In Search Of Excellence - The Grandfather of Modern Real Estate Investing: Sam Zell Revisited

Episode Date: August 16, 2022

In celebration of our one-year anniversary, we are revisiting a couple of our early episodes that people loved!In today's episode, Randall Kaplan is joined by American billionaire businessman and philanthropist Sam Zell to discuss daring to be different, finding and capitalizing on opportunities, what it means to go for greatness, and much more. Topics Include:- How Sam’s parents escaped from Poland prior to Nazi invasion.  - What freedom and an opportunity to thrive in the US meant to the Zell family.  - Sam’s early success in real estate during his college years.  - The power of clarity to transform your business.  - Getting turned down by 43 consecutive law firms.  - Evaluating and taking on risk as a business owner and investor.  - The importance of culture, access, and a lack of hierarchy within an organization.  - Thoughts on current investment trends such as digital currencies.  - And other topics.Samuel Zell is the chairman of Equity Group Investments and five publicly-traded companies on the NYSE.  He is considered one of the grandfathers of the modern real estate investment industry and was recognized by Forbes as one of the greatest living business minds.  A self-made billionaire with a net worth of over $5 billion, Sam is an active philanthropist with a focus on entrepreneurial education.Resources Mentioned:Am I Being Too Subtle by Sam Zell“The Grave Dancer” by Sam ZellSponsors:Sandee | Bliss: BeachesWant to Connect? Reach out to us online!Website | Instagram | LinkedIn

Hi, everyone. We're celebrating our one-year anniversary of In Search of Excellence by rebroadcasting a couple of our early episodes that people loved. And we're starting with my very first podcast with Sam Zell. My interview with Sam was very special for me. Sam was my first call to a potential guest, and I was truly grateful that he immediately

said that he would love to do it. I've admired Sam since I first heard his name as a freshman at the University of Michigan. For more than 30 years, his amazing journey to success always inspired and motivated me to be my best. And in the same way, I hope his story will inspire you and motivate you to be your best. I want to thank all of my listeners and viewers over the last 12 months for the overwhelming support I've received for In Search of Excellence. The past 25 interviews have been incredibly meaningful to me. It's been an honor to share them, and I'm eager to interview more incredible guests

and share their inspirational stories with you in the year ahead. If you want to learn how Sam earned more than a million dollars in college and how he managed 4,000 apartments and owned more than 100 buildings before he graduated law school when he was 24 years old, keep listening to our awesome conversation. I stopped and I kind of looked over my shoulder and I said, how come everybody else isn't doing what I'm doing? Maybe I'm wrong. There's lots of smart people. There's lots of people with money. How come I'm doing this and I'm literally doing it alone until all of a sudden I wasn't alone? There's a serious period of loneliness when you operate off your own ledger. Welcome to In Search of Excellence, which is about our quest for greatness and our desire to be the very best we can be.

To learn, educate, and motivate ourselves to live up to our highest potential. It's about planning for excellence and how we achieve excellence through incredibly hard work, dedication, and perseverance. It's about believing in ourselves and the ability to overcome the many obstacles we all face on our way there. Achieving excellence is our goal and it's never easy to do. We all have different backgrounds, personalities, and surroundings, and we all have different routes on how we hope and want to get there. My guest today is my friend, the incredible Sam Zell. Sam is the chairman of Equity Group Investments, a private investment firm he founded more

than 50 years ago. He's the chairman of five public companies on the New York Stock Exchange, including Equity Residential, which has a market capitalization of $27 billion, and Equity Lifestyle Properties, which has a market cap of $12 billion. He was also the founder and chairman of Equity Office, the largest office read in the country until its sale in 2007 for $39 billion. He's considered one of the grandfathers of the modern real estate investing industry and was recognized by Forbes Magazine as one of the 100 greatest living business minds. He's a self-made billionaire with a net worth of more than $5 billion, and he's been on the Forbes 400 since it started in 1982. Sam is also an active

philanthropist with a focus on entrepreneurial education. Among the many other organizations who have been the recipients of his generous gifts. He's given more than $150 million to the greatest university on the planet, the University of Michigan. Sam, welcome to In Search of Excellence. My pleasure, Randy. Let's start with family. From the moment we're born, our family helped shape our personality and values in the preparation for our future. Your parents were Jewish immigrants from Poland who left the Nazis before they invaded. And they had a very long trip that took many stops before they arrived by ship in Seattle in May of 1941. Your dad was 36.

Your mom was 33. They had little money and they didn't speak English. Can you tell us more about their journey, what they were like, what kind of values they instilled in you? And let's start with the 12-hour span after they arrived. Well, maybe one of the best ways to describe their unique characteristics was the fact that they landed at 6 a.m. May 16th, 1941. my mother was pregnant with me. I had an older sister. And at 6 p.m. that night, they went to their first English school. Rapidly learned how to speak English and learned how to be, and were very proud of being citizens of the United States.

More than anything that really talks about conviction. My parents lived on the German-Polish border, and my father had taken the steps necessary earlier to provide for the ability to escape, since he felt that leaving Poland was going to be the only way to survive. Unfortunately, he tried to convince other members of his family or her family to join them. I think they were probably viewed as young, crazy kids and didn't understand what stability was. Unfortunately, everybody, with the exception of two who stayed, didn't make it. That was kind of the way it started. It took them 18 months to go from Zarbich in Poland to Seattle in the United States. That was across Poland into Lithuania to Moscow across the rest of Russia, 11 days and 11 nights on the Trans-Siberian Express, and then into Japan.

Along the way, lots of stories, lots of examples of my mother saying to my father, you know, Bernard, enough already. Why don't we stop here? And he was determined to make it all the way. And so there was never any option of stopping. And, you know, and it took a lot of, you know, acrobatics and they were the beneficiaries of a Japanese council in Kovnos, which is part of Lithuania, who signed transit visas that allowed him and another 2,000-some-odd Jews that were basically stateless immigrants to get across Russia and get out of harm's way. And most of them ended up spending the war in Shanghai, which is where the Japanese deported them to. But of course, they survived versus the many millions that didn't make it.

So with that kind of a background of my life, and I remember as a four-year-old or a five-year-old, sitting usually at a Passover Seder table when they would be in the mood to tell stories, and they told the stories of that trip and their experiences and how they felt about being Americans and being part of America built in me a whole deep layer of patriotism and love of this country. And what kind of values did your parents instill of you? What did your dad do for a living? And did you watch what he was doing and want to be like your dad? And what kind of qualities did he have that you wanted to emulate?

Well, in Poland, he was a grain trader and a very, very successful one, which, by the way, probably ended up saving the family's life because he was much more sophisticated than most of the people who lived around him. And he was much more connected to world news and knew a great deal more about what was going on in Germany at the time. So the job led to a level of knowledge and sophistication that certainly contributed to the steps that he took to go from there. Once he got to the United States, he ended up in Chicago because this was the center of the grain business in the United States. And one of his biggest customers in Europe was Quaker Oats. And Quaker, whoever the Quaker representative was in Europe, just loved my father and would frequently say, you know, if only we had people that we could hire like you to work for us,

it would really be terrific. So we went to Quaker Oaks to get a job, and they wouldn't hire him because he didn't have a college education. So he became kind of an independent Miller's representative for a year or two and then became a wholesale jeweler. In those days, wholesale jewelers were much more entrepreneurs. And in effect, they operated their businesses and distributed among 11 or 12 states. And then he eventually became a representative for a watchman company and basically did the same thing.

He was a very, very unusual man. Just as an example, despite he was obviously a recent immigrant and spoke with an accent, and yet this watchman company he worked for was never able to get into Sears. I was never able to get into JCPenney. My father accomplished both of those objectives. So he was very persuasive, very smart. And, you know, he had an extraordinary level of self-confidence. I suppose you could say that, you know, at age 34, when he made the decision to leave Poland, you know, very few 34-year-olds ever make a life and death decision and it becomes very difficult if you make a life and death decision

and you're right. I don't think he ever thought he was wrong again. At least that's the perspective from his son. But they set examples for me, emphasized how lucky I was to be in the United States, that the streets were paved with gold. But his definition of paved with gold meant freedom, meant the ability to, you know, excel, to test your limits, to do whatever you could. And so I grew up in that kind of an environment. It was also an environment that, you know, encouraged me to be humble and not get out there, quote unquote.

And to a large extent, you know, despite all of the different things I've done, I think that I've made a point of not being a quote-unquote public figure and affect, you know, dictates to society in any way. My feelings are that I believe very strongly in what I believe in. I believe in consistency, as you mentioned. You know, I wrote a book and I titled it, Am I Being Too Subtle? In many respects, that's as good a description of me as I could think of because I'm not known for my subtlety, but I've always really wanted no one to ever leave a meeting with me. They may not agree with me. They may not like what I had to say, but they couldn't possibly say, what do you think he

meant by that? And so that's created a long history and a long business community that I've created where those kinds of standards are prevalent. What were you like as a kid? Were you one of these popular kids? Were you a leader? Did you have things you loved to do for fun? And then as part of, we can weave into where Playboy played a factor in your childhood. Well, I was a different kid. I mean, going back to my father, my father's attitude was, and as often expressed to me, you're different. And I'd say, well, I want to go out and play again. And he says, why don't you go sit and read a book? You're different. I remember as a teenager going to a high school basketball game.

And that was like on a Friday night. And a week later, I wanted to go to another basketball game. And my father's attitude was, you already went to a basketball game once. Why would you want to ever go to more than one basketball game when you could be studying or when you could be doing something, quote unquote, productive? the fact that I live and that I came from a different household, that the environment was different, that the expectations of me were very different. I mean, I had numerous friends, but their parents didn't lean on them in any way, shape, or form similar to the experience that I had. But obviously, it gave me discipline. It gave me a lot of self-confidence. My parents were very relaxed, as opposed to today's parents.

If I was gone for six or seven hours, that was normal. And I was, you know, very curious. And I remember when I was like 10 years old, you know, for a nickel, I was able to get on the subway system and I rode all day long on the same nickel because I knew where I could transfer and, you know, and therefore not incur another affair. But I was curious. I wanted to see everything. And in the same way, as you, as you mentioned, when I was 12 years old and in sixth grade, my parents moved from the city to the suburbs. And I had been enrolled in Hebrew school when I was five. So by the time I was 12, I had a much more extensive than average education. So the only way I could continue my education was by going back into the city every day after school

and going to a Hebrew where it was called a yeshiva on the north side of Chicago. And so literally every Monday, Tuesday, Wednesday, Thursday, and Sunday morning, I got on the train and went by myself. You know, my parents never, I don't think they ever crossed their mind that there was anything dangerous about a 12-year-old boy being, you know, totally loose in a major city. But as a result, again, my levels of curiosity, you know, were unending at that age in particular. One of the things that I discovered that was really extraordinary was that there were magazine stands, you know, usually under the L tracks and that they sold magazines that they didn't sell at every other magazine store. And they were, you know, girly magazines

and stuff like that. And then in 1953, Hugh Hefner published something called Playboy, which was really the first quote-unquote girly magazine that was really, you know, well done. And so I bought it. It cost 50 cents. And I read it on the way home on the train. And then I showed it to a friend of mine.

And the friend of mine was, and this is the kind of magazine that in those days wasn't sold in the suburbs. It was limited to those under the tracks magazine store. So I showed it to a friend of mine and he was enthralled and said, geez, you know, can I buy it? And I said, sure. And he said, how much? And I said, I don't know, $3. He said, great. So he paid me $3 for something that I had paid 50 cents for. And P.S. I'd gotten to read first. And maybe for the first time in my life, I really understood supply and demand. You know, there was an unlimited demand for that product. And so I started, quote unquote, importing Playboy from my friends.

But that was one of a number of, you know, entrepreneurial endeavors that I pursued during the period I grew up. You've made a career out of seeing things that other people can't see. When you were young, did you realize you saw things differently than other people? Oh, I recognized for sure that I saw things differently. I didn't, frankly, understand what it meant. As I've gotten greater and older, I've come to understand that for whatever reasons, I am different and I see things differently and my perspective is different. You asked me whether I was part of the popular group. I was never able to be part of the popular group because I couldn't possibly adjust my thinking to the common participant. And so I was constantly challenged by my own

level of thinking that made me act differently and created environments later on in life turned out to be extraordinarily productive and profitable. But when I was a young kid, all I knew was I was different. And frankly, that was something I discovered later on in life. It was also at times quite lonely. Just as 50 years later, when I was buying up distressed real estate in the early 90s, one day I was standing in the lobby of the Irving Trust Bank in New York, and I had just negotiated the purchase of a building that they had foreclosed upon. And I stopped and I kind of looked over my shoulder and I said, how come everybody else isn't doing what I'm doing? Maybe I'm wrong. How come all those, you know, how come there's lots of smart people, there's lots of people with money? How come I'm doing this and I'm literally doing it alone, just as I did in the mid-70s until all of a sudden I wasn't alone.

But there's a serious period of loneliness when common viewpoints just don't work with you and you operate off your own ledger. When we talk about excellence, we're talking about our drive to be the best we can be at whatever we're doing. How old were you? Were you really made a conscious effort to be the best at what you did? And when you did, was there a certain way you went about it? I don't think that there was a certain way about it per se. I think that I was driven by the desire to feel fulfilled. When I was a kid, I had a very close friend and he and I were laying on the living room floor one day, maybe we were 17, and he looked at me and he said, what makes you the way you are? So I obviously was probably driven at that point, too. And I looked at him and I said, you know, I think that, you know, every one of us is born with certain traits and skills and abilities.

And I've always felt that my obligation is to maximize those talents that I've been given, whatever they may be. And that's driven me more than anything else is that that's an obligation to society. When we're trying to improve, I think one way to do that is to work with people better we are. If you're a basketball player, you don't want to be the best player on the team, especially as you're making your way up. You want to play with people better. When I came to Sun America, I was 27, and I was the junior guy in the senior team. And what really made an impact on my life and my professional life was working with an incredible group of people, including one senior person, Jim Bilardi, who's gone off to create his own real estate company.

He's become a billionaire, Jay Wintraub, who was one of my two bosses, now CEO at Oak Tree. Did you work with more experienced people, especially when you were younger? And we're going to talk about your career and some of the stepping stones and the beginnings, but have you worked with people even in your work life that made you better? Well, I think that it depends. The answer, of course, is yes. But I think the answer is adjusted accordingly. As you mentioned, my work life per se has been quite different than most people who had jobs. I went to law school. I graduated from law school. I actually even did reasonably well in law school. I had a hell of a time getting a job, primarily because I told them what I did while I was in

law school, and nobody could believe that I'd want to be a lawyer. They were right, but I didn't know it. I only really worked for anybody else for four days. I only worked with a, quote, group of people that didn't report to me for four days. So as opposed to your experience, I never got to work with the kinds of people that you had those kinds of enormous influences on you. But instead, what ended up for me being the case since almost from the very first moments that I left the theoretical practice of law, I was always raising money for various kinds of real estate projects. And as a result, I met fascinating men and women who did all kinds of things and made all kinds of lots of money and needed opportunities to invest. And I was apparently a very good salesman because except for the very first deal I ever did, people really stood in line to invest with me.

But those people were fabulous people. I mean, they were the excellence generation of their generations as reflected by economically how they did. And the breadth of what they did was enormous. And so it for sure kindled all my curiosity and encouraged me even further. Let's talk about education and its importance, incredible importance in all of our lives and what we do. Is education the first cornerstone to our future success?

Well, let's say that education is the minimum requirement. In other words, I can't imagine how anybody would survive in this world. And now we're talking about 2021, but even think about 1951 or anything in between, education has always been really critical. And there's very little doubt that my education contributed to my ability to make the right decisions. This episode of In Search of Excellence is brought to you by Sandy.com. S-A-N-D-E-E.com.

We are a Yelp for beaches and have created the world's most comprehensive beach resource by cataloging more than 100 categories of information for every beach in the world, more than 100,000 beaches in 212 countries. Sandy.com provides beach goers around the world with detailed, comprehensive, and easy-to-use information to help them plan their perfect beach getaway at home and abroad, and to make sure you're never disappointed by a beach visit again. Plan the perfect beach trip today by visiting sandy.com. That's www.sandee.com. The link is in our show notes. Stay sandy, my friends. You went to the University of Michigan, which I've already said, and we both know is the greatest

school on earth. Absolutely. You did well there. And you went to law school, as you mentioned. For 99.999% of people, they go to college or grad school before the end of the real world and start their careers. But like so much of your career and your DNA, you were the 0.0001% who didn't go that route. You got into real estate your junior year by managing a 15-unit building and returned for free room and board, and then you kept going. You were managing the owner's other properties as well. And this is crazy, but by the time you graduated, that venture was netting $150,000, which in today's dollars is $1.2 million. Then you met Robert Lurie, your fraternity brother in AEPI, who became your partner. By the time you graduated law school in 1966, the two of you managed a total of 4,000

apartments and personally owned more than 100 buildings. That's just insane. Can you give us more insight into how that happened? And was that some kind of a master plan? No, as a matter of fact, it was anything but a master plan. Somebody once asked me, you know, how would I best describe, you know, who I am and what I do. And the answer is that I consider myself a professional opportunist. And when we took over that first 15-unit building and we worked hard at it and we learned a lot, when the second building was offered to us, it was just a natural and it wasn't even, you know, wasn't even a difficult choice. And then when the third building was offered to us, Lurie was the guy we hired to run the third building.

Eventually, we ran a whole bunch of other buildings and then started buying buildings. And it just all became, well, why not? I mean, you know, I spent a couple of years acquiring a square block in Ann Arbor, Michigan. And, you know, and it basically started out with a friend of mine who was in law school, who had graduated, and he had some kind of a gastronomical problem. And so when he became a freshman at Michigan, his father bought him a house and he rented out the other rooms to other people and was able to cook his own food. Well, and eventually he graduated from law school and he called me one night and he said somebody wanted to buy the

building, the house. And what did I think? And I said, I don't know. So I'll go look at it and I'll call you back tomorrow and tell you what I think. And I basically called him back and said, you know, my partners and I would buy it from you. He said, fine. So we paid him a little more than what he was offered. And that was the first of that square block block and so then we owned the corner and i said to two local real estate guys who were my partners geez you know maybe it'd be worth more if we owned the one next door so then we bought the one next door and then once we owned those two then it would begin next question because maybe we'd be worth more if we bought another one next door. And so literally, I became the king of the street as I went from house to house to house and literally buying up what amount it would ultimately turn out to be like half a block or three quarters of a block.

But it was quite an experience. You already mentioned you went to law school and you did well there. And then you're looking for a job after you graduate, despite having made a tremendous amount of money as an undergrad and in law school. You were wealthy by the time you graduated. And if you look at the average worker, you were extremely wealthy. And then you're trying to get a law school job. And you mentioned you had a hard time. So how many job interviews did you have?

And how did you land the last one? And what did that partner tell you? Because you did set a world record for how long you were there. Yeah, I'm sure of that. Well, I struck out in 43 different attempts. In other words, I had 43 interviews with 43 different firms. And then that result was that I got not one single job offer. I had one kind of a funny experience where toward the end of this,

it was really a horrible experience, as you can imagine. I got into an interview, and I got a second interview, and then I got an interview with the boss, the guy whose name was on the door. And so I went in, and he was a wood panel lawyer's office, and he was on the phone. So he told me to sit down, nodded his head, and he got off the phone. So he told me to sit down, you know, nodded his head and he got off the phone. He got up, he closed the door to his office. He said, tell me about your deals. I said, tell you about my deals. I want a job. He says, oh, we would never hire you. You'd be here three months and you'd be off. And I said, what about Perry Mason? And he just laughed at me.

He says, what you don't understand is that what you've done is not what anybody else could do. It's a lot more guys who could draft contracts that could compete with me as opposed to what you've done. And I didn't realize it, but he was right. And the job I did get was with a very small law firm that was kind of a half loss firm, half real estate developer. And so they thought that, you know, that I would fit. And from the firm's perspective, I think they paid me $5,600 a week in 1966. And, you know, and I was there for four days and drafted a contract and came to relatively quick resolution that this just wasn't my cup of tea. And I went in to see the senior partner on Friday morning and I said, I just don't think this is a good use of my time.

He was stunned that he just looked at me and he says, you're quitting? I said, yeah. And he said, what are you going to do? I said, well, I'm just going to go back to doing deals like I did, you know, right before I, you know, got this job. And he said, well, why don't you just stay here and we'll do the legal work and we'll invest in your deals. So I said, sure. So that's what happened. And so I stayed in an office with the law firm. They did the legal work and I did the deals. And they and some of their other clients put up money to go along with what we needed to make it work. And it worked. It was just fine until about maybe a year into it.

I was fortunately very successful. And the disparity between what I was earning and what everybody else in the firm was earning became much too great. And so I, in effect, went out and became independent. 20 years ago, a tech billionaire named Peter Thiel, one of the founders of PayPal, the first outside investor in Facebook, launched a program that awards $100,000 to promising young entrepreneurs under 23 years old are willing to drop out of college and turn their ideas into businesses.

It's had very mixed results. What do you think about that plan? I know Peter, and I'm familiar with the program. I think I'm pretty critical of it because I think it's waving the flag of money and maybe encouraging somebody to make a bad life decision, alter their educational process to pursue something like that. So that'd be my observations. Clearly, I think the idea of encouraging people to pursue entrepreneurial objectives.

I'm very much in favor of that, but not at the price of disturbing education and running the risk that you may not return to it. And so that'd be my viewpoint. I'll just digress here. I have a scholarship at the University of Michigan. It's a full ride for a student from Michigan interested in business. And I'm not going to mention his name, obviously, but he gets the scholarship. I don't hear from him. And the next year,

I called the university, hey, what's up with this kid? And they said he didn't enroll in college. And I said, what are you talking about? Did you try to find them? He said, yeah, we tried to find them and we couldn't get a hold of them. So I go on LinkedIn, I find them in 30 seconds and I call the guy and he has dropped out of college to work in New York City. He's from Las Vegas, comes from a very underprivileged background. He's in New York City making $40,000 a year to join a startup that was funded by Excel Ventures. They had raised something like $3 million to be the chief of staff. I begged the guy to go back to school.

I had Brad Keywell call him. I had a bunch of friends call him. And he never went back to Michigan. It was unfortunate. The company failed. Last time I checked, he had gone to City College and he had dropped out of school. It can be tempting to do things that are just craziness. So one of the goals of In Search of Excellence is to encourage people to pursue their passions on their path to realizing their dreams. And for many, as we talked about, that means starting

their own business, being an entrepreneur. But the stats show that 75% of new businesses fail after 10 years. And there's a lot of people listening to this and watching this who are thinking, I got to start my own company. I want to do it. I'm afraid to do it. And they're planning for it. But given the low success rate, should that put a damper on being an entrepreneur? Well, I certainly think it should be taken into consideration.

When you talk about an entrepreneur, one of the things you talk about is the fact that to an entrepreneur, the word failure doesn't exist. Maybe it didn't work out, but you get up off your ass and you start again. I think that the biggest risk is not reaching out and failing. It's not being realistic about when to say no go so that you make a commitment to pursue an idea and it works out or doesn't work out within a very specified period of time. You don't run the risk of finding yourself 10 years later with a startup that didn't work. And most productive years of your business career are behind you. Some people are born with the entrepreneur gene. Some people are not born with it. For those that aren't born with it, can you learn how to become an entrepreneur?

You know, that's maybe the $60 question that we've spent a fortune and many years, you know, trying to find out. Maybe you got to start by defining what it is an entrepreneur, because it's a big psychological scenario. It's a high level of self-confidence. It's an ability to absorb rejection. It's an ability to shut off the noise and recognize that conventional wisdom is not necessarily the answer to the problem. You take all those things and you end up with different kinds of entrepreneurs. We ran a program that we ended up with at the University of Michigan

where we ran a nationwide contest to design a syllabus in entrepreneurship. And this resulted from me sitting with the dean of the business school in 1979 and reading his curriculum. And I looked at him and I said, how could the word entrepreneur not exist in your entire curriculum with all these courses that you're putting out? The word entrepreneur doesn't even exist. So we ran this contest open to any academic to basically design a course. And the first winner was a woman. And the woman taught music at Wayne State University. And her specialty was composition. And she basically taught the course as in showing that in order to be an effective composer, you have to be able to bring together a whole bunch of ideas.

You need to get focused. You need to make it happen. You need to be driven. But how different is it to compose a piece as it is to start a business? And maybe it isn't very different. So it was very interesting that that was the first winner. In the late 60s, the early 70s, you noticed a trend that some other people weren't seeing. You took advantage of it.

Jimmy Carter helped you out there a little bit with inflation. And then you wrote an eight-page paper, which you can still find online for those of you who want to read it. It's a fascinating read. It's a technical read, but it's fascinating. And it was titled The Grave Dancer. And you met one thing, it's sometimes been interpreted as something else. Can you talk about the term and what you saw and what you did? Yeah. You know, in early 70s, roughly 66 when I got out of law school to 73. I was operating under the thesis, the real estate investment world was divided between major cities and the rest of the country. And that whereas an

investor might take a 4% return to invest in Chicago. He couldn't even imagine taking any return, two or three times it, to go to Ann Arbor, Michigan or some little town. I decided that that's where the opportunity was. And so that's what I did. And I watched it all happen. And I remember vividly that I had purchased an apartment project in Orlando, Florida. It was beautiful and fully occupied. And then in the course of roughly a year and a half, maybe two years, all around it were quote unquote new projects being constructed. And occupancy went from 100% to 68%. And that's when I said, oh my God, you know, they're going to oversupply the whole country. And that I need to stop making investments, build a distressed property management company, and then begin buying distressed assets. And that's what I did. All I can say is that during that period of time, I ended up, or toward the end of it, I ended up going to an NYU conference to hear, I can't remember his name right now, but Zeckendorf. Unfortunately, Zeckendorf was too old to make

a presentation at that time. But somebody came to me and said, you've been buying up all this distressed property. Would you be willing to write a piece for NYU, a real estate review, to describe it? So I sat down and I started to put together, I'd never written an article for a publication before, and tried to put together the elements of what was involved in buying distressed assets. And I got to the end of it and I started thinking about the name that I should put on it. And then I kind of referred to the end, the last thing I said, which was, you know, you really needed to be careful because you're really dancing around a lot of opportunity. But if you're not careful, you can fall in the

pit. And that led me to think about a grave and Grave Dancer. And so that was the name of the article. Are you looking for your next great gift to surprise a friend, colleague, or loved one? Bliss Beaches makes the perfect gift. This best-selling bright and beautiful coffee table book by Randall Kaplan features stunning drone photography from exotic beach locations around the world. It's the perfect housewarming gift, a great addition to any home or office, and a fun and creative alternative to bringing a bottle of wine to somebody's house for dinner. Bliss Beaches is available for purchase on Amazon,

where it has glowing reviews and a five-star rating. Get your next amazing gift and order a copy of Bliss Beaches by clicking the link in our show notes. Let's switch gears on our path to success. As we've talked about already, we have challengers and failures along the way. And if we're going to achieve excellence, we need to overcome them to achieve our goals. And I want to talk about the Chicago Tribune deal, which was a very high-profile investment, especially because you live in Chicago,

and it did go so well. In late 2007, he bought a controlling share in the Tribune Company for $315 million. He beat out bids from Ron Burkle and my former boss, Eli Broad. The deal included the Chicago Tribune, the LA Times, a bunch of other newspapers, Newsday, the Chicago Cubs, and a 25% stake in Comcast's Sportsnet Chicago. A year later, the company files for bankruptcy. It has $7.6 billion in assets, $13 billion in debt. At the time, it was the largest bankruptcy in the history of American media. What went wrong here? And as part of that, can you talk about how you evaluate risk and how what you do with risk can also be a huge part of our success? Well, first of all, unfortunately, we signed that deal in April. The Federal Communications

Commission withheld their approval until December. So during that period of time, there was a significant erosion in the business, but we were unable to do anything about it. When we took over and we did our due diligence, we did a model that assumed a 6% regression in revenue from print ads. So we were aware of the fact that the print ad business was starting to become subject to the internet competition. Anyway, we took over January 1st, give or take, I think 2008. In the first 30 days, print revenue dropped 30%.

I would tell you that, and that stayed that way all year. When you talk about an industry like media, a revenue drop of 30% is not salvageable. And so consequently, we ended up losing the property and losing the deal. And I learned, like you do from everything you do, you learn from it. What I learned from it was that I really thought that the decision to buy it, assuming that my projections of what was going to happen were reasonably right, I still think was a good decision at the time. And I looked at it as a real estate deal. And we got the real estate. We got all these different newspapers. We had valuations on the

sale of each part of the Tribune that we were getting. We created a very tax-attractive methodology for ownership. But probably the most important thing we did is we lost $350 million. We, in effect, established that as the risk amount we were willing to risk to do the deal so that we lost, but were able to talk about it afterwards and continue. I think I learned being able to understand not only what the risk is, but limit the risk to a level you could handle and allow yourself to, in effect, pursue opportunity thereafter. So it was probably, well, not probably from an economic point of view, it was for sure the worst deal I've ever done in my life. I've never lost $350 million before, but I probably, you know, grew off of the experience. And it And certainly appreciative of my own level of discipline to avoid, you know, getting myself in an unknown, indeterminate loss versus a fixed amount.

Would you complete this sentence? If during your career you correctly assess the risk, the likelihood of you excelling is? 80%. The 20% is factors that are uncontrollable to you, outside influences? Yeah, or mistakes. I mean, you got to recognize the fact that if you're right 80% of the time, you're, you know, remember, we pay guys to play baseball $25 million a year to be right one out of three times. I'm already telling you my goal is 80.

And so, you know, they're mistakes, things out of my control. I remember, you know, we lost one company to September 11th. No way I could predict September 11th, but it happened. We talk about rejection. We've talked about it a little bit before, but overcoming it is very important to be successful in your career as an entrepreneur.

Can you just talk about how Hairspray played a role in your success? Well, the summer, I don't know, the summer before my senior year in college, I spent as a traveling salesman for Helene Curtis Industries. And I was selling stop bed and suave shampoo and airhead, a whole bunch of stuff. And as you might suspect, the customers they gave me to call on were customers that really weren't called on or taken care of by the guys who made a living doing this. And so I got, I mean, I had one lady pick up my briefcase and then pick me up. She weighed about 300 pounds and just threw me out on the street when I told her what I wanted and that I sold it. I spent, you know, more than one day in the basement of a drugstore taking back a whole bunch of stuff that had been sold to them by the last salesman that had called on. And it assured them this product was terrific. And instead, it ended up being on

a shelf downstairs. So I saw a lot of rejection. Finally, it got to the point where I would walk in and say, hi, I'm Malene Curtis. And the guy says, so what? And I say, well, it keeps me off the street. But, you know, it just, you know, and then all of a sudden the guy, you know, who really needs another salesman to talk to, like he needs a hole in the head, says, well, I got a kid, he's funny,

and I'll talk to him. And eventually I made progress and was able to execute sales that were totally unexpected by the company. Let's talk about investment trends. Every few years, there's always something new, the latest and greatest. And I want to start out by talking about the annual gift you sent out to around 650 of your friends and associates. They're individually numbered, custom-made bronze statues, music boxes that reflect your public thinking and predictions for the upcoming year. You sent me one in 1999. It had a naked man standing on a stack of Wall Street journals,

and it predicted a catastrophic collapse of technology companies under the title, The Emperor Has No Clothes. The man is wrapped in a ribbon, and the ribbon has ticker symbols of the high-flying tech companies at the time, Webvan, eToys, Dr. Coop, and others, not Akamai, so thank you for that one. Then you hit a button on the back of the statue and a recording comes on with your voice for an introduction as to what comes next. And you say, new technology will change our lives, but it will not change the basic laws of economics. Then the music to the Paul Simon song, 50 Ways to Leave Your Lover comes on. And there's a guy who sounds exactly like Paul

Simon, who sings a parody, 50 Ways to Make a Billion. This was two years before the dot-com crash. And as you predicted, all of those companies went bankrupt or were sold for pennies on the dollar. Now we're seeing the latest fads and investment trends. You got Bitcoin, cryptocurrency, the GameStop phenomenon, and the very latest NFTs, non-fungible tokens, were three weeks ago, a JPEG file made by a guy named Mike Winkleman. This guy's a graphic designer turned digital artist who's known as Beeple or Beeple Crap. And a digital picture he made sold at a Christie's online auction for $69.3 million. It's a JPEG file, not a Warhol you can hang on your wall. It's an NFT frenzy out there. And the best venture

capital firms in the world are backing them and have guys like Mark Cuban, who's calling them this the next big thing. What are your thoughts on all of this? I'm too old. I don't understand them. I think we, you know, I'm old enough to remember Pet Rocks. And I think what you're describing are extreme examples. We as a culture, as human beings, played the South Sea bubble, and we've been involved in lots of different trends. Now, some of the stuff you're describing, I think there is a role for crypto and there is a role for similar possibilities. But generally speaking, I think people are responding to fads as opposed to making intelligent decisions. I want to switch gears and talk about mentoring and role models and their importance in our success. As part of that, I want to talk about the first chapter of

your book and the first time you and I met. The first chapter is called An Impossible Life, and the central theme of the book is that anything is possible. That's actually been my motto for the last 20 years since Akamai went public. It's on my Instagram page. It's what I preach to my interns and my mentees and in my public speaking engagements. And I want to share a story about which leads up to our first meeting. I had a lot of struggles when I was younger. I was bullied because I stuttered. Kids would make fun of me. I did not

have a lot of confidence, but I always did well in school. At Michigan, I graduated in the top 1% of my class with honors from Northwestern Law School. But I always wanted to be an entrepreneur. So I took $400 of my bar mitzvah money. I made 100 t-shirts. I went door to door in the dorms. I'd get kicked out. I'd go in the other door. It was much harder to start a company in those days than it is today. There were only a few of us doing it. Me, Jeff Blau, Brad Keywell, and two others. It's a small world. Brad is one of your protégés, the founder of four public companies and is a billionaire. Jeff Blau isn't far behind. He's the CEO of the

Related Companies, which is the largest developer in the world. And when I get to Michigan, I'm looking around and I see the name is Zell everywhere. And I'm wondering, who is this guy? So I look you up, I read about your background. I say to myself, I'd love to meet that guy one day and be like that guy one day. So fast forward a few years, I'm 31 years old when Akamai goes public and a reporter from the Detroit Free Press named Jerome Levin calls me up out of the blue one day and says, he wants to do a story about me, a kid from Detroit from modest means who struck a big in technology. And I didn't want to do the story. I didn't know what people were going to talk about. I thought they were

going to focus on the money. But my old boss, Eli Broad, convinced me to do it because if I cooperated, I could help influence the outcome of the story. So the piece comes out and it's incredibly flattering. And later that night, Jerome calls me. It's 7 p.m. in LA, 10 p.m. in Detroit. I tell him I love it. I thank him. We talk for a few minutes about many things. Then we get to talking about Michigan, where I'd just been invited to join the undergraduate board. He asked me if I knew you. I said, no. He asked if I want to meet you. So I said, yes. He said, he's going to call you right then and there. And he called me back.

There's no way a reporter knows Sam Zell that way to be calling you at that hour. And I'm thinking there's no way, even if he did, that you're going to pick up the phone. So sure enough, he calls me back five minutes later and he gives me your number. And I said, I should call you now. I'm thinking, wow, nervously. And you invited me. I call you. You pick up the phone.

You invited me to your house in Malibu two days later on a Friday afternoon. I had just bought a Porsche 911. This was the car. It was my dream car. I used to go in the Porsche dealership once or twice a year. I'd sit in the car and tell myself, one day, I'm going to own one of these. And there I am driving along PCH, top down, radio is blasting, on my way to meet you. I'm a founder of a successful public company. I've made a good amount of money. I'm thinking, I can't believe where I'm going. Sit down with Sam Zell, one of my business idols. I was living my dream, telling myself that anything is possible. We sat for three hours talking about business, life, responsibilities of being wealthy and giving back.

So thank you for all that. As we plan for our future success and our search for excellence, I want to talk about the importance of others to help teach, guide, encourage us to achieve our goals. I know your dad was one of your mentors, but can you tell us about Jay Pritzker? How did you meet him? What influence did he have on you as not only a business person, as a businessman, but a person as well? Well, Jay was one of those investors that I got to know as a result of hawking my concepts and ideas. I found him extraordinarily challenging and extraordinarily interesting.

And I think the smartest business head I had ever encountered. And I used to sit at his desk and I'd spend the whole day there. He'd make deals and talk on the phone and we'd talk in between. And he had an enormous impact on my evolution. And I learned a lot. Maybe, you know, if I had to identify one characteristic that I took from that relationship, it was the characteristic of make it simple. That, in effect, if you're going to succeed, you've got to be able to have a plan that has a simple execution. The risk of execution is the most underrated risk one can have. And yet, the story of people not understanding that is legion. So that was probably the best mentor

experience of my life. Jay died, I don't know, maybe 20 years ago. But for a period of 25 years, I interfaced with him and worked with him. And I think I was very lucky. I love meeting successful people to this day. It's one of my most enjoyable things. I love learning. J.B. Pritzker was my classmate in law school, and he invited Jay to come speak at the law school about the TransUnion case, a Supreme Court case regarding the Bismuth Judgment Rule, which held that directors of a public company had exercised reasonable prudence in making a decision, and if they didn't, they'd be held personally liable for decisions in that case. Jay comes and speaks. I came to class in a suit. And as he walked out of the building, I followed him out of the building. And I said, excuse me, Mr. Pritzker, I'm Randy Kaplan.

Nice to meet you. I'd love to sit down for a cup of coffee. He said, let's take a walk. So I walked back to his apartment on Lakeshore Drive. It's a 20-minute walk. I went into his apartment. For a half hour, he drove me back to law school in a Ford Tempo with AM radio only, by the way. And that was a huge, huge moment for me. Later on, I asked JB, can I meet Robert Pritzker, his brother? So JB sets up a dinner at California Pizza Kitchen across from the East Bank Club. I'm all nervous, and I'm sitting there, and they come. And I got to ask him every deal of the origins of what became the Marmon Group. And the first company, his father, as you know, was a successful lawyer. And then he started buying companies. The first company they bought was a paint company for $6 million. And for me to meet these people, it made a huge

impact on me. And I love learning from people who are successful. It motivates me. And that's one of the goals of this podcast, too. Let's talk about the culture at your company. In 50 years, you've only had one senior person leave and be recruited away. And this guy came back in six months. That has to be another one of your world records. It says a tremendous amount about you. What goes into creating a culture, and how important is it to your success? Well, I'm a great believer in culture. That's part of the reason I think this work-from-home concept is like bedrocks. I think we need to be together. I think that it's very important. My definition of culture is the enemy is without. Abe Lincoln might have succeeded with

a team of rivals. I don't think I want a team of rivals. I want a team of people who work together and take on outside challenges. I operate my world on the very simple thesis, and that is access and lack of hierarchy. And the guy who left and came back, I asked him after he came back why he came back. He was making more money and had a better title. And he said, it's very simple. He said, when I work for UCM, I'd sit there and work on a problem. And if I didn't know the answer or if I had a question, I'd walk down the hall and get the answer to the question. Now I write a memo and wait two weeks to find out the answer. So I think that creating that kind of a culture, creating an environment where

everybody talks to everybody else and everybody adds support to everybody else, and we're all in it together. And from the very beginning, I've created a scenario where people participate in the investments we make. So we have a continued alignment of interest. And I think that is a major contributor to being a successful operation. I'm also going to mention that you're accessible to people who are not at your company. I call your office a couple of times a year. I'm coming to Chicago. Can we get together? If you're there, it's a for sure yes. And I'm not calling for you. And you pick up the phone. Hey, Randy, what's up? Which is always great to hear your voice. I want to talk about

fun. It's an important part of all of our success. It's a huge part of your life. You have Zell's Angels. You take a motorcycle trip each year with some of your friends. And in 1985, you did a Wall Street Journal interview, and you told them, if it ain't fun, we don't do it. The next day you come to work, and the office all has t-shirts that say, if it ain't fun, we don't do it. So let's talk about enjoyment and being good to yourself. When we need to talk about your birthday parties, the best way I can explain them is that I can't explain them. Well, I think the standard is very simple. That night I get up and I welcome everybody

and I say to everybody, the standard of this evening is not being able to describe it tomorrow morning. And we assemble 800 people. We do it every two or three years. We try and get, you know, pretty outstanding entertainment that turns it into a private concert. And it's worked out to be a lot of fun. And we've had some wonderful entertainers and some wonderful evenings. You know, I think that saying this, using the sentence of any fun we don't do it is really what it's all about. I think that I've always been interested in, I mean, I do a lot of traveling in the air a thousand hours a year. I've been on almost everywhere in the world and

some of it terrific, some of it not. But I think that's part of my own satisfying my own sense of curiosity. And to me, that's a lot of fun. And I get to have a lot of fun out of meeting, you know, interesting and challenging people from different societies and kind of understanding how they're responding to the impact of what's going on. The party itself is incredible. You've had Elton John twice, Fleetwood Mac, the Eagles, Eric Clapton played at the last one. And the fun starts with the invitation, which is a t-shirt that contains clues as to who is playing that night. Do you come up with the clues? Because most people are never going to guess in a million years who's playing. Sometimes it's done by the guy who

handles putting evenings together. But the whole idea is to turn it into a super, super great evening. The t-shirts are designed to make everybody look the same so that we don't have people going out of their way to dress up or create special costumes or anything. You know, everybody wears the entry. The ticket to entry is the t-shirt. And then they have a souvenir for the experience. Everybody listening and watching today wants to hear the answer to this question. What are the elements of success? What are the elements of success? I think they start probably with the 11th commandment, which is thou shalt not take oneself seriously. I think that if you're really successful, you have a humility and an understanding why you're successful.

It doesn't happen because lightning hits the deck or something like that. It's having the ambition, having the energy, having the curiosity, having the interest, and having the self-confidence to execute on what you learned. I think you need to be a super observer, and a super observer of lots of different things. You know, one of the most interesting things that I've learned was, you know, between 1990 and 2000, there was a demographic change in our country. And we delayed the, basically, society delayed marriage, changed the way we live, changed the amount of disposable income, changed some of the ways we invested, being curious, recognizing opportunities, identifying, and then executing. That's the definition of success.

And then in the end, I think you're going to make a difference. In other words, I think everybody needs to be concerned about their legacy. And I think their legacy has to be things they've achieved. I don't think putting your name on a building is legacy. I think creating a program that perpetuates itself and adds people to the definition of learning individuals is the answer and things of that nature. You led me right into my next question. Talking about philanthropy, legacy, you and Helen are two of the most generous philanthropists

of our time. I'd love to know where your desire to help comes from and at what age did you start giving back? You don't have to be wealthy to start giving back. And as a follow-up to that, you've done so much for so many people, given away hundreds and hundreds of millions of dollars. Do you ever sit back and think about, gosh, think about all of the, not hundreds of thousands of lives, but the millions of lives

you've improved in a very material way? I'll go back to your definition of success, suggests that you don't sit around thinking about that. I think you look for opportunities, you look for ways to make a difference and execute accordingly. And I think that if you do that, then by definition, you've improved the lives of others. You've created opportunity for others. And you've left a mark on society. And we've done a lot of charitable work. We've done a lot of work in education. We've done a lot of work in education. We've done a lot of work in the medical health, you know, medical arena.

And most of the time I'd say, you know, very little of it is, quote, a check to the American Cancer Society. That doesn't cut it. What cuts it is when you do something that you're involved in. So when I do something at the University of Michigan Entrepreneurial Center, I go to all the meetings. I participate in the same manner in other things that we do. Helen's created a writing program at the University of Michigan

and goes up there and spends a day and talks to the kids. And I think that's marvelous. But they need idols and they need people they can look up to. And that's part of the process. So it's more than just writing a check. It's identifying how you can make a difference. Helen has been head of the Chicago Symphony Orchestra for the last six years, dramatically changed the organization. Isn't that terrific? I mean, you know, that's what makes it great, and that's what we should do.

What impact do you want to have on the world? I don't think that I think like that. I think that the people I've met, the people who've read my book, people who have a perception of me, have a perception of someone who goes along and participates and tries to make a difference and tries to do the right thing and tries to be a person of his word.

You know, these are all simple concepts. They're not esoteric scenarios. I don't need to build a monument and I don't want to build a monument, but I want to help a lot of people get there. Before we sign off today, do you have any other advice to those listening or watching about how to achieve excellence and go about achieving our dreams? or unless you're going to do esoteric biotech, you need an above-average IQ that's maybe 120 or something like that. And then the difference beyond that becomes motivation, becomes discipline, becomes how you handle yourself. I think our society puts too much emphasis on IQ and not enough

emphasis on EQ. And having EQ is really the answer going forward. Sam, you made a huge difference in my life as a role model, as a friend. I'm super grateful for that. And I thank you for sharing your story today. My pleasure. Bye-bye. Thank you.