Founders - #243 Francis Greenburger (Real Estate Billionaire)

Episode Date: April 25, 2022

What I learned from reading Risk Game: Self Portrait of an Entrepreneur by Francis Greenburger.----Get access to the World’s Most Valuable Notebook for Founders at Founders Notes.com----[1:26]  I can be extremely stubborn when I have a hunch about something.[3:31] I knew all too well that markets can turn on a dime.[5:40] Money that had once flowed freely dried up over night.[6:41] I always listened to other people's ideas because that is how you happen upon the good ones.[6:46] Logic is no match for bureaucracy.[7:33] This ruthless industry has created far more bankruptcies than it has billionaires. Saying no is the most important judgment that you make.[9:00] Time to Make the Donuts: The Founder of Dunkin Donuts Shares an American Journey (Founders #231)[9:09] Sometimes the best lessons that you learn in life are from what you discover in the weaknesses of otherwise very good people.[15:54] My father was terrible with money. His knack of mismanaging it, losing it, or not making it in the first place was an incredible source of stress within our family.[19:09] The constant question mark that was my parents's checkbook balance made a lasting impression.[24:31] His pride in my abilities formed the basis of the self-confidence that allowed me to start businesses, sell books, make crazy friends, and love women at an age when most others were busy with their homework.[29:40]  The Fish That Ate the Whale: The Life and Times of America's Banana King (Founders #37)[30:12] I see opportunity where others saw nothing.[31:34] He doesn't dilly-dally. This guy moves fast. It's not like I proved it once, let me try two or three times. He is like it worked once, it's gotta work over and over again, and he immediately starts to scale it.[37:40] Don’t interrupt the compounding:  I was skating on razor thin margins that a busted toilet could threaten. But I prefer to remain on the edge as I kept my buildings running rather than sell any of them before they grew to the much higher value that I had a hunch they would one day achieve.[40:45] The idea that builds his empire: By co-oping I would be dealing with tens of thousands of dollars in sales, rather than hundreds of dollars in rents.[41:58] Once something works don't dilly dally. Go as fast as you possibly can.[43:08] Lots of folks thought what I was doing was insane.[43:17] I knew something that the market had not yet fully embraced.[47:06] My advice to those with expanding businesses is that they must first make a decision about how they want to allocate their time and structure their business so that the balance reflects that.[49:33] Children require attention and involvement. This takes you out of your self orientation and makes you invest in another person who can only pay you in one currency: Love.[50:09]  If anyone had asked me in 1990 what the chances of my business survival was I would have said 1 in 100. I still consider it a miracle that we didn't go bankrupt.[53:12] The main lesson is never delay discomfort. Waiting or ignoring a problem never solves it. Just run towards it.[55:36] Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future (Founders #30)[56:27] Every parent’s worst nightmare.[1:06:25] Disaster usually rises when short-term profit takes precedence over lasting value creation.[1:08:21] I don't pick investments. I pick jockeys, not horses.[1:10:31] Tuxedo Park: A Wall Street Tycoon and The Secret Palace of Science That Changed The Course of World War II (Founders #143)[1:10:52] The Richest Woman in America: Hetty Green in the Gilded Age (Founders #103)[1:13:52]  Real security comes from adaptability.[1:13:59]  Independent thinking in its simplest forms means not assuming that the status quo was the best answer, the right answer, or the most effective answer.----Get access to the World’s Most Valuable Notebook for Founders at Founders Notes.com----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested, so my poor wallet suffers.” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

As soon as I took the phone call, I regretted it. All of my authors had a lot of personality, but Jim was never happy about anything. I just read about your latest real estate deal in the newspaper, he said. I'm not sure how you can be doing your job for me when you're busy buying up this city. I didn't appreciate Jim's questioning my competence as his agent when I not only worked hard on his behalf, but had also discovered him from the slush pile. Not long after my father died, I had taken over the agency.

I put a small notice in the New York Times calling for authors to send in their work in an effort to drum up some new clients. Accepting unsolicited manuscripts was very unconventional for an agent. I was deluged with all manners of books. Most were not worthwhile, but I did find a good, highly stylized, fast-paced thriller built around a political assassination. I liked the book and contacted the author to take on the challenge of selling his first novel. A challenge is exactly what it became. I went through 27 rejections until I found an editor who didn't say no immediately. If the author would rewrite it, the editor would consider publishing it. Jim agreed and rewrote

the book, which I resubmitted to the editor, who nonetheless declined it. Most agents would have certainly given up at this point, but I can be extremely stubborn when I have a hunch about something. On the 38th submission, not only did the editor buy it, he paid $10,000, a very generous advance for any first novel, and especially one that had been rejected 37 times. Jim's first book, published in 1976, won the Edgar Award for Best First Mystery. It was a nice little success story and a parable on the merit of dogged determination, but it hardly warranted him calling the shots in my career. Look, he said, you have to decide whether you're buying buildings or you're selling books because I can't have an agent who does both. If you want to keep me as a

client, you have to give up your real estate business. I didn't even need two seconds to think about my answer. There was no contest. I wasn't going to let any author, not even James Patterson, who would go on to sell over 350 million books, put an end to my real estate ventures. That is an excerpt from the book I'm going to talk to you about today, which is Risk Game, a self-portrait of an entrepreneur and is the autobiography of Francis J. Greenberger. So this book has been recommended to me probably five or six different times. I bought it a while back. It's been sitting in a pile of unread books. A few days ago, my friend Mitchell recommended it to me again, and I said, okay, there's got to be a reason why so many different people have recommended reading this book. Let me pick it up and see what's going

on. And I was less than halfway through the book when I realized this book is nuts, and it's totally not what I expected when I picked it up. And I'll expound on that idea as we move through the book. I have no idea where this podcast is going to go. You'll see what I mean. This is a very odd character and he doesn't try to hide that fact at all. Let's go to the very beginning in the prologue. He's talking about what it was like trying to build the largest project of his career.

This is this giant skyscraper in New York City in 2008. And it's this project called 50 West. And he says, I knew all too well that markets can turn on a dime. And I had spent my career always looking over my shoulder for signs of trouble and keeping an ear to the ground for the sounds of crumbling economic conditions. Even so, I completely missed the signs of this disaster that I experienced through the very expensive prism of 50 West. And so this project was expected to cost him about 500 million, just one building, $500 million.

And it's just one part of his gigantic real estate empire. So it says, when in January of 2008, we began demolishing the three buildings on the site, I was full of optimism. And why shouldn't I have been? Arranging the financing for the project had been a given. It was only a question of which bank we would allow to give us the money. That's how flush those times were. Then on September 15th, Lehman Brothers filed for Chapter 11 in the largest emotional rollercoaster, while putting a stop to the building. And so that is the book's first mention of this euphoria and terror, his emotional state, the entrepreneurial emotional rollercoaster

that Francis is going to experience both personally and professionally over and over and over again. He starts working at the age of like 14. He writes the book. He's almost 70 years old. And these wild ups and downs never leave him. That's also part of what I think makes the book so interesting to read and why so many people have recommended it. And something he talks about quite a bit is the fact that real estate is a business of human beings. And he's quick to point out just how irrational and bizarre human beings are. This is the first example of that.

As soon as I halted construction, the bank with whom we had a $55 million loan balance sent us a letter stating that we were in default with ongoing construction as a stipulation of our loan agreement. They were entitled to foreclose on the land, the blindness of bureaucracy. My options were limited. And so why were his options limited? He says that right here, money had once flowed freely, dried up overnight. I had to sort this out while also resolving hundreds of millions of dollars of other development commitments that I was trying to undo. And this was only one out of my 200 properties that I had to shepherd through an international financial collapse. And just as you can imagine, just as the economy slips towards depression,

so does his mind. I had fallen off financial precipices before and survived them. This one, though, was different. The emotional toll was greater than even I had realized at the time. And I think later in the book, he's going to talk in more detail about that. I think at this point, he had been 40 years deep into his real estate career. As I fought daily to find solutions to an endless list of financial demands and crisis, I slipped into a depression. And so some of the stuff I'm going to pull out today are just, he's got these like one line, like maximum spread throughout the book that I really enjoyed. Three of them just happen up here on this page. I'm just going to read them

to you. I don't think they need many, like I don't need to explain them. I always listen to other people's ideas because that is how you happen upon the good ones. Logic is no match for bureaucracy. One rule of real estate is that everyone renegotiates. And then he's going to give us overall advice on the real estate business. This idea that he's going to describe to us right now, Rockefeller in the book Titan also talks about. So he says, one of the dangers of the real estate business is that often you are competing against people who have money but are not that knowledgeable. It is a counterintuitive idea. Yet those with money, the only barrier to entry into the real estate market, but no experience in the buying and selling of property, drive up prices because they want to get in on the action.

And their power lies in their checkbook. If you pay a certain account simply because the guy next door has paid it, you will not survive this ruthless industry that has created far more bankruptcies than it has billionaires. Saying no is the most important judgment that you make. And so 150 years ago, Johnny Rockefeller noticed the exact same thing. And he said, oftentimes the most difficult competition comes not from the strong, the intelligent, the conservative competitor, but from the man who is holding on by the eyelids and is ignorant of his costs. And then he ends the prologue with a description of himself.

These are my favorite people. I don't give up easily, not on people or properties. And I wasn't ready to give up on 50 West, not even after a global financial crisis made the land practically worthless. And so that is the last time he talks about real estate for like one third of the book, which was really surprising because so his father, I'm going to get into the complicated relationship he had with both his father and his mother right now. But his father ran a literary agency in New York City. His father is going to die. I think Francis was in his early 20s. So he has to take over his father's agency. And so he's working in that business along with the real estate business for most of his life. But it is very, very clear from his writing which one he loves

real estate. And so once he starts talking about real estate later in the book, the literary agency kind of just disappears off the map until the very end of the book. And so the way I think about Francis's relationship with his father is very similar to the relationship that the founder of Dunkin Donuts had in that podcast I did on his autobiography. His name's William Rosenberg. That's episode 231 if you haven't listened to it. But the relationship that the founder of Dunkin Donuts had with his dad, I think there was a great summary in their relationship when he said that sometimes the best lessons that you learn in life are from what you discover in the weaknesses of otherwise very good people. That's how he

described his relationship with his father. I think it's very similar to the way Francis's approach, like Francis views the relationship he had with his dad. And he says, I was the son of a cautious father who was sometimes hard to communicate with. And just like the founder of Dunkin Donuts, his dad was very bad in business, caused the family a lot of turmoil because they were in like a precarious financial position. Same thing with Francis's father. My father remained a poor businessman. He was constantly settling for too little compensation and loaning money to his authors who were anything but good for it and so from a very young age francis is working in the agency with his father i'm going to take you to a conversation they're having wait till i get to the punchline this is insane they're talking about a difficult client

so he says look you can't make money this way we're not a charity but he's turning us into one my father leaned back in his chair and gave me a look that was not easily discernible, part confusion and part dismay. Sitting across from me at his desk, my father put his hands up and defeat the contemplative nature that kept my father meandering through the vagaries of life, bowed to my bolder American directness. Okay, fine. You're in charge of the numbers, he said. I'll call him and ask for an increase to $350. So the person was paying $300 a month. His father says, no, okay, I'll call him, ask for 350. Look what Francis does here. Let me call. I'm going to ask for $1,500 a month. A look of amusement sparked in my father's eyes. He knew I was serious and that I understood things he didn't.

Remember that sentence for when I get to the punchline. He knew I was serious and that I understood things that he didn't. So Francis calls up the client and he says, after I showed the client the numbers, he was a man who, unlike my father, had some sense of what a business costs. He agreed and we got an increase from $300 to $1,500 a month. Here's the punchline. That was 1962. I was 12 years old. And so we've already seen two traits right from the

very beginning of the book that he doesn't give up and that he's willing to be bold. And you're going to see the next, the third trait, he's got a lot of confidence. I was a prodigy. It perfectly described my early aptitude for business. I always had a job R3. Money was my security blanket. Working gave me a purpose. It grounded me in this topsy-turvy world. And so he's working full-time from a very young age. He winds up dropping out of high school and starting.

So he's working for his father, doing whatever he can. He drops out of high school at either 15 or 16. We'll get there in a little bit. And he's been running businesses the entire time. So by the time he writes the book, he's got almost a half a century of experience in business. Now we get to the bizarre. This book, what's interesting about the book, and again, why I think it's recommended by so many people, so many different people, is because he's not really writing the book to get you to like him.

And that'll make more sense as we move through. Like there's stuff that he says, not only about his family, just about himself. It's, he's, just like I talked about with Francis Ford Coppola last week, he's a messy human. And what I appreciate is the fact that he didn't try to hide that. And just like Jay-Z said in his autobiography, like, there's things that even I do that I can't explain why I do it. And I think that's just somebody, that's something that all, everybody understands. And when you kind of just, like, lead with your flaws or with mistakes you made, I just think it resonates more. So let's go to his mom. Later in life, a therapist posited that

I was insecure about my relationship with my mother. There was certainly a lot to be insecure about. So he's talking about this love affair that his mom had she was living in germany this is when um the nazis take over she winds up leaving germany with her one true love because she wasn't in agreement with what the nazis were doing her one true love is going to get killed and she never gets over that she essentially marries francis's father for like convenience more than love so it says their affair ended when andre that's her lover or her boyfriend or whatever, was tragically killed right before the end of World War II. Still, he remained the love of my mother's life

and the father of her first child. And this is where we get into some weird stuff, right? The man remained a permanent shadow lurking around our house the entire time I was growing up. My mother and father fought constantly with or over my brother. So his older brother, his older half-brother, he's also named Andre, whom she aptly called Andre since he was in her eyes the reincarnation of her dead lover.

My brother was a difficult kid, acting out all the time. But if my father tried to assert discipline in any way, my mother wouldn't have it. He didn't mean it was her constant refrain. She just repeat that over and over again. He didn't mean it. He didn't mean it. At the end of one weekend in the country, Andre, who was 13 at the time, didn't want to leave. So he kept us captive by hiding the distributor cap of our car. He didn't mean it, my mother said, as we sat hostage for hours while Andre refused to return the necessary part. What do you mean he didn't mean it?

My father shouted. He could run us all over with the car and you'd still say, oh, he didn't mean it. And then check out this, like his interpretation of what's happening, which again, it's just really, really unusual. Everyone knew what the fight was really about. Andre was the only remnant of a doomed and noble love. When my father attacked him, it was like he was attacking her dead resistance fighter. And so he's got a lot of unresolved issues with his mother, even towards the end of the book when she passes away. This resolution, this unhappiness that's coming from his childhood is never resolved.

If I intuitively understood that my mother married my father because when she came to America with a young child, she didn't know anyone, but that she wound up feeling compromised by the bargain, then my suspicions were confirmed by a comment she made to me over the lunch table when I was six. I had some advice for you. Don't let some woman marry you for your money and she continued never have children and so he's raised in an unusual household with an unusual situation and his response is rather unusual and we kind of see the the determination to control his own life and something he talks about over and over again it's just the necessity to have independent thinking it talks about a lot in business but we see that he applies it to his own personal life as well. I was lying in bed one

night when I made a decision to give up trying to be an emotional part of our family. I'm not doing this anymore. These people are nuts. And if they want to drive themselves even crazier, they're doing it without me. And so he's like, I'm not going to be an emotional part of the family, but I'm going to still be part of, I'm going to control the finances of the family. Even from a young age, his parents let him do all the budgeting and everything because he said they were just completely clueless. And this is probably why he just has this like relentless focus on getting extremely rich. He said, my father was terrible with money. His lack of mismanaging it, losing it, or not making it in the first place was an incredible source of stress within our family. It sounds exactly like the founder of

Dunkin' Donuts. Money was their second biggest source of argument. The first one obviously is fighting over Andre, the stepson. And so Francis puts a line in the ground and he said, this is what I'm going to, this is the role I'm going to play. No more Francis the peacekeeper or Francis the child. Francis the worker was the role I much preferred. And listen to how he describes it. It's such unique language. Childhood didn't suit me. My intentions weren't focused on school. I hardly even showed up and I barely even handed in homework at all. My move from the quiet sidelines of managing the finances to the middle of the action happened when I was 14 years old. And why does he say that?

Because that's when he starts his first business. He's going to his very first business. He's going to start exporting books. So there's this thing in publishing where it's called remainder books, which are books that a publisher has an excess inventory of. And so they usually sell off to retailers or like discount distributors. So his father's selling books in the United States. Most of those are in English.

There's a lot of people that speak English in Germany at the time. Why don't we sell these books that are in English to our German clients? And this is why they could do this. It took a year or two after books came out in the U.S. to be translated and published in Germany. That meant by the time they were out in Germany, the same books were going into paperback back in the United States. And the hardcover publisher was remandering its excess inventory. I saw an opportunity. And so he calls up a publisher and tries to pitch him on this idea.

He says, look, I want to take 5,000 copies of hardcovers off your hands. But instead of 30 cents per book that the remainder guys pay, I'm willing to offer 50 cents. What's the catch? They're headed to Germany. This is a win-win. You're remaindering the books anyway. This will get them out of your market, so it's not going to compete with the paperback, which you're about to release anyways, right? And I'm going to pay you almost double what the remainder dealers do. So he gets 5,000 books. This is how the money breaks down. It's actually really interesting. So he's going to get paid.

His partner in Germany is going to buy the books from him at $1.25. He's got to pay. He just said, I'm paying 50 cents per to the publisher. And then I have a cost of shipping for 25 cents. So I'm getting $1.25. I have 75 cents of expenses. That's 50 cents a book that I'm making, right? I just sold 5,000 books and I get 50% profit for each one. So he made 2,500 bucks. And then this is just great, clear writing to summarize what's taking place in his life at this time. In 1963, 3,000 bucks was a fortune. It was the cost of a new car, two years of tuition at Harvard, or half the average annual American income. And the whole deal only took me an hour. And so now he's got a book business reselling books into other markets, right? But he's talking about why this is so

important. Imagine coming through from the, like the family that he came from. He said money was a security blanket, right? Money for me was never about ambition. Even at 15, success for me meant not having to worry. My dream was never wild opulence, but rather the luxury of stability. More great writing. The constant question mark that was my parents' checkbook balance made a lasting impression. So then I'm reading a while. He starts other book businesses that are very similar. I'm going to get into how he stumbles upon real estate when he's 19. But I went through like, I got to around page 40 or 50. And I left this note for myself.

I could not understand at this point why this book was recommended so much. Because this is what I wrote to myself. I was like, way, way too much detail about his sex life that he's having as a teenager. I don't need to know this. Please keep this to yourself. Little did I know that was only the beginning and a theme that's going to continue throughout the entire book. He winds up like renting mansions. He's making so much money. When he's in his 20s, he talks about like the crazy stuff people were doing in the 70s, all the drugs and the group sex parties. Again, this book is

nuts and it's totally not what I expected when I picked it up. I mean, for God's sakes, if you look at the blurb on the back, like one of the blurbs is from Fred Wilson, which is like this well-known venture capitalist. He founded a union square ventures. And he says, Francis is one of the most decisive people I know. He made a commitment to invest in our first fund in a five minute cab that we shared one morning. And it talks about his philanthropy and all this other stuff on the back. And then you open up the book and it's just like orgies, drugs, and alcohol.

And so at 19, he accidentally stumbles into the real estate business. He's working at his dad's agency part-time. He's running his, selling a bunch of, he's got three different book businesses and he's also his own independent literary agent. And it says, my first real estate deal, which happened purely by chance, was a complete success.

I found a new office that had been on the fence about the place because it had two rooms and I only needed one. And so the guy he's gonna rent from says, so find somebody else to sublet it to. So he knew somebody from the book business who just happened to be looking for an office. I paid $50 a month for each room

and rented him one of the rooms for 100 bucks. So he was essentially paying for my office. I paid $50 a month for each room and rented him one of the rooms for a hundred bucks. So he was essentially paying for my office and his. This is good, I thought, and easy. So he's doing all these different things and his father's trying to get him to commit, just run my business. And he does something here that's really smart that everybody has to. Like at some point, he's 19 years old. He's got to make his own decisions. You've got to control your own life. And so he kind of puts his foot down again. He just does not like people giving him ultimatums, right? So he says, look, you've got to decide what you're going to do, he said. Either you're going to take over my business or you're going to do other things. You can't do

both. People keep saying that same statement to him. In that moment, I was conflicted. Like most good kids, it's comfortable to do what our parents want us to do. Yet it was very clear in my mind that my father was asking me to commit to something I couldn't impose on myself. Freeing myself from this parental obligation was the right decision. And then we just get really great writing about an emotionally heavy human experience. It says, was planning on forcing my father into retirement. My father was just barely holding on. The future of his business was not at all clear. That's when my parents' housekeeper called. Your father's passed. Your father's passed.

Her hysteria was so confusing that for a moment I couldn't understand what she meant by passed. Then suddenly, I got it. I ran the six blocks from my office to my parents' apartment, where I found my father lying on the couch in his robe and pajamas, looking very still and very white. He had suffered a stroke and died. And his description of the funeral and the impact it had on him. Wait, just wait till we get to this. As I watched my father's coffin lowered by a flick of some switch by someone I didn't know, it all felt too easy. From the moment the undertakers

had wheeled him out of his apartment to now, a lonely box abandoned by the mourners making their ways back to their cars. I had trouble connecting to the reality of the situation. My father's death was too antiseptic to be believed. Once the last of his friends and family had driven away, I turned to the gravediggers and told them that they could leave too. Confused and concerned, they motioned to the hole in the ground that was empty except for my father. I ignored them and took my jacket off, grabbed a shovel, and begun to dump the cold, wet earth onto the casket. The thud was hard, visceral. It cracked my protective shell. Remember, he is 22 when this is happening. More dirt went in. As it collected in dark, dirty mounds, a strange, inversely proportional dynamic occurred.

The heavier the piles grew on top of him, the lighter I felt. I always understood that my father's approval of me and his constant concern was simply an outgrowth of his love. His wanting to be helpful by giving good advice, though it drove me crazy, was a purely positive instinct. His pride in my abilities formed the basis of the self-confidence that allowed me to start businesses, sell books, make crazy friends, and love women at an age when most others were busy with their homework. And yet, as the earth settled into a form vaguely resembling a mound, there was an easing. The recognition that he was gone and I was on my own released me from the burden of his So the very next day, he walks into his father's agency and tries to figure out what's going on. It's losing money. He says he could summarize the way his father ran business, essentially borrow from Peter to pay Paul. So there's more detail in the book. I'm going to

skip to the philosophy that he applied to his father's literary agency that his father did not. And so he has a very different business philosophy. He says, I came into the agency not with a deep understanding of literature or writing like my dad, but instead an understanding of what was sellable. My feel for the business of books was direct and results-based and ran contrary to my father's meandering,

intellectual, or literary approach. I sold whatever viable material arrived at my desk. And so he completely turns around the agency. He winds up signing people that are, wind up selling some of the most successful books of all time, like Dan Brown, the guy that wrote the Da Vinci Code, Brad Thor, who writes like spy novels. And so he starts making enough money. This is where we get into the book where I wrote, what the is going on here this was not what I expected when I picked up the book he's 25 he's renting mansions they're all naked all the time they're doing drugs he says sex drugs and rock and roll so I'm going to skip over all that part I do want to get to some of these interesting the book is full of just unique

characters and here's one example of that says Helen Van Slyke was a one-time beauty editor at Glamour magazine and vice president of the makeup company Helena Rubinstein. And it says, Helen churned out best-selling romance novels faster than her former employer made lipsticks. From her 10-room Park Avenue apartment, she carried over her workaholic ways from her days as a cosmetics executive and produced 2 000 words a day six days a week which each novel only taking about seven months to complete she had sold more than four million copies and so we're about to transition into the

vast majority of the book which is about real estate but throughout the, he sprinkles in and he mentions this over and over again. He's like, I had a conflicted relationship with my father, but he gave me this abnormal level of self-confidence that I have. And so this is just really great writing. He says, by the end of the 70s, the agency was alive and well. It's still in existence to this day. I don't know if I already told you that or not. Sitting at the desk, sitting at his desk, the desk that his father used to sit at, my mind couldn't help but wander to my reinterpretation of his life's work. That's a really interesting thought to have. My thoughts were divided. His pride in me fanned the self-confidence that permitted all of my actions, regardless of my

lack of formal training or education. Remember, he's a high school dropout. Yet our worldviews were so radically different as to make me wonder about the meaning of legacy. My father's fundamental commitment had been to an intellectual tradition that revolved around his European constellation of authors and influences, right? While I honed my own literary instincts, aggressively pushing for big deals.

My commitment instead was to good business. It was the old world clubhouse of my father versus the American upstarts. And as far as I could tell, we were winning. And so then we revisit his first, where he finds his opening to get into real estate. And he's going to, the same idea that he applies here, he just keeps applying to different domains within the real estate industry over and over again. What had started as a deal to sublet the extra office I had rented for my book business evolved into a calling as strong as if not stronger than the literary agency having finished the book. It's stronger it's completely it's a lot stronger

he loved he just loves real estate he's still alive so i don't want to use the past tense but he loves real estate he barely mentions the agency for her and my first real estate deal opened my eyes to the fact that there was quite a bit of money to be made from renting small one room office spaces back in 1965 it was hard to find small offices for small businesses. Commercial landlords at the time fixated on renting large offices, and they were leaving good money on the table that I was more than happy to collect. When I got to that section about the fact that he identified a niche that was being ignored by other people in this industry. It's exactly what Sam Zimuri did in that fantastic book, The Fish That Ate the Whale. I

think it was Founders Number 37, where he's like, you guys are focused on selling bananas. There's one aspect of bananas that you're not paying attention to, which they called rifes, which essentially said they're going to decay if you don't sell them right now. You have like a couple, you know, maybe a two or three day window, whatever the time is to sell them before they go bad. The larger producers in the industry just ignored them. They throw them away. And so Samson Murray is like, I see opportunity where others saw nothing. That's a line from the book.

It's fantastic. It's exactly what's happening where we are in Francis's life. And how did he know that? Because he was his own customer, right? I was filling a gap in the rental market for one room offices that I had discovered when I looked for one for myself. I knew there would be demand because I knew there were many other people just like me. Discovering an unmet need in the market is a tremendous start to any business. Again, I think this is why, I don't mean to repeat myself, but I think this is why,

part of the reason why this book is recommended by so many different people is because not only does he have this crazy story like let's all his flaws show but he just has some fantastic business advice throughout the entire book he will describe an experience he's having and then tell you the principle or the idea behind that experience that then he would use in other domains so we repeat that again discovering an unmet need in the market is a tremendous start to any business. An effective way to find those opportunities hiding in plain sight is to consider one's own experience. Once I stumbled upon the need for one room offices, I test marketed the strategy by leasing one of my original offices. When I found someone willing to pay double what I had paid, I declared my concept a success and repeated the formula again and again and again.

And that is his standard playbook. He's going to do it over and over again. Find an unmet need. Once he proves it once, he doesn't dilly-dally. This guy moves fast. It's not like, okay, I proved it once. Let me try two, three times. Oh, it worked once.

It's going to work over and over again. And he immediately starts to scale it. And so then he goes and looks for other offices that are not being used. They're larger offices. Then he rents the whole thing, chops them into smaller pieces, smaller offices, kind of almost like what WeWork did. And that first opportunity, right, is going to lead to a second opportunity. The guy that he's the guy that owns the business that he's doing this in or the building that he's doing this in is impressed with Francis and invites him to invest alongside him. So he says the owner of the real estate company was sufficiently impressed by my

success to include me in a deal to buy a loft building on 15th Street. The money for the down payment came from a group of investors who would receive a fixed return. Then he and I shared in the profits above the fixed return for our management services. He does this a few times, and this is where he discovers, I really want to, like, I love what I'm doing. This is what I'm going to do for the rest of my life. Throughout all these deals, I discovered that I loved buildings, not just their unique architecture or the income they could provide, but also the life that teemed inside. I felt at home. There was a lot to conquer, improve, and fix. And another great thing about this book is because his career spans 50 years you see all these up and down like economic cycles right and so he's getting

started in the new york city real estate industry when nobody wants to be involved in the new york city real estate industry this is in the 1970s a ton more uh detail in the book so if this is interesting to you make sure you buy it. Three sentences, three different lessons. Number one, real estate was in a terrible state, but it was also very, very cheap. Without any basis for my certainty, I was convinced the situation had to get better. So number one, he's getting in when everyone else wants to get out. Number two, I realized the problems of buildings are the problems of people. That is the same for business. The problems of business are the problems of people. Number three, I had underestimated the expenses, something everyone always does,

but that I didn't have the experience to know. History doesn't repeat. Human nature does. He's saying I did this mistake. Everybody else did this mistake as well. The only people making that mistake are the people that don't have the experience or don't have the ability to learn from other people's experiences. So he's saying if you're going to get involved in real estate,

you're going to underestimate the expenses. Don't do that. Another three paragraphs, three different lessons. Again, the number one is be careful when picking partners. Remember the Dunkin' Donuts guy to draw that parallel again. He said he had a bunch of issues with partners, including two of his former partners. He wound up breaking up with them, and then one other partner killed the other partner. So it's actually good that he escaped that. But he said that he needed partners, like he needed holes in his head. So he says, this was one of my first many disagreements I had with

Phil, which eventually had to be resolved in the worst litigation of my career that felt more like civil war than a lawsuit. Phil had what I regarded as completely irrational or fictional points of view that bordered on psychotic paranoia. It took the talents of an extraordinary litigator to overcome the army of aggressive litigators that Phil employed. So be very careful. He makes the example, it actually popped to my mind before he said it, but he says it later in the book that picking a business partner is just as important and just as difficult as picking the right spouse. Number two, being naive can sometimes be an asset. He's going to start buying.

He's going to start investing in the Soho neighborhood in New York City in the 1970s. He winds up buying entire buildings for like $10,000, $20,000. These buildings now, you couldn't even rent one apartment for it. That's more that what he built, he bought the whole building for rent of one apartment is more per month. It's insane. But it was, it's not that easy. He struggled to hold onto the buildings to make money and everything else. So he says, if the spring street deal was crazy, I didn't know enough to know that I hadn't't grown up in the business like so many of my competitors who were part of real estate dynasties. Making my own way meant there was no one to tell me to stop buying. So conventional wisdom is the time is like you're

these are terrible deals. You're in some cases, he's literally the only bidder on entire buildings in Soho. And then three, this is the importance of finding an older, wiser mentor that you can just speed up your learning by decades. And he's got a bunch of them. They essentially teach him the real estate business. And one guy is this guy Milton who's probably, he's got to be 25 years older than him, maybe older. It would take me a while to learn that Milton, brilliant and generous,

immediately picked up on my potential that him and Milton have throughout the book. I love this idea because I like the idea of having something to puzzle over, something that the answer is not at all obvious. It says, Milton leaned back in his chair and asked me, have you heard the story about the bag of gold and the man's head? Definitely not. So these are rather religious people, rather religious Jewish people, and they have all these things from, I guess, religious texts.

And Francis is always confused because even though he's Jewish, he was not really religious, so didn't know like these ancient texts and says have you heard the story about the bag of gold in the man's head definitely not if you have a bag of gold and you throw it at a man's head in order to kill him but the gold falls at his feet and he uses it to become wealthy have you done a good deed or a bad one I have absolutely no idea, I answered. My knowledge of the Bible isn't too great. Francis, it's an enigma, he said, energized by the expansion of my mind. It's something to puzzle over. And he just goes into like the fact that he laid the foundation for his real estate empire in the 70s when it was extremely difficult.

And just the importance of just surviving, one, and then letting it compound. Do not interrupt the compounding. One day I had two buildings and two employees. Then I had five buildings and five employees. Then it was 20 buildings and as many employees. As I managed my growing property interest, I was often stressed. On paper, I was a millionaire. In real life though, I was skating on razor thin margins that a busted toilet could threaten but I preferred to remain on the edge as I kept my buildings running rather than sell any of them before they grew to the much higher value that I had a hunch they would one day achieve and so he gives examples later in the book that like a building he bought held on to for 35 years and it's 200 times 500 times the value that he bought it for and he's

able to maintain this idea it's like i'm just not gonna sell anything even when older wiser mentors because you get a bunch of them say hey why don't you just sell one of your buildings then you get the cash and he's always constantly looking for uh it's interesting so his biggest problem in the 70s was a lack of cash and in the 80s it was an abundance of cash and so again that's why he talks about markets can turn on a dime. Why don't you sell one of your buildings? That'd solve your cash problem, Abbott said. I'm not a great seller. It's not in my DNA. You'd like to hold on to things? Yes, I'd like to hold on to things.

And then he just talks about how difficult the real estate business is. In the case of real estate, the anxiety starts with the closing on the property. Will I have enough money for the transaction? Will the bank or my investors come through the way they promised? And making the acquisition is just the beginning. The next round of worries comes from the business plan, whether it is the amount of rent charged, improving the occupancy of the building, or bringing down operation costs. You are constantly putting your judgment up against the marketplace. And there's a lot of detail in the book that I'm obviously having to omit. The book's almost 300 pages. An entrepreneur in charge of reaching these goals is constantly haunted by concerns, many of which are totally unpredictable.

And something he goes into great detail is just how corrupt the real estate and finance industries can be. And so this is just more wisdom from his mentor. During this period of real estate in New York, the temptation of landlords to cut corners that broke the law was very great. I brought this topic up with Milton, saying that a lot of the new owners were taking very liberal approaches to the city's new interpretation of the law. Then they don't have real estate, he answered swiftly and sternly. His response puzzled me. This is another of Milton's cryptic parables. And so Milton explains, by doing that, in effect, you no longer have legitimate property. That kind of thing always catches up to people. You will see. Milton taught me early on that you might get away with bending the rules

for a little while, but eventually you destroy what you have. And the reason he says that they don't have any real estate is because he gave us some examples in the past where the regulations are obviously changing all the time. And Milton knew many examples of people trying to skirt around it and eventually many of them had their properties taken away completely. He's got two maxims on real estate. Number one, I learned from him the important skill of managing debt which is fundamentally what the real estate business is all about and number two, nothing in real estate was easy and then we get to the idea. This is the idea that becomes the formation of his empire

and what drastically increases his amount of wealth. He's known as the co-op king, which I didn't know either until I read the book. So he says, I did the math. Most rental buildings, this is what his current business mostly consists of, right? Most rental buildings by this point offered at best a 4% profit. By co-opping, I would be dealing with tens of thousands of dollars in sales rather than hundreds of dollars in rents. Co-opping one of my buildings would be nothing short of revolutionary. And so a few years ago, I had no idea what a co-op was.

If you ever look at real estate in New York City, you'll see it everywhere. And so it says co-op is short for cooperative. When you buy a co-op apartment, you're actually buying shares in a corporation that owns the building. That might sound strange given a co-op listing advertises a specific apartment, but technically the buyer is purchasing shares. And so for Francis's purposes, it's a way to turn a rental apartment into something you can actually sell. The person owns the unit or the right to the unit whatever you want to frame that language he does this for one of his and the difference that made it so special for why it was working for him is because he was co-oping buildings

people thought no one would ever buy and he's like because he thought only rich people might want to do this and he's like well this doesn't make sense humans are humans like rich people want to own house their apartments and poor poor middle class people want to own their apartments if they can. And so that was his thesis that we're just kind of all the same. And so he winds up doing it in like a like a lower income place. It works. And this is what this is what I meant. Like this is the second time he mentions this. Like once something works, don't dilly dally. Like just go as fast as you possibly can.

When a business plan works i not only acknowledge it but embrace it feeling that we were on to something i was excited to push the concept by applying it on a much wider basis there was no time to sit back and enjoy the success of the first co-op i wanted to scale it up we were often running in the co-op co-op business and this is what he says this is the way the economics worked if half the tenants bought apartments that provided enough money for me to pay for 100% of the building. Then slowly, over many years, as the renters moved out or died, I could sell their apartments to make good money, possibly very good money. So they had the option to either continue renting or buy their apartment. And if they didn't want to buy

their apartment, that's fine. They could continue renting. But once they moved out, you now had the opportunity to sell their apartment. And then Francis does the work for us by showing, hey, I'm just using the same idea that I used in one-room office spaces to co-oping. So it says, for me as an entrepreneur, discovering this wide-open market was like striking oil. Just like when I figured out that I could make money by turning big offices into smaller ones, co-opping lesser buildings was wide open field that I had practically all to myself. Lots of folks thought what I was doing was insane. And so then he talks about the secret that he knew that he was able to build his entire business empire on. I knew something that the market had not yet fully embraced. I could pay a high, this is a secret, I could pay a higher price for buildings than most people looking at them as rental properties. At the time, buildings generally sold for five to seven times gross

rents. With my strategy, I could afford to pay nine or ten times that. I would have my pick of almost any building that came on the market. And so that is the end of the 70s. We get into the 80s. And the entire time, he's like, I don't get this. I'm a millionaire on paper, but a broken toilet can cause me scrambling for cash. So he'd go around to banks trying to loan money. And at the time, the most he could get, he would get like $5,000 from each bank, and he'd have to go to like seven different banks, right? So it's not a lot of money.

Overnight, and this is what he means about, listen, my career, something he repeats over and over again, markets change on a dime, both in good and bad, right? So it's not a lot of money. Overnight, and this is what he means about, listen, my career, something he repeats over and over again, markets change on a dime, both in good and bad, right? And so this is where it just completely, it goes from having no money to I have unlimited money, which is also going to lead to a bubble and his first crash in about seven years from now and everything else will get there. I was blown away by the sudden ease of it all. A young loan officer soon suggested that she organize a credit facility that put all of my buildings together and let me borrow as much money as I needed as long as my loan to value ratio fell within certain limits. By now, I had 20 different co-op buildings for which chemical bank would give me credit. What does all that mean? The bottom line, a 24-year-old loan officer

put through a $50 million line of credit for me. I now had 100% of the purchase price and fixed cost of any building that I wanted to buy. A year later, the bank raised my limit to $100 million. Imagine that. Two years going from $35,000 line of credit to $100 million. This is why it's so important. One of the main lessons of history of entrepreneurship is that things can change incredibly fast. You have to hold on. You've got to survive to be able to take advantage of that. Optimize your survival. And just like that, my days of scrapping together the funds to buy buildings were gone. Suddenly, the broke 70s were over and the world was rich. Now, good times also lead to increased competition. But one thing that Francis, you can tell from his writing, he's obsessed about having control. If a business process is important to his overall company, he wants to

control that business process. This is a little bit about that. And again, just a very common theme in the history of entrepreneurship. I want to keep bringing to your attention every time I find it. The growth during the go-go 80s was out of control. At its height, I was buying a building every two or three weeks with 250 employees converting thousands of units from rentals to co-ops or condos and managing as many as 100 buildings. I had sales, marketing, construction, and design departments, as well as legal, rent administration, accounts, and acquisition departments. Having all those in-house resources was unusual for a real estate company at the time, but this let me control my own destiny

as I established priorities for my company. I didn't want to go outside to professionals who might have different priorities, different agendas, and also frankly, in some cases, extraordinary high fees. So his business is off and running. He's making a ton of money. And yet he realized somewhere along the way, he made a mistake. And what he made a mistake was he didn't figure out how do I want to spend my time? What is the point of being in control of my own company, of my own destiny, if I'm spending my time doing things I don't want to do? And this goes back to that old maxim from Ben Franklin, you know, 200, 300 years ago, time is literally the stuff life is made of. It's the only important, the most important part. So it says, my advice to those with expanding businesses is that they must first make a decision

about how they want to allocate their time and structure their business so that the balance reflects that. What I noticed as time equities, that's the name of his company, what I noticed as time equities ballooned before I hired Bob was that my role had shifted from a doer to a teacher. I was uncomfortable in the shift because I like doing. I love to conceive of projects, convince banks to invest, and be part of the marketing strategy and so on. Bringing in Bob as a chief operating officer allowed me to rebalance my own agenda so I could become a doer again. So as you can imagine, what's going to happen to a young person? It's like, oh, I stumbled on this industry.

I'm a genius. Started an office space, started co-ops. Now I got banks giving me $100 million. Just one bank gave me $100 million. I go to other banks, get a ton of money. But there's a lot of wisdom in these ancient sayings. And one ancient saying is that pride comes before a fall. At 36 years old, I was self-assured and foresaw limitless possibilities not because i own one of

the biggest apartment complexes in manhattan or had hundreds of employees but because of my instincts they went decidedly against the mainstream but they had yet to prove me wrong so you already know what happens in 1987, right? One of the largest financial crashes in history. We're going to get there first. He talks about the transformation of turning from a bachelor to being married and then the radical transformation of becoming a parent for the first time. And it's just fantastic writing. I'll get to that in a minute.

By the time we were getting married, Judy was already pregnant with our son, Alexander, whose birth was more transformative than I could ever have imagined. The arrival of this tiny boy was an unanticipated revelation. I understood life, the meaning of being born, growing up and dying

in a completely different way. My efforts would take on a greater meaning with Alexander as my heir. So there I was, in love with my son, who grew more magical with every passing month. With the halo of blonde curls and a beaming expression, he looked like an angel. I loved having him. And this is where we get to the part where I just wrote great writing. With him, the simplest moments, having his little face greet me as I woke early in the morning, playing one of his favorite games in the pool where I tossed him

high in the air, reading Goodnight Moon to him every night, filled me with satisfaction and love. Children require attention and involvement. This takes you out of your self-orientation and makes you invest in another person who can only pay you in one currency, love. My son's entrance marked a halcyon period in my personal life accompanied by one conversely dark one in my professional life. So I had to look up that word, halcyon, and it says denoting a period of time in the past that was ideologically happy and peaceful. Remember that part, especially that description. If anyone had asked me in 1990 what the chances of my business survival was,

I would have said one in a hundred. I still consider it a miracle that we didn't go bankrupt. The swift and brutal transformation of what had been the go-go real estate boom of the 80s into economic devastation began with the Tax Reform Act of 1986. Prior to January 1st, 1987, when the government's new tax regulations went into effect, a lot of investing in real estate had been driven by generous tax benefits. So a lot of the real estate deals prior to 1986 were driven not by their true economic value, but by their tax value. Deciding that it was missing out on too much revenue, the government eliminated these tax loopholes.

And by taking away these tax benefits, it radically changed real estate's value. The dramatic and swift reduction in the worth of real estate touched off a chain of events that quickly led to catastrophe for hundreds of small savings and loan banks across the country. Then came the worst stock market came the worst crash in stock market history. On October 19, 1987, otherwise known as Black Monday, the Dow lost 22% of its value in a day. That was it. The banks wouldn't lend one cent to anyone. All the tributaries that kept our business running went completely dry. Banks pulled the plug on their lending while we still owed over a hundred million dollars on co-op projects in process. I had made a fortune by the time I was 30 and at 40 I was facing ruin. And then he does something

really really smart here and he says okay well if you, if you're running into a problem, you can't, like, you have to run towards it. So he goes and he'll, he does this twice because the Attorney General's office in New York City are the ones that are the regulators for co-ops. So when he's running into problems, he'll tell them before the problem happens. So he goes right to the banks. He says, I decided the only viable plan was to try to talk reason with the 15 or so banks that we had loans. I find when you confront problems and are transparent about them with others who are involved, you can sometimes resolve things in a way you never imagined. And so he pitches them. He says, I can understand why you don't want to lend money to new projects, but these are projects that are already on your books.

Wouldn't it make more sense to continue to lend to the buyer and use the money to pay down the project loans? You're shooting me in the head, but you're shooting yourself in the foot, I said. You're not late in any of your payments. Why are you telling us this? And he couldn't believe that. So this is another example in the real estate finance industry about just how irrational people can be. And he says, you turn the water off. What do you think is going to happen? It was hard to understand how the banks couldn't understand what was happening since it revolved around their actions. But too often people are so immersed in the micro, what's happening on their spreadsheets or in their cubicles, that they miss the big picture, which in this case was total collapse. So he talks about slipping into depression,

talks about now having to go. But I just mentioned that they have to go to the AG and say, you know, part of this is that if we're going to be the sponsors of a co-op we have to be in strong financial position we're obviously not going to be in strong financial position if the bank turns us off but really the main lesson here is just you never delay discomfort waiting or ignoring a problem does not never solves it just run towards it and so that's what he does he just puts one foot in front of the other he's just trying to make deals deals. And in some cases, like most of them, when you talk to them, he can work out deals because he's like, listen, if they push legal proceedings against me, they could destroy my empire. And so there's a fantastic little sentence here. It's just really about the importance of always

trying to survive. And so later on, he talks about trying to build a financial fortress. I think he says they always try to keep at least $100 million in cash. But he says, I always think about the line that Sam Zell, one of the great real estate investors of my generation used during the late 80s, when real estate was in a depression, stay alive to 95. And so it's crazy. One of the craziest parts of this entire book is the fact that if he hadn't made this angel investment, he may have lost his entire real estate empire. This is very similar to something that happened to Elon Musk in 2008, which I'll get there in a minute. And so he's essentially saved by an investment. So it says around the start of my troubles in 1988, I put some money in my wife Judy's name so that

I wouldn't be exposed to my creditors if the worst happened. Although to ensure that we would have enough to live on, for some reason, in the depths of my financial problems, which were astronomical, I decided to invest a substantial part of this, a part of the money that he put in his wife's name, because, well, I could never resist a good deal. And so he gives money to essentially somebody that's investing in private companies, right?

And it says it could have, I'm skipping over large parts, just to give you the punchline so you understand what happened. It could have all gone very, very badly. But a year later, one of the companies that Michelle bought into went public and hit the jackpot. I paid about $2 a share. Luck really shined her face down on me when the stock soared to $60 a share. Eventually, the stock collapsed back to $2 a share and went bankrupt. But not before Michelle had sold out about half of our investment, and I got $15 million out of it. So he made a $500,000 investment, and he winds up getting $15 million out of it. That money, which the banks weren't entitled to because it was in Judy's name, was critical in keeping me

afloat. So it's amazing the parallel between what was happening in Francis's life and what happened in Elon's life. So this is happening to Francis, obviously, in the crash of 1987. What I'm about to read to you comes from Elon's biography by Ashley Vance. This is happening in the crash of 2008. To give investors some measure of confidence, Musk made a last-ditch effort to raise all the personal funds he could and put them into the company he took out a loan from spacex which nasa approved and earmarked the money for tesla musk went to the secondary markets to try to sell some of his shares in solar city he also seized about 15 million that came wow it's the same not only is that it's the same exact amount. He got $15 million too. Francis got $15 million too.

So Elon seized about $15 million that came through when Dell acquired a data center software startup called Everdream that was founded by Musk's cousin in which he had invested. It was like the fucking Matrix, Musk said, describing his financial maneuvers. The Everdream deal saved my butt. And then complete and utter devastation. Then came the blackest day of my life. Judy, Alexander, and I were at our beach house in Long Island. I had woken up early to play tennis. It was something I did often. Alexander was still asleep when I left him in the house with Judy and the au pair. I was in the middle of my game when one of my house guests ran towards the court.

Something had happened. I should return to the house immediately. When I arrived, there was an ambulance in the driveway. Alexander had woken up, unlatched the lock to the staircase, gone down to the first floor, walked across the parking lot where he somehow also opened another locked gate, took the steps down to the pool, and jumped in. I followed the ambulance to the hospital where they tried to resuscitate him until finally the doctor said it was over. He was two years old. My son was gone. Alexander loved the water. Jumping into the pool while I stood waiting to catch him was one of his favorite things in the whole world. He could jump in for hours and hours.

When he went to the pool himself, he had no idea that he didn't have his floaties on or that he couldn't swim. That he drowned doing something he loved was too much to bear. And so having a two-year-old son, there's just parts of this I cannot read. I just can't. So I'm going to skip over some parts. I just can't read them. So it says, I couldn't protect him in life.

I resented my wife for... This is where he like... This is what I meant. He's not writing this book to be liked because it was like the stuff he shares and some of this. So I'll just read to you. Look at what he says here. Cause like he lost his son, but so his mom, his wife lost his son too. And he just lays into her and just starts blaming her and he says i resented her for that and so much more i held her accountable for our son's drowning i blame you i told judy judy was untidy and always late what i had dismissed as distraction now that our son was gone had reappeared as self-involved how many times had i waited for her while she fussed with

this or that aspect of her appearance. I darkly imagined that if Judy hadn't taken so long getting ready in the morning, she would have caught him. It wasn't fair of me to think that. I knew the judgment I leveled at her was very harsh, but I spoke from the heart. I didn't know how to live after Alexander's death. I took some time off work.

When I got back, I wasn't there. By four o'clock on most days at the office, I had had it. My patience and tolerance, two traits that I had prized in myself were gone. I will never fully recover from the death of my son. I cried every day for a year. I still harbored resentment towards my wife for the lackadaisical style that I held partially liable for our tragedy. My solution to repairing our lives was to have another child and every month that we discovered she wasn't pregnant

disappointment heaped itself upon a foundation of anger. I became almost dysfunctional with sadness. it's impossible not to read this part of the book and have it hit you directly in the heart. And I think the fact that these stories, these life stories evoke so much emotion, make them resonate deep inside of you. So I knew I was going to record a podcast today, but the first thing I did when I woke up is I took my son, my two-year-old son, just me and him, and we went to the park. And I'm watching him walk, and I'm watching him run and play, and I thought about this book and what happened to Francis. And it's about priorities. It's about understanding what truly gives us satisfaction as opposed to what we think will give us satisfaction. It's about understanding what truly gives us satisfaction as opposed to what we think will give us satisfaction.

It's not mentioned in the book, but I'm pretty sure Francis is a billionaire. And if he's not a billionaire, he's damn close. And the thought that ran through my mind this morning looking at my son is without a doubt, if given the opportunity for all the money in the world, Francis would switch spots with me in an instant. And it's because understanding the human stories behind these ideas that makes it so powerful. They're seared into your soul. So they decide to adopt.

The adoption didn't solve our problems. It was Judy and the way she lived that I could no longer relate to. Our apartment was always a mess even though she had all the resources in the world. I wasn't sure what she was attending to because it certainly wasn't Morgan who was primarily cared for by her housekeeper. From my perspective, it seemed that the housekeeper was doing 70% of the mothering job while Judy came and went as she pleased. Once she opened her restaurant, she was around even less. Seven days a week, she was at the restaurant and didn't return home

until one or two in the morning. I was up at six in the morning and took the boys to school before she woke up. So unless I ate dinner at the restaurant, I wouldn't see her. My frustration grew until finally I confronted Judy. What do you consider your responsibilities in our marriage? I demanded to know. Responsibilities? I have no responsibilities, she said. I only do things I want to do.

Partnership has always been one of my core values. Good partnerships are a huge part of my success in business. And here I was in the most important partnership of my life with someone who had no concept of the definition. I was trying to work out in my mind why I was so unhappy. If I were truly honest with myself, my unmet expectations of her were a rationalization for my own less than perfect behavior, namely the romance I had rekindled with Isabel so from this point he starts he has two families for a while eventually he's going to get divorced from Judy but he's pregnates his mistress and he talks about just a crazy schedule he had he's running

this gigantic business he's got two two or three kids with judy two kids with judy one's adopted one they wind up having successfully conceiving he's going to wind up having two or three more with isabel and so part of the time he just he has i mean there's no other way to describe it he's got two families and then another tragedy happens in his life. His wife, or soon-to-be ex-wife, Judy, is diagnosed with terminal cancer at 50. When the doctor, she had some stomach issues. She goes to the hospital. They thought it was some kind of obstruction. She has to have surgery, and it takes forever.

He couldn't understand. He's like, what's happening? It was supposed to be done two hours ago. When the doctor finally appeared at 2.30, his first words to me were, I'm sorry. He hadn't expected to find what he found in her stomach. What is it? I asked. Cancer. All over. He had removed as much of it as he could. What happens now? She has six to 12 months. What? Two weeks ago, we were living together. Three days earlier, it was her 50th birthday party. And now she was terminally ill. And for 18 months, they go around the world

searching for a cure. The entire time Judy was in denial. She said she wasn't terminally ill. This is actually more common than you would expect in cancer patients. I had dealt with it personally. And then he gets a call. I got the call at around 6 a.m. Judy had died. The idea that she would just disappear into thin air didn't seem right to me. He goes to the apartment and sees her body. But what lay there, ravaged by illness, wasn't truly their mother.

He wasn't sure if his kids should see their mom again, and he winds up deciding to bring them over there. He says, but what lay here, ravaged by illness, wasn't their mother. I worried that the last image of her would be the indelible one. Morgan was six. Noah was four. And so one of the last things he talks about was it starts, this chapter starts out describing his life in 2008. And I thought that's where it was going to go. And it just really, the chapter is called Intelligent Risk and Investment Strategy.

So it starts out talking about 2008. It just kind of goes on how he thinks about investing and money. And there's just a lot of interesting thoughts here. So I'm just going to read some sections from this to you. I was on my year, it was the spring of 2008 and I was on my yearly tennis trip. It was an annual tradition where I gathered up a group of tennis players, all good friends for some informal male bonding time. We played tennis every morning from, this actually sounds fun. We played tennis every morning from 9.30 to noon. We stopped for a big lunch at one of Anguilla's, so he's in the Caribbean, many wonderful restaurants, hung out on the beach or went swimming, and then played tennis again from 4 to 6 p.m.

Then we'd clean up for dinner. It was heaven, never to get out of your bathing suit or tennis shorts. He's talking about he's on the beach looking out at the ocean. Everybody's relaxed, but he's not. And he said, how could I relax when everything I had worked so hard for the last 40 years was threatened by a global financial crisis, the likes of which no one had ever experienced, let alone understood. He's just got a great line in here. It says, Disaster usually arises when short-term profit takes precedence over lasting value creation.

Normally when I go to Anguilla, I don't take much more than a tennis racket, but these were not normal times. I had toted all of my files and worries along with me to paradise. I felt not only anxious, but depressed. And he's depressed because he had already survived through other financial shocks. And he made a promise that that would never happen to him again. And now he finds himself in that situation. The source of my depression during that period

wasn't simply the financial chaos happening all around me, but the fact that I wasn't able to protect my company from it. After the savings and loan crisis of the 80s, I had vowed never to find myself so exposed to the economic forces over which I had no control. The only way to do that is, of course, diversification. I had always sought out diversified investments beyond real estate, not just as a method of financial hedging, but because my entrepreneurialism makes me naturally curious about the work others do. That's how I started investing with Michelle during the early 80s. That's the guy that was investing in private companies and that one investment saved his ass. And using the money

from that fund to save time equities during the fallout from the S&L crisis when the lending completely dried up. I just said that I wanted to continue that kind of investment I had done with him. So I tried to look for new Michels, so other people that were investing in private companies. He wants to be their limited partner and provide them money, right? I speculated in a number of new companies on the advice of financial experts or friends, and they all turned out to be disasters. And so the reason he's bringing that up is because he had to learn who to invest money with and who not to invest money with. It was a skill that you have to learn just like anything else. He eventually figures it out, makes quite a bit of money from Fred Wilson's fund.

But he really, again, it starts out with 2008. I thought, okay, we're going to go here. No, it just goes on to where he puts his money essentially. I don't pick investments. I pick jockeys, not horses. It's less about the particular vehicles they have found and more whether their general approach makes sense to me. And this includes other people in the real estate industry. Another crucial factor for anyone I invested with is that they have to have a substantial amount of their own

money in the game. So they aren't just losing my money. So when he's talking about investing in fund managers, one, your own net worth has to be at risk as well. And two, I'm going to do my own thinking. I must personally know that you're smart and honest. And if that's the case, then he makes decisions rather quickly. And it's an example of that. When I believe in a fund manager,

it's not because of how widespread their popularity is. I have to be personally convinced of their intelligence and integrity. When I met a parent at my children's school, all I knew of him was that he made quite a bit of money investing in tech, but had sold his company. Fred struck me as a super smart guy, but for the first three years I knew him, he was retired. Around 2003, Fred mentioned that it was a good time to get back into tech. When I heard his ideas on the subject, I said if he needed an investor that I would be interested and wound up committing several million dollars. It was in that year that it took for him to start up his new fund, New York Magazine ran a cover story that Fred

Wilson, everyone's favorite tech venture capitalist, was back. Only then did I realize that he was well known to everyone but me. And so then he goes back into 2008. I thought I had taken the kind of measures in terms of diversification and other forms of insurance so that I wouldn't find myself fighting for my life. But a crisis so large that it brought down the 158-year-old investment bank Lehman Brothers was obviously beyond any kind of cycle anyone could anticipate. Okay, hold up. That's not true. In every financial panic, somebody sees it coming.

We know of many examples that not only saw it coming but bet against it, bet on it happening and made a ton of money. But that's just from 2008. You read history, you see this over and over again. bet on it happening and made a ton of money. But that's just from 2008. You read history, you see this over and over again. The two that popped my mind without even doing any kind of research as I read this was Alfred Lee Loomis. I read his biography. It's Founders No. 143. Alfred Lee Loomis saw the Great Depression coming, converted to cash.

I think he made like $40 or $50 million in that time period, which would be hundreds of millions if not billions of dollars today, then retires from that and then builds that palace of science, which is what the book's about. And then even further back, like go back and read about Hedy Green. I've read her biography, which is called The Richest Woman in America. It's founders number 103. Same thing. There was at least two examples. There might've been a third because financial panics in her time were a lot more common that she not only she saw coming, but she profited from. So, yes, a ton of people, most people are going to get caught up in it. But there's always in every financial crisis an example of somebody, a small handful of people that saw it coming.

And so he talks about like he was lucky enough to survive, but a ton of other people that were in his business, people he admired, even were older and he looked up to, did not. And so the note I left myself on the section I'm about to read to you now is avoid this at all costs. No potential profit is worth it. More often than not, I feel like the fact that I have survived, let alone succeeded, in my business is a miracle. Particularly when I've seen how other real estate investors I have admired have fallen. When a real estate investor who had been worth hundreds of millions of dollars reached out to me in his time of financial troubles, I was more than empathetic. Here was a prominent philanthropist who had called me countless times before to raise money for various causes, now trying to raise money on his own behalf.

I'm desperate, said the 80-year-old man. That's what I mean. It's like, avoid this little cost. No potential profit is worth it. I sent him a check on the spot. Real estate is a tough business where you can lose money even when prices are going up. Like so much else in life, there are always unforeseen variables, and it is never as easy as it looks. And so one of the aphorisms that he uses to reflect on all the lessons from all these financial crises that he had to run through was that you have to carry a large umbrella, which means be ready for bad times with cash. And so he talks about in 2008, all the major banks and investment banks were at

risk. And during this time, a friend that worked at Goldman Sachs called him and told me that Goldman carried over $100 billion in cash and liquid assets on their balance sheets. That's the first time I heard that. That's actually surprising to me that I haven't heard that before. I follow their example and maintain cash of over 100 million throughout our various entities, properties, and accounts. And then today, obviously, you and I have studied Warren Buffett over and over again. Same thing. He's got this gigantic financial fortress.

Right now, I think they're sitting on like 140 billion in cash, if I'm not mistaken. So he's got advice for real estate investors, but this, I think, applies to a lot of different things. I learned early in my career that one can't fall in love with bricks, meaning one can't fall in love with the idea of a certain kind of real estate. What works at one price, it's essentially advice not to be ignorant of your costs, okay? What works at one price doesn't work at another. If you accept a 4% return today because interest rates are at 3%, you will have a disaster on your hands if interest rates go to 6%. And his point is

that you can't predict when interest rates will increase or decrease. So don't put yourself in that position. Two great lines that he has spread out throughout the book. Real security comes from adaptability. I really like that one. And this is his definition of independent thinking, which I thought was pretty good. Independent thinking in its simplest forms means not assuming that the status quo is the best answer, the right answer, or the most effective answer. And he's got a sentence in the epilogue that I just wrote down. A ton of older people all say this. If we mess this up by the time we get to their age, it's too late to fix it. So we need to prioritize the relationship we have with the people that we love, I hold on to people just as I do with buildings because the relationships I have made over a lifetime are as crucial to me

as my wealth. And finally, he closes on the fact that if you find what you truly love to do in life, the only extra strategy is death. My fundamental optimism in people, places, and markets is what has kept me going not only through financial crisis, but also personal ones, and what hopefully will keep me going indefinitely. Retirement is not in the makeup for this man. My plan is to continue doing what I'm doing until I'm at least 70, and then maybe I will give up one of my titles and some of the activities associated with it. Instead of working 14 hours a day, I'll work 8. I recognize that it is not much of a plan, and my true choice would be to die in my chair. With all of my careers, enterprises, friends, lovers, and kids, I have lived the lives of several people.

Certainly, it has been an adventure. I've had a lot of accomplishments as well as defeats, known extraordinary people both professionally and personally, fostered the creation of many beautiful things from art to babies to a tower reaching the sky, experience terrible tragedy and unparalleled happiness. Would I go back and do it again? Of course I would. Not to do it better or differently,

but because I loved it all. And that is where I'll leave it for the full story. Recommend buying the book. There is a lot in this book that I did not include. If you want to support the podcast and get the book at the same time, buy the book using the link in the show notes. If you want to give a gift subscription, that's a fantastic way to support founders. The link to do so is in the show notes as well and available at founderspodcast.com. That is 243 books down, 1,000 to go.

And I'll talk to you again soon.