloppy like real estate investors and entrepreneurs are and that they're just very undisciplined.
And he was like obsessed with understanding risk and understanding what the numbers of his business actually are.
And uh part of this he thinks that he got from his father or from his parents, because even after his father dies, Sam's rather wealthy.
His
mom would not let Sam give her like a ride home. He winds up h I think following her, or I forgot how he finds out this information, but she was so frugal in the sense that like Sam at this point in his life, you know, had
basically unlimited resources. His mom would make an up excuse that oh no, you can't take me home or you can't get me right home or you can't pay for a cab or whatever because I gotta go to Walgreens. And so he finds that that's not he she's going to Walgreens'cause there's a bus stop right in front of Walgreens. Instead of spending
three dollars on a cab
She would spend fifty cents.
on the bus ticket.
And in some cases this is very irrational considering that her son is wealthy and would obviously give her the money to to have a taxi, right? And then
So I just gave you like a summary of the story, but I want to hit you with his punchline because I think this is the best takeaway. And he says a refugee
Never forgets.
And part of the background to that story also is the fact that the only way they were ab able to escape was that Sam's dad saw this coming, so he was able to get money out of Poland and deposit it.
I forgot where the money went. I can't remember went to London or Palestine at the time, but he was able to sneak about ten with the equivalent of like$10,000 today.
out of the country in advance of him escaping. And if he didn't do that, there was a good chance that they wouldn't have never made it to America. So that's what he's talking about, like being careful of like watching your costs and a refugee never forgets. Now he talks of goes back to his childhood and he tells us his first like he's like I've always thought like an entrepreneur. I don't and he says later on he's not entirely sure that entrepreneurship can be taught.
It's most likely an inherent like characteristic and part of your personality. And so he's gonna tell us a story of like the first time you realize, hey, I can buy something for a dollar.
Or I think fifty cents, and then sell it for more money on. So it says this was my first entrepreneurial adventure. It was nineteen fifty three, and a provocative new magazine called Playboy had just made its debut featuring Marilyn Monroe on the cover.
Uh the magazine sold for fifty cents and I bought a copy. So he's doing this
In Chicago, but he's growing up.
think he's in Highland Park. He's like in a suburb of Chicago. So he goes back and he's like
I can buy something in the city that is not available in the suburbs.
And because
It is scarce in the suburbs I can charge more.
So he goes back, shows it to his friends.
And he says, I showed it to my friends. One of them offered to buy it. Three bucks, I said.
After that, I started a little magazine import business and in the process learned a lasting business lesson. When there is scarcity, price is no object. This basic tenet of supply and demand would later become a governing principle of my investment philosophy.
Let's fast forward to high school. And we see he opened up the introduction of the book, talking about being comfortable standing out.
being comfortable being an outlier, being comfortable going left when other people are going right. This is something that he w he did even when he was a young person. And it's just very already a pronounced trait when he's in high school. I discovered that fitting in just wasn't important to me.
I was more comfortable standing apart than I was in searching for a common denominator with others. I could embrace my tendency to go against conventional wisdom, and it would later end up defining my career.
And that embracing the fact that he was a misfit. I mean, look at the subtitle of the book.
Straight talk from a business rebel. I've also seen it published under the subtitle of The Adventures of a Business Maverick. He's wearing that as a badge.
And so he tells a quick story about
doing something that he could not tell his parents about because they thought it would be too dangerous.
And he's like, I want to see the entire country. He goes and enrolls I think he's taking like a summer class at U C LA. He's like, Well, I don't know how to get there, let's just hitchhike. So him and his friend decide, Hey, we're just gonna hitchhike across the country. I was gonna use the extra two weeks to hitchhike across the country. I don't know if it was rebellion, but I didn't want my parents to worry, so I never told them about the trip.
I do know that it was a two week adventure, that it was too that was too good to pass up.
So while he's in college, this is how he accidentally enters into the real estate industry. And from this point in the story to where we are in modern days about fifty years.
Where Sam builds he's regarded essentially as like one of the most successful real estate professionals of his time.
He's gonna sell his real estate company for thirty eight I think it's like thirty eight billion dollars.
to Blackstone in two thousand seven.
And his education in this industry starts right here. One day in the middle of my junior year, I was at a friend's apartment and he mentioned that his landlord had just bought the house next door.
They were gonna knock down both houses to build a fifteen unit student housing apartment. I'm pretty sure this is in Ann Arbor, Michigan.
Let's pitch them to manage it, I said. Who's better than us? We're students, we know what students want, and we'll run the building and maintain it, maintain it and each get a free apartment. So I've heard him talk in addition to reading the book. I also went and listened to he was on this f there's a fantastic episode of Tim Ferris' podcast and I listened to a bunch of his videos on YouTube.
And he talks about it's like my real estate career started just by trying to get free r a free apartment. So that's what he's talking about. We didn't know how to manage or rent apartments. We had no clue.
But this is something
He's about to say the sentence for the first time and it really is is like
Part of his operating system.
It says it just never occurred to me that I couldn't do it.
That's how you know you're born to be an entrepreneur. The desire to take risks to test my limits and to ask why not was just part of my DNA and I do not think that I've changed that much since then.
He goes into much more detail in the book, but essentially he did a good job with this first opportunity. You and I have talked about this all the time. Just focus on being you have one opportunity right in front of your face.
Do that the best you can and it will unlock opportunities you cannot possibly predict going down the road.
So he does a good job with the one, then he gets a second one.
Then a third one. And just kind of steamrolls from there. The same landlord built a second student apartment building and gave it to man gave it to us to manage as well. And then he gave us a third.
So in addition to managing all these student apartments, he gets a summer job where he has to be a door to door salesperson. And this is extremely important because he thinks this is foundational to the success that he that is gonna happen later on in his life.
And so he says, if you've never sold anything through cold calls or without appointments, it may be hard to imagine, but I can promise you that it is humbling.
Most responses are no. You will build up a tolerance for rejection.
You're you learn to keep asking and find ways to get a conversation going.
While I was unaware of it at the time, my real compensation for that job was not money.
I was learning about and getting comfortable with rejection.
And as I would later realize, indifference to rejection is a fundamental part.
of being an entrepreneur. That is a great line, so I want to read it again. Indifference to rejection is a fundamental part of being an entrepreneur.
So he graduates.
Then his dad is like listen.
I know you're into real estate, but you have to have pr uh a profession. He would tell him if everything goes bad, you need to have a profession that you can fall back on. So he g so Sam goes to law school.
And this is what he says about it.
says law school was boring beyond belief.
I just wasn't built for the arcane attention to detail and the endless rules and sub rules and sub sub rules.

Chapter is Are are you noticing a pattern? He needs control over how he spends his time.
You're gonna see another pattern in this real estate deal he does. So while he's in law school, he's buying up, he still has this idea for doing student housing.
So it's like I bought my first building during my second year of law school. I bought it for nineteen thousand five hundred dollars with fifteen hundred dollars down.
This is where he build he buys out like an entire block by one by one. A couple months later, I bought another building next door and then I bought the house I was in between them.
I had some money saved from my various ventures and I was able to bootstrap my way into these early deals with a combination of my own savings and then bank loans. I was twenty three.
I didn't know anything.
About financing.
And here is what I mean about you see patterns over never getting this book, but it never crossed my mind.
that I might be too young to start an investment business or that I couldn't do it.
And so once these first three transactions work, he's like, Well can we buy the whole block?
And his pitch was unique. He's like, Listen, you guys are older families, maybe you have kids, maybe your kids have left the h home. This is all b this neighborhood is changing. It's going to be
A bunch of drunk college kids. You don't want that around your house, right? And so it says as I explained to the homeowners that that we were gonna build student housing and that they could either stay and put up a loud music at night and beer cans over the lawn, or they could move to the other side of Ann Arbor. It worked. I kept buying houses and eventually acquired one full block of land.
This project eventually grows bigger and gets more sophisticated. So then he goes to his dad and saying, Hey, can you invite can you do you want to invest? First of all, do you want to invest with me and can you introduce me to other people?
And this was more about like their relationship.
Like the unspoken part of their relationship. Being able to invite my father to participate in this investment and his willingness to do so.
were big confidence builders for me.
Like any kid, I wanted my father's approval, and knowing that he viewed me as a legitimate businessman, even though he's only twenty three, right?
Was a milstone for me.
He was a gruff guy.
Stoic in an old world way.
He would never say that he thought I had done well.
So I learned to appreciate the small signs that I had his blessing.
And so since his idea was like let me vi buy these individual plots and then I can put them together and they'll be more valuable in time
He had to overcome like if there was one hold out out of ten or fifteen, that's a big problem. And so one person, one of these deals just takes a long time to actually get him out of there, but Sam's relentless. And really I'm skipping over the story and I just want to get to
The lesson he learned, because I think it's very, very important. And he's something he repeats over and over again. I remember this event so clearly because it was at this point in my career that I fully realized the value of tenacity.
I just had to assume that there was a way through any obstacle, and then I would find it.
This and this is why I'm reading this to you, this sentence in particular. This is perhaps
My most fundamental principle.
of entrepreneurship
And to success.
In general.
The value of tenacity.
And so one thing I skipped over that I need to explain to you now is like uh at the time uh you know successful business other businessmen and and things like that would take the money that their businesses produce and they would invest in real estate.
And they were looking for like
Returns of like four percent, five percent.
And most of their investments were concentrated in in big developed cities.
The idea that Sam built his early career on.
was going where there was no competition. And this is something that he's gonna repeat over and over all. He's like competition is for other people, it is not for me.
And this is also where he gets the value of hey, I'm when everybody else is going right, I'm going left. When everybody else is going left, I'm going right. The cost of construction in these cities where he's doing these deals, okay? The cost of construction was significantly less in smaller cities. And even more important, there was no competition.
There was no real capital looking for assets in these smaller markets where he's doing this, okay? Without competition, I could set the price and the market. This was my first real investment thesis. If I could replicate what I was doing in Ann Arbor in other markets, I could realize some serious upside.
I would build a portfolio of assets in smaller
high growth markets with a focus on university towns. That is the very foundation, the first idea of this business empire that's going to grow and morph and change over the next several decades into something that he can sell for thirty-eight billion dollars. Okay, I would build a portfolio of assets in smaller high growth markets with a focus on university towns.
That all seems logical in hindsight today, but
But back then
Nobody was doing it.
And then he compares the returns. He's like we weren't getting four or six percent, we were getting twenty, twenty five, eighteen, thirty percent of returns.
As James Dyson says, episode two hundred if you haven't listened to it, and it's gonna be episode three hundred'cause I think instead of reading that book every year, like I've t I told you I'm going to do, this is against the odds, an autobiography of James Dyson's still my number one um
recommendation for autobiographies. If you can only read one autobiography of an entrepreneur, that's when I'd make it. I think I'm just gonna like like every hundred episodes. So I did it on two hundred for the second time, I'll do it on episode three hundred, episode four hundred, and so on and so forth. But main theme of
Dyson's book which is very which is really what's happening
in Sam's life when he's a young
personal law school is
Difference for the sake of it.
That is where all the outsize returns are, and we're seeing that exactly in a young Sam Zell's life.
So he tries to get a job as a attorney and he's his idea is like I'm gonna be an attorney and do deals on the side.
He
goes through forty three rejections, finally gets hired, last four days. I'm skipping through that
'Cause what happens is after four days like, Man, I don't wanna do contracts
So the the guy that owns the law firm's like, Hey, why don't you just do your real estate deals, we'll co invest with you and then we'll do the legal work.
And so he does that for a little bit, but then he's making so much more money than even other people that other people in the law office are getting jealous. And this is where he's just like, Man, I'm just going out on my own. This is ridiculous. And the reason I'm reading this this paragraph to you is because even today, when there is some kind of like entrepreneurship industry per se, it's still a very weird thing to do.
But you know that it's what you're meant to do because it never felt weird to you.
And so Sam is relating this conversation between a d a partner in the office and they're just they can't understand the way he thinks and he's like, Oh
I am kinda weird. So he says the conversation was a revelation. Until then I hadn't recognized that my career was so radically different from the mainstream. I had thought I was just off center. I hadn't realized that it was on a completely different road.
But that partner's perspective jarred me into an epiphany.
I have to leave this law firm.
I remember coming home after I I quit and my wife, the first wife at this time, was pregnant.
You quit, she asked, alarmed. What are you gonna do?
Just what I do, I replied.
Which is real estate deals at this time. My orientation towards being an outlier was gone how many times
How many times has he repeated this?
Like this is extremely important part to understand San Zoo and what he I you can read through the lines, he's like giving he's giving
Future generations of entrepreneurs that same advice.
lean into your eccentricities, be comfortable.
Standing out from the crowd.
That in and of itself, the ability to do so is an advantage, right? My orientation towards being an outlier was going to define my future. I was going to do what I love doing.
And I wasn't going to be encumbered by anyone else's rules.
So I left and opened my business in a spare office at my brother in law's law firm.
That was the precursor to the investment firm that I still run.
Today.
So this is when he goes into one of the most important relationships that he ever has.
And there's this extremely famous and wealthy family in Chicago that still exists to this day, but I think goes back multiple generations. I'm gonna s go to Google to figure out how to pronounce it. I think it's
Pritzker.
I don't know if you can hear that. It's
Pritzker. Pritzker.
And the point of the story is that he's gonna turn down a job offer from an extremely famous entrepreneur.
And he says everyone knew the Pritzkers. They were one of the most prominent business families in Chicago Chicago, and they had started the Hyatt Hotel chain. Jay Pritzker, which is going to be his partner.
One of his partners and like basically his mentor.
He talks I mean, even many years I I heard Sam talking, I think Jay died like twenty or thirty years ago. He still talks about all the lessons that he learned.
Uh, from Jay Jay Pritzker was legendary in the investment world. He had built and now controlled a staggering empire.
And so Jay is looking for a young person that knows law and that is interested in real estate.
And
Sam fits all these bills, so he's introduced, he's like, Hey, go talk to this guy.
And
Sam didn't understand why he should do that because it's like I'm not for hire. There's no way in hell I'm working for anybody else. So says the idea of meeting Jay Pritzer was intriguing to me, but I already knew I didn't want to work for anyone.
But his friend convinces him, Just go meet him and it'll be worth your time. The next morning I went over to see Jay. I got there at nine in the morning and I did not leave until four thirty that afternoon.
And so Jay's trying to recruit him. He's like, Listen, come here.
We have a lot of resources, you can do deals and you'll end up owning five percent.
And Sam's like that's ridiculous. Like why would I ever accept five percent?
But they got along, so it says I stayed and kept talking. Truth is Jay and I instantly clicked. I was having fun, even though I knew I wouldn't take the job.
Finally at the end of the day, I said, Jay, I'm not gonna work for you or anybody else, but why don't we do a deal together?
And he said fine.
That was a really smart idea that
Sam did because Jay winds up being he says Jay was like knew risk better than anybody else
And he just learned how, like, even at that level, like how fast they make decisions, how there's just he calls it no bullshit.
I think at one point he he comes to Jay in a bad situation is like I need fifty million dollars
And by this time they'd done a couple of deals together and Jay just trusted him.
So I think that also echoes why Sam talked about hey, you really need to be optimizing, leave money on the table, optimizing for these return relationships that that last for ten, twenty, thirty years, because then it just helps you go faster later on in life because you have this shared like web of trust. The meeting with Jay was the beginning of the most influential relationships of my career. Jay was the smartest financial guy I ever met.
So the first deal that they do together is somewhere in Lake Tahoe.
This is really important because
He wasn't sure at this point in his career, like what part of the real estate chain do I want to be in. He's like, Oh, maybe I'll be a developer. So he tries to do a development deal.
He's like, Oh, this is terrible. I'm never doing this again. As a result, I was cured of any inclination to become a developer. I think that to stay in that business, most developers must get fifty percent of their returns from real cash flow and the other fifty percent from the intangible benefit of seeing their phallic symbols
Rise out of the ground. Sam was hilarious. If you I hope you buy the book. The book's pretty easy to read, too. You can read in a weekend. It's just hilarious.
Uh, but that idea is like, Oh, you're only getting fifty percent of your return from actual money and fifty percent of the intangible benefit of seeing their phallic symbols rise out rise out of the ground. Otherwise I cannot see the reward. My takeaway was a whole new respect for simplicity.
That's something he repeats over and over again, too.
Development required multiple steps and every step meant one more chance for something to go wrong.
And then he goes right into another lesson that he learned from Jay. He's like, You just bet on the person. You bet you cannot make a bad deal.
with excuse me, you cannot make a good deal with bad people.
And so Jay Trot Jay
Developed a trust.
with Sam allowed him to work quickly and you see it it manifests in stuff like this.
Listen, I said we close this deal, but I just realized we never drew up a formal partnership agreement between the two of us, Jay.
And Jay's response was yeah yeah.
He said, Not really interested. That was indicative of Jay. Trust was one of his abiding principles. He'd always bet a lot more on the person than on the deal. Once Jay decided decided that I was honest and smart, he was on board. He never called me to check in on things. He never questioned where we were in our investment.
He continues. He just this entire chapter. I'm I'm if you buy the book, I'm in the chapter called My Own Rules.
I think it's important to read this.
Because it's really what's what I find fascinating is just how many of these ideas that he got from a older, more experienced entrepreneur.
that he used for the rest of his life that he talks about many decades after Jay dies.
And it's this idea it's like, listen, you might have seven things, eight things, nine different variables in whatever you're working on, but really you can always identify there's gonna be one important variable. And he learned that from Jay.
Where he'd be describing a deal to Jay, he's like, okay, we got seven, you know, twelve steps here, and Jay's like actually the only step that's important is seven. Step seven. Like if we can rent this commercial office space, then everything else, all of our assumptions are gonna be proven true. And if we failed that one assumption, then the whole deal falls apart. That's one example that he used. Jay's level of intellectual in intellectual rigor really applied to me.
And I immediately latched on to the understanding that it could cut right to the heart of something complex if I broke the problem into pieces.
It was a matter of organizing my thinking. It was a discipline.
Meaning it is an actual
skill that you can learn.
And really for me that was one of the most important parts of the book, it's just this r constant reminder.
That there is usually just a handful of variables. I remember I did that three part um series on Larry Ellison. It's founders uh episode 124, 126, and 127.
And that was his belief too.
Where his his assistant or his partners would be like Hey there's a thousand things we gotta talk about
There's four.
There's like the handful of really important things that I know that that that require my attention, and I'm going to ignore everything else.
Even if people get upset at me for that.
And then I was reminded
how important this principle was.
In a past highlight, uh when I did the the um the biography of Johnny Carson back on w episode one eighty three.
Johnny Carson at this point in his career, he's like, Am I gonna am I going to leave at there's you know, I think there's only like three or four channels on TV at the time.
And it's like do I wanna leave NBC for ABC or it could be vice versa, but whatever like am I going to leave the channel I'm on?
For another channel.
And so Johnny and his team are going through and they're like, Okay, let's make a list of the this are the pros and the cons and what are we gonna do? And so he goes and seeks advice from Lou Wasserman. Lou Wasserman is like they consider he's like the most powerful and influential person in Hollywood. He was like a Hollywood mogul for like four decades.
And so Johnny goes to see him, lays out all these things, like I don't know what to do.
And in ri and Lou gets very it's the reason I'm gonna read this paragraph to you from Johnny's biography is'cause it's almost exactly what
Sam Zell's learning from from Jay Pritzker. It's like
What's the most important variable, focus on that. And so it says like most oracles, Wasserman gave an opinion that was simple and sensible.
It is not prudent.
he replied, to ask people to change their nightly viewing habits.
Once they are used to turning into a given channel, they find it hard to make the move, no matter how good an alternative is being provided elsewhere.
That's the end of his quote. This is what Johnny says.
Was that it?
All of our thinking and talking and arguing and agonizing came down to the belief that Americans won't change the dial.
And so as a result, Johnny stays put.
And this is the deal. He gets one of the most lucrative deals ever offered to a single individual in the history of television. Let me read this to you. This f this is it blew my mind.
Johnny's salary was set at twenty five million dollars a year.
For that.
He worked one hour a night.
From eleven thirty pm to twelve thirty a m
Three nights a week.
thirty seven weeks a year. He had fifteen weeks off. So he is getting twenty five million a year.
To work one hour a night.
Three nights a week.
Thirty seven.
Weeks a year.
Okay, so let's go back to Sam Zell's autobiography. Sam, just like everybody else that we study on the podcast, read biographies, learned from biographies and autobiographies of the great people that came before him, exactly what you and I are doing at this moment. Around the same time I was spending a lot of time with Jay. I read the book Zeckendorf, the autobiography of the man who played a real life game of Monopoly and won the largest real estate empire in history. That is a
Very, very long subtitle. It reinforced the approach of viewing the whole through its individual pieces, but for different purposes. William Zeckendorf was perhaps one of the greatest real estate developers of the modern era.
And so this one idea he picks up from this book changes the trajectory of Sam's career. His autobiography is packed with colorful stories, but what fascinated me most most was his strategy.
Zekendor viewed assets as a sum of parts. So he could increase the value of the whole. Various parts were more valuable to different buy.
So Zeckendorf would maximize the value of his holdings overall, in effect making one plus one equal three.
He calculated this is the main punchline of what he learned from him, okay?
He calculated everything separately.
The building's title.
The building's land.
The leases, the individual mortgages.
I thought this was brilliant.
I adopted the approach both inside and later.
Outside
of the real estate industry.
And I just realized I'm gonna I'm gonna buy while while I'm talking to you right now, I am buying
This book, Zackendorf's book.
Um, that's how I like I w when I hear like a book recommendation or in this case, when y you normally a lot of the book rec recommendations come from you. But whenever I receive them, and in this case, this guy we have Sam Sell saying, Hey, I read this book, I got a great idea, I made a ton of money from this idea
Like it's a no brainer. My point is like I don't I don't think it's smart to deliberate on the purchasing of books. What's cool is I'm looking at the page now, it's already bought. So I just ordered it while I'm recording the podcast. This book was first published May sixth, nineteen seventy one.
So now he talks about the building of his real estate empire. He does a bunch of deals with different people, but he only had one like true partner, and this guy named Bob Lurry, who unfortunately dies. I think he's in his forties when he dies from an aggressive form of cancer.
But he really talks about
That they had different personalities, but they had the same passion. It says Bob and I both saw business as a puzzle to be solved, and we both had an insatiable intellectual curiosity.
And so this rebel and maverick nature applies to the way they build their business. They have you walk in the business or uh you walk in the office and it's like bright cover colors everywhere. He doesn't allow office doors to be shut. And this is where I started laughing because he says he invented business casual. We abandoned all pretense and established a casual dress dress office policy, which believe me
Was unheard of in the rigid world of finance in the 1970s. We invented business casual. Our thinking was that if you dress funny and you're great at what you do, you're eccentric.
But if you dress funny and you're just okay at what you do, you're a schmuck.
We were determined to show everyone that we could excel without conforming.
in the early days they were asset rich and cash poor because they kept pumping all their cash flow back into the business.
And part of the their ability to do that is but that Bob was extremely resourceful. He watched all the costs. This is a fantastic paragraph for you.
Uh, Bob watched every single nickel in our business. Bob was constantly on the lookout for anything that could be reused. He used to walk into somebody's office and while talking,
Would casually rumage through the person's trash can.
He'd take out stacks of paper that still had paper clips on them.
All while continuing his conversation as though nothing out of the ordinary was occurring.
Bob would pull off those paper clips.
Our Bob would just pull those paperclips off and hand them back to the employee, conclude the conversation.
And walk out.
And so when I read that, I immediately thought of this hilarious story. I did all the way back.
One of my favorite books, I should reread it and re-record another podcast on it. It's called The Invisible Billionaire by Daniel Ludwig. Very hard to find book.
But it's uh episode sixty eight of Founders and he was very much like Bob, uh there's an entire gigantic organization. Where I remember one time in the book, he's like uh admonishing an employee because they put paper clips like there's documents that had to be signed for this massive deal, if I remember correctly. And they're like FedExing it or whatever.
way that you could get it back then. I don't even know if FedEx existed at this point in history, but they're like FedExing the paperwork and Daniel
It's just
Going ape shit.
because they included the paperwork and I think he said something like or the paper clip in there. He's like, We don't send
Iron mungery, use this weird word I had to look up, which I didn't know what the definition was. It's like we don't send iron mungery by mail or by air. It was just hilarious.
And it's really memorable writing too because I could just see Bob, like in my mind's eye when I'm reading this, I just see Bob like having these conversations. Imagine sitting in your office, your boss comes in, he starts rummaging through your trash can and he just doesn't even admonish you. He just like pulls them out. I was like, Oh here, hands back
And then just walks out the door when the conversation's finished. I just love that.
So Sam Zell's nickname is the grave dancer.
And the reason he's called the grave dancer is because he accumulated a lot of uh assets
when their price was de depressed by like some kind of financial
Crisis.
And this is the first time he talks about that. He says between 1974 and 1977, we brought roughly four billion dollars in assets with a dollar down and a hope certificate. I didn't know what a hope certificate was before reading this book.
And it says hope certificates were prominently used during downturns.
Uh they would allow a seller that was reluctant to unload at an asset at a depressed price the opportunity to participate in the potential
Post sale appreciation.
And so he gives an overview of what he was thinking at this point.
uh in his career. He says the nineteen seventies could have been a disaster for us. They were for many in real estate. Instead they were a they were a great ride. Our firm ended the decade with an enormous diverse portfolio, some of which
Would later see two of the largest REITs in the industry.

Some people say Sam Zell invented the reet. He says he was not the inventor. He's just the one I think he says it's like I'm just the one that made Reets dance.
And the way he would describe what a read is to an outsider is it's liquid real estate.
There's a lot more detail in the book on that. Years later, people would would ask me, How did you know when and what to buy? But all I did was basically create a massive arbitrage. A f this is the the grave dancing
strategy he's using between nineteen seventy four and nineteen seventy seven. That's what he's describing. Okay. But I all I did uh was create a massive arbitrage, a fixed rate instrument in an inflationary environment.
I essentially took on four billion dollars of non recourse debt.
at an average interest rate of six percent in an environment
with inflation of nine percent or higher.
That means I was already making three percent returns the second the deal closed.
Without doing a thing to the assets.
And so there's several times throughout his career where he writes these like
Marquis.
articles or pieces explaining his philosophy and usually his philosophy at the time is completely counter to whatever else is occurring in his industry. Says I ended my nineteen eighty six article called The Grave Dancer Dancer with an important warning. Grave dancing is an art
That has many potential benefits, but one must be careful while prancing around not to fall into the open pit and join the cadaver.
there is often a thin line between the dancer
And the danced upon.
And so as he continues to build up his real estate business, he realizes, hey, a lot of the principles that I'm learning to experience and learning from more experienced people like Jake Pritzer.
And all my other partners.
It's like they can apply not just to real state. And so that's where he starts buying into and in some cases grave dancing.
into other industries.
And it came from just this question that he's asking himself. If we've been as successful in real estate as we have been
Aren't we really just good businessmen?
And if we're good businessmen, then why couldn't the same principles that apply to buying real estate
apply to buying anything else.
So then he talks about some of the ideas he has between acquiring or buying into or investing into other companies.
And I really want to pull this out because it's really fundamental understanding his his distaste. He hates competition.
He says frankly, there's no substitute for limited competition. You can be a genius, but if there's a lot of competition, it will not matter.
I've spent my career trying to avoid its destructive consequences.
Competition skews people's assessments.
As buyers get competitive,
The demand for assets inflate pricing.
Often beyond reasoning. Later on I gotta finish the sentence, but later on he talks about he's like I hate auctions unless I'm the one
Doing the auction. So he says competition skews people's assessments. As buyers get competitive, the demand for assets inflates pricing.
Of and beyond reason.
I jokingly tell people that competition is great.
For you.
Me.
I'd rather have a natural monopoly
And if I can't get that
I will take an oligopoly.
And so one thing he looked for when he's buying into other companies is
Just poorly run companies that did not have control. He's like I don't think you can it's realistic to think, hey, you know, they're doing this amount of sales and I'm just gonna go in there and you know, five X sales. But it's always
These poorly run companies you can always make returns by getting rid of expenses.
And this story.
This paragraph I'm about to read to you is if you listen to last week's podcast with John on John Malone, he did he had the exact same thing happen.
He actually threatened
to throw the manager of one of his subsidiaries out of a window.
For behavior like this. Throughout the nineteen seventies, it was a giant and flamboyant company known for its corporate excess. So this is a company he's buying into. The management threw lavish parties, filled the drinking fountains at headquarters with Perrier.
installed Persian rugs offices and gave massive bonuses to senior executives.
Even while the company was struggling, it sent its stale staff
on a one point five million caribon cruise
So that's what they were doing in nineteen seventies.
The company's called Inta
Not Intel.
It's Intel without the N. So ITEL.
Uh
I think ITEL. In so that's what they were ITEL was doing in the nineteen seventies. In nineteen eighty one, ITE was one of the largest bankruptcies in the history of the country. The reason I just point that out is okay.
They're a giant influencing company.
uh known for corporate excess, they throw lavish parties, they fill their drinking fountain fountains at the house at the headquarters with Perrier, they're installing Persian rugs.
Let me ask you a question.
Is having a Persian rug in executive office doing anything for your customer?
So then why does it exist? It's ridiculous. And then gives massive bonuses and has a a huge travel uh uh a travel budget even though they're not doing well financially.
And the reason I included that is because really the note that popped my mind when I got to that section, I said every single entrepreneur that you and I have studied on the podcast would Mollywap.
mediocre business managers like this.
And the world of business, surprisingly, is full.
Of mediocre business managers that do stuff like this. That is insane.
Why are you putting Perier in drinking fountains? Why are you buying Persian rugs for your office?
It should not be surprising that six years later that company is bankrupt.
And so that leads to one of his main points that redundancies are much more predictable and transparent than theoretical opportunities to add value. My focus is always on the downside.
Overly optimistic assumptions lead to g the graveyard of corporate acquisitions.
So my interpretation of what he's telling you and I at that point, most companies are poorly run. If you buy one, focus on cutting waste as opposed to thinking that you can quickly grow revenue.
And so even though he's working all the time, definitely workaholic, he takes these he he's traveling the world and he takes breaks to do these they sound really fun.
um motorcycle trips.
And so he lands in the pole and him and his group pull over.
And this is what they were doing. We were enjoying the sunny day, drinking wine and eating sandwiches, when an old woman carrying a shopping bag down the nearest mountain walked towards us.
It was filled with high quality cannabis.
And she offered to sell it to us for ten dollars. So it sounds like him and his friends are smoking weed. So we bought it and shared it enthusiastically with our new friends. At some point, the guy I was sitting next to turned to me and asked, So what do you do? I replied, This is why I'm reading this whole section to you.
I'm a professional opportunist.
And that has been my response to that question ever since. What do you do for a living?
I'm a professional opportunist.
And then we move on to a devastating part of his life because not only
Is he have his biggest financial challenge in the company in the in the early nineteen nineties, but this is when his partner dies.
Bob and I had been partners for about twenty years. Bob was only forty six in nineteen eighty seven when he was diagnosed with advanced colon cancer. He did not tell anyone, even me for a long time.
As he explained to his wife, I'm not going to be able to stand it if people mourn me before I'm gone.
When Bob got sick, I went into a rational denial.
We talked two or three times a day, but I didn't see him, so he stopped coming to the office.
And so this is going on for like two years, and then Bob finally shows up and
It hits them.
Like he can't be in denial anymore. A couple month uh Sam can't be in denial.
Bob wasn't in denial the whole time. A couple a couple months after Bob had stopped coming in, he walked into my office. I was dumbstruck by his appearance at how frail he was.
To me, this is the absolute worst way to die.
And then not only like to be on to be an actual person suffering from cancer, but then to see I went through this with my mom back in uh two thousand fifteen, two thousand sixteen, and two thousand seventeen.
She had metastatic breast cancer that went everywhere all over her body.
And I think there's actually an important lesson there that I it was way too late for me to learn is
So I we me and her had been in a fight, and so I hadn't talked to her for six months.
And then we found the family found out that she f she had cancer, advanced cancer. So I go to visit her, remember?
I wasted six she's only gonna survive two years. Less I think a little less than two years from the point the story I'm telling you right now. And I go to visit her and I see her and I
Burst out.
crying because she had literally shrunk. The cancer was in her bones.
Everybody else in my family lives in the same city, so they would see her all the time.
And so they didn't notice it, but because I hadn't seen her in so long.
I'd immediately noticed that she had literally got shorter.
And she was young, she was in her late fifties at this time.
And the reason I bring this up is because I'm so disappointed with myself.
Let's say she had twenty-four to months to live, right? The previous six months we hadn't talked, so it's she had thirty months left to live. We didn't know at that time. I wasted twenty percent.
Of the time that she had left on this earth.
Being a a dick.
And letting an argument get me from stopping to talk like stop talking to her.
And the worst part is I don't even remember
What the hell?
We were arguing over.
Because I couldn't swallow my pride, because I couldn't see it to her perspective, because I was just being there's no other way to describe it. I was being a dick.
I l missed out on the last twenti percent of her life.
And then from there the the rest of the eighty percent she had left was unbelievably heartbreaking because they literally
You you see somebody that gave birth to you, somebody raised you.
slowly widow their body widows away and they die.
And there's nothing I can do about it. Like I can't that that that's a mistake I can never get back. So
I'm telling you, in case you're in a position where your parents or somebody you love is still around.
It's just not worth it.
It's like how I don't even remember.
What the fight was about.
That's heartbreaking.
And so when Sam is talking about in this book, I know exactly what he's talking about.
You see so like you were shocked at how
different and the the physical manifestation of what cancer makes people look like is just it's one of the cruel things
That life has to offer.
Something I'll never ever ever understand. I was dumbstruck by his appearance at how frail he was.
And he said we had to talk. He looked at me straight in the eye and said, Sam, you have to understand I'm going to die and I'm going to die soon.
It was the first time.
I had really faced
The truth.
I was devastated.
I think he dies like six months after this. His death coincided with the most challenging time in our business to date.
Just weeks later the economy tipped into a full blown recession. There was no financing.
for high no no refinancing for highly leveraged asset owners, which is exactly what Sam is at this point, okay? We were rich in assets but starved for cash and in the and we had an insatiable need for capital that dominated my waking hours. There were weeks when our billion dollar company was scrambling to scrape up enough money to make payroll.
I didn't know it then, but this phrase in my career or this phase excuse me, this phase in my career
was degenerate genesis.
Of a mantra that I would repeat regularly for decades to come.
Liquidity.
equals value.
And that's something Sam would repeat over and over again. He even talked about it later on in like the dot the technological uh like the technology dot com bu uh bubble.
in the late nineties where people were like, Sam, it took you, you know, multiple decades to become a billion, you must be frustrated that these people are bil uh become billionaires, you know, in a few months or in a year.
And he has a great line. He's like, Yeah, tell he has he says, Call me when that actually t turns into cash in the bank.
I don't care what your valuation is, what is the cash that you actually have, is his point.
And this is where he realizes like to get the capital I need, I have to go to the public markets.
he winds up taking a couple of pump companies that he had been in like investors in
And actually.
Taking'em public through an IPO.
He talks about the fact that he had never done an IPO before, he had to figure out like learn this process and he does it over and over again.
And he gets the idea w where
He says that I think it was in nineteen ninety three, nineteen early nineteen nineties.
Th there was no such thing as uh like institutional investors in real estate.
That they had to invent something.
They had to invent a reet.
as a way to draw in
uh institutional capital.
And I think as far back in like the late eighties, he thought if there was a way to make uh real estate liquid, that it'd be a trillion dollar industry. And I'm pretty sure, if I'm not mistaken, he actually uh is on like public record, like he actually wrote it and published that.
And two decades later winds up hitting ch almost a trillion dollars.
Or maybe I think it might be over trying now.
So the reason I bring that to your attention is because like understanding the IPO process of right like private companies.
influences his thinking on building all these reets later on.
And so in addition to his business struggling at this time, his
one of his closest friends and and best partner ever dies.
He also goes through
His second divorce, and he's like, I'm having personal failures too. But then he starts to learn more about himself.
And this is his realization. Over the years, I had just resolved that someone who had the responsibilities I had and whose goals required such an enormous amount of attention simply had to make a trade. So he's saying I made a trade for my work over my personal life. It caused the dissolution of two marriages. And at this point, he is fifty three years old.
So then he goes into what it's like trying to raise a lot of money at this point in history. Like how is his message being received, I guess is the way to think about this. And so he lays it out for us here. He says, Imagine the scene. I'd walk in the door and announce we're about to have the worst real estate debacle in history.
And the guy would look at me and say, What do you mean? We're at twelve percent this year in real estate, twelve percent return, I think. I had to get him to come to grips with what was really going on before I could even start to talk about the opportunity. I had to show him that vacancy rates and related metrics and prove to him that all the conditions were aligned for an epic fall.
And then I had to assure him that we were gonna make money, lots of it, by picking up the pieces.
Sure enough, over the next few years in the early nineteen nineties, the devastation became increasingly apparent.
Most private real estate was leveraged at eighty to ninety percent.
And with falling occupancies and rents.
Debt service became unsustainable.
Many of the big real estate players that had dominated the industry for decades had lost their shirts.
It was called the worst real estate crisis since the Great Depression.
And this is this punchline here, it did not matter how smart you were if you didn't have staying power.
If you were not able to hang on to your assets.
That kinda echoes Warren Buffett's uh quote that to win you must first survive.
And so he goes more into like his role that he's playing.
In this field, I mentioned this quote earlier. I did not invent the modern reet industry, but I helped make it dance.
My goal was to secure the industry as an independent asset class with its own allocation among institutional investors. It took a lot of lobbying and preaching in front of my peers, pension funds, insurance companies.
Banks and politicians.
The idea that real estate could graduate into the upper class of corporate America was absurd at the time.
But by force of will I knew we could get there.
And so this part's a little confusing to me because he says hey, in nineteen ninety two, it's actually Morgan Stanley that created this first structure. It was called an upright.
So the word re or the the acronym REIT and then put up in front of it.
But I wanted to read this part to you because it's important because he's saying why. Like why did he want to start doing this? And so he says and he goes through like stuff I don't understand and then he kinda breaks it down for something I can't understand, hopefully and I can read to you. In other words, the Upri establish a methodology for large holders of real estate to create liquidity
Without triggering a taxable event. So this is the why he wanted to do this. As long as the holders didn't sell their shares.
The structure allowed the majority of major private real estate holders
Чу інкорпоратир пофоліос.
into the public sector.
And he compares this invention like being an oil boom for private real estate holders like himself, okay?
And the reason I'm going to read this to you because this is fantastic and something I've noticed over and over again. Do not be surprised if your best idea comes after decades and decades of experience. I see this all over and over again, where there's Enzo Ferrari, Sam Walton, even Steve Jobs, their best idea came after decades of experience. We see the exact same thing happening in Sam Zell's life.
By the time of the first modern REIT in nineteen eighty three, I had the advantage of having spent the last decade schooling myself in the public markets for our corporate companies. I was very familiar with what worked on Wall Street and what ex what was expected of great companies. And I knew the real estate industry was starting to
У стартational дефіцит.
I said our latest entry into the public markets reminded me of a bumper sticker I once saw in Houston, Texas, in nineteen eighty four. That said, Please, God, give us one more oil boom, and we promise we won't screw it up.
And this sentence is just unbelievable. We ended up growing the industry.
From seven billlion dollars in the early NT Nights.
to over a trillion dollars by two thousand and sixteen
The simple genius of public REITs is that they turn brick and mortar.
into transparent
And predictable
Liquid assets.
So now I have to get to what Sam Zell is most well known.
Four.
I'm sure people on h within his industry knew who he was, but
Uh the vast majority of people when you say Sam Zell they're like, Oh, that's the guy that almost that sold the company for almost forty billion dollars.
And the reason he sold is because he said he received a Godfather offer. That's obviously from one of my favorite movies where it's like, Hey, I'll I'll give him an offer he can't refuse. Timing is everything. That's another thing that he says over and over again in the book. Timing is everything.
That's just a tripe phrase until you actually find yourself in a situation where you've closed the business tr biggest transaction in history on the cusp of a catastrophic collapse in the global real estate market.
But perfect timing is revealed only in hindsight. So when I completed the thirty nine billion dollar sale of Equity Office, that's his company in early two thousand seven, I didn't yet know how the story would play out.
So he says equity office was the largest REIT in the country. We had spent a decade acquiring an irreplaceable collection of over five hundred of the best office buildings in every major market in the US.
It was my baby.
Truth is, had I had I kept the company private, I probably would have never considered selling.
But when I took it public, I assumed a fiduciary responsibility to shareholders. In exchange for their capital, I made a commitment to give them the best return on their investment. That was my primary obligation, and nothing stood before that.
Over the years he gets a bunch of different offers. They keep going higher and higher and higher.
Blackstone called us informally with an offer of forty to forty two dollars a share.
We told Blackstone the bid was insufficient.
Still, we were a little bit surprised to have such a robust offer. Suddenly I realized that my big my what he st what he thought at the time
So he says suddenly I realized that my too big to sell company might sell after all. He thought like he had built a business so big, like there's no acquires. Like no one's gonna spend forty billion dollars on an acquisition.
And then he's realizing, Oh, wait, they actually might do that.
And what's crazy at the time is there the guy doing this deal for Blackstone, his name is John Gray. At the time he was thirty six years old. So he's the thirty six year old head
of Blackstone's real estate uh
division. So he sends out this this float of an offer at forty to forty two a share like no it's you know it's still insufficient.
So it says serious and detail oriented, Gray didn't overlook even a stray remark when Richard, this is somebody working with Sam.
told him that our board had decided against selling the company, Gray asked under what circumstances that decision might change. Recalling what I often told him, Richard says, Sam says it has to be a Godfather offer.
It has to be an offer that's too good to refuse.
So they come back. Now they're saying, Okay, we'll do forty seven fifty.
And Sam's like now we have to listen. Blackstone's offer is well north of what we knew the value of our real estate was then. I've always believed that ev this is a really important
point because he repeats this over and over again on how to value your assets.
Or at least his opinion on how you should value your assets. I had always believed that every day you choose to hold an asset, you're also choosing to buy it. Would I buy our building at the price Blackstone was quoting?
Nope.
And why does he say that? Because this is gonna wind up being the biggest deal in real estate history.
So once the Blackstone bid comes out
There's another deal by or another offer by this company called Vornado.
And this is Sam's response to what's happening. He says the game was on. If you do deals for a living, like he does, you know the energy that big that a big deal generates. It's intoxicating. The air crackles with the energy of anticipation. You're bouncing on your toes all day, every day. It is quite simply really
Really fun.
Blackstone winds up winning the deal.
And this is actually pretty surprising.
And I guess it gives insight into Sam, that he's really about deals and not companies.
I guess to put it another way, his love is for the deal, not for any particular company. So it says, As for the attachment I felt for the company had nurtured from its infancy, I had moved on.
Once the deal was done, it was over for me. I had no remorse. I didn't think about it anymore.
And so he's got a bunch of other deals and companies he goes into detail in the book. I just wanna pull out a couple other things. They're just really uh to me pieces of advice on life and building a business. Says time is much more important to me at this stage than money.
I am highly judicious.
about where I put my time. At this point that he's writing
і систі сев
at this time in the story. So of course I think that's uh something that we should work on trying to make time obviously way more important to money, even when you're younger.
But it sure as hell's time is way more important when you have less of it. And it's a byproduct of him being sixty seven as opposed to like thirty seven or forty seven. He's got he knows he's got less time.
Then he's got some good advice for other entrepreneurs. As an entrepreneur, I am nature I I am by nature an optimist. The word failure is not in my lexicon. I don't spend a lot of time lamenting on what could have been done.
My mental set is that my head doesn't turn the other way around.
I am always compelled
Творц во інець.
Another piece of advice he's quoting this one of his favorite poems.
Does our fate lie in the stars or in ourselves?
I believe it is in the latter.
I think this is just good advice for life. When I read or hear about a place in the world that intrigues me.
I go there.
I've always been that way.
And then he goes into detail how
the world now. Like world markets, he was trying to do like international investments, you know, decades ago. It's very difficult.
He just talks about like how interconnected.
Like we have truly world markets today as opposed to like what he had when he was growing up. And really w large part of that is like how the internet enables like these truly global world markets.
And he says, I don't think we've even begun to understand the various ways that interconnection and interdependency will evolve over the next couple of decades.
And I definitely see that from my vantage point. In fact, um
One of my friends is a synonymous account on
Twitter, it's called Mostly Borrowed Ideas. And I was able to get to know him through the podcast and he sent me a message the other day that was fascinating. He says, David, I just want to let you know that your podcast reached many of my Bangladeshi friends. That's where he's from, most of whom discovered it even before I shared it with them. So you're definitely reaching all the nooks and crannies of the world.
So I like that idea. I don't even think we've even understand the various ways the interconnected interconnection and interdependency will evolve over the next couple of decades.
He also talks about really understanding who you are and what your skill set is and making sure you're designing a business to
to around what you're uh what you're good at and what you actually like to enjoy. He says I'm a ch I often say I'm chairman of everything and the CEO of nothing.
I stick to what I'm good at vision, direction, strategy. That is where I add the most value.
I pick great people to run my businesses. I do not involve myself in the day to day management.
But I stay close to those who do.
And then I think if you read in between the lines, he's really encouraging you to think about like the culture you're building and the company you're building.
And I think what I'm what I learned and I I feel this way myself, but what I'm learning from this paragraph in this book is that people really, really dislike formality and bureaucracy.
And they h they sure as hell don't like the slow movement that accompanies
Formality and bureaucracy.
And here's an example of that. One of the few senior managers who ever voluntarily left my company ended up coming back. He left after twenty years for a job that paid more money and gave him more power.
So when he returned, I was curious to know why.
I don't understand, I said. You were earning twice as much money, you had a much higher position. Why do you why did you come back? He said, It's really simple.
When I was here, if I had a problem, I walked down to your office and asked a question and you'd answer it.
Ага інстан аксе.
In my new company, every issue involved writing memos to half a dozen people, and by the time we got to the end, all creativity had been stifled.
You could hardly remember the idea you started with.
fast decision making and autonomy.
Had become like oxygen to him.
Just two great quotes about entrepreneurship. I'm often asked can entrepreneurship be taught or is it innate? My answer is that I there is an inherent entrepreneurial gene.
Albeit it's stronger in some
than others. That's my guess too, that there's an there's an in hate inherent entrepreneurial gene.
And then another great line, critical thinking.
is the hallmark of an entrepreneur.
I'm often asked what I want my legacy to be.
My best answer is
He made a difference.
He also talks that he just consumes way more information than most people who reads like five newspapers a day, three magazines a week.
uh reads a book and he says this part was kinda funny. Uh and I've experienced this myself. I go through about one book a week. I usually remember nothing about them.
Unless all of a sudden something becomes relevant.
It's just amazing how we have to constantly remind ourselves about what we read.
This part made me laugh out loud. I suffer from being very competitive and that is not limited to things I can do well.
And then I may have saved the best for last.
And he says, Let me leave you with this. An entrepreneur is consum with making the most out of what he already has. He is all in.
An entrepreneur is always looking for new opportunity. He is always reaching.
This isn't a dress rehearsal.
I try to live full throttle.
I believe I was put on this earth to make a difference.
And to do that.
I have to test my limits.
Go.
For greatness.
And that is where I'll leave it. Highly recommend buying the book. If you buy the book using the link that's in the show notes on your podcast player.
Or we go on to Founders Podcast Podcast dot com.
You'll be supporting the podcast at the same time.
If you want to remember more of what you read and you wanna use the app that I use to store all my highlights and all my notes, and really the app I use to to help make the podcast.
You can it's called ReadWise. You can get two months free by going to readwise.io forward slash founders. That link, of course, will be in the show notes and available at founderspodcast.com, like everything else.
That is two hundred and sixty nine books down.
One thousand ago.
And I'll talk to you again soon.