Am I Being Too Subtle?: Straight Talk From a Business Rebel

by Sam Zell

which was kind of like a precursor to a scene out of Animal House.

My buddy and I left Los Angeles and in seventeen days we traveled some eight thousand miles; we got over two hundred rides. A surprising number of people were willing to pick up two guys in Bermuda shorts and Michigan sweatshirts. And they were so kind. They took us to their homes, bought

us dinners and hotel rooms, and even taught us to water ski. The trip had an enormous impact on my life. It was such an outlier experience and truly extraordinary connection to America. It also gave me one particular epiphany that still influences how I meet with people.

Well, as a Jewish boy who grew up in Highland Park, there was no way in the world I would have conceivably thought of that solution. If my car overheated, I’d have waved someone down and had them call a tow truck. That guy had a sense of logic and orientation that was completely foreign to me. He never had a doubt. Priceless.

That experience never left me. It was a lesson in the value of how much you learn by seeing people in their own environments. Today I could probably get just about anybody to come to my office for a meeting, but that wouldn’t tell me much. Instead, I spend over a thousand hours a year on my

plane traveling around the world to meet with people. I want to see what they are like on their home court, how they treat the...

Despite all those businesses, I only had one “job” while I was in college. During the summers of my junior and senior years, I was a traveling salesman for Helene Curtis, and I sold to drugstores and supermarkets. I didn’t know anything about cosmetics when I started out, but I knew something about selling and I was a fast learner. Because I was a summer employee, I got all of the worst assignments. If you’ve never sold anything through cold calls or without appointments, it may be hard to imagine, but I can promise you that it’s humbling. Most responses are no. Some emphatic, some really emphatic. You just build up a tolerance for rejection. You learn to keep asking and to find ways to get a conversation going. If you can just start and keep a dialogue, you have a chance.

While I was unaware of it at the time, my real compensation for that job wasn’t monetary. It was learning about and getting comfortable with rejection. And as I would later realize, indifference to rejection is a fundamental part of being an entrepreneur. • • •

Along the way, I learned something about people I’ll never forget. I was trying to buy the next house in the succession of acquisitions, and the owners said, “You just paid eighteen thousand dollars for the house next door, and you’re only offering us eighteen thousand, but our house is a lot nicer.”

And then they said, “Pay us more, and we won’t tell them.”

I was stunned. I wasn’t naïve, but that was a lesson in human nature that was completely foreign to me and the way I was raised. These people had been friends and neighbors for twenty-five years, and for $1,000, they were willing to throw their neighbors under the bus. I ended up paying them the original price I offered. They could fool their neighbors, but I wasn’t going to. The idea that I was supposed to lie to the people next door—I would never do that. I’ve never forgotten that experience.

My father drove to Ann Arbor and I showed him the properties. Then I took him to meet Chisholm, who told my father that he wanted him to buy a one-third stake. My father refused. He wanted a fifty-fifty deal and that was his condition.

I remember this event so clearly because it was at this point in my career that I fully realized the value of tenacity. I just had to assume there was a way through any obstacle, and then I’d find it. This is perhaps my most fundamental principle of entrepreneurialism, and to success in general.

But my experience with Mrs. D was also about the value of really listening, which is at the heart of any negotiation. Understanding what’s truly important to the other person out of the dozen or so things they might tell you. Mrs. D’s brother had to be taken care of. That was her bottom line. Homing in on that got the deal done.

That was my first real investment thesis. If I could replicate what I was doing in Ann Arbor in other markets, I could realize some serious upside. I would build a portfolio of assets in smaller, high-growth markets with a focus on university towns. That all seems logical in hindsight today, but back then nobody was doing it.

trouble finding a job with a good law firm. But after my forty-third rejection, I was beginning to wonder. I couldn’t figure out what the problem was. I

didn’t make any sense. Finally, I got a meeting with Charles Kaufman, a founder and senior partner of Vedder, Price, Kaufman in Chicago, which had about 150 lawyers.

on the phone and he motioned me to sit down. He finished his phone call, got up and closed the door, then sat across from me. He gave me a funny look. “Tell me about your deals,” he said.

“What?” I was taken aback. “I’m here for a job!” He waved his hand dismissively and said, “Oh, we’d never hire you. You’d last maybe three months...

You’re not going to be a lawyer, you’re going to be a deal guy. We would just be wasting our time if we hired you, because we’d train you and you wouldn’t stick around.”

now I knew why I kept getting turned down. My resume was focused on my business experience, not on my legal education.

I spent them laboring over a contract between a linen supply company and Northern Illinois University. It was horrendous, just excruciating. On the fifth day, I went in to see my boss, the junior partner, Bob Michaelson, and told him—as only a twenty-four-year-old can do—that I didn’t think writing legal contracts was really a good use of my time.

“I’m going back to doing deals,” I replied. He said, “Well, then, why don’t you just keep doing deals? We’ll invest and do the legal work, and you can keep an office here.”

That sounded like a good idea, so I agreed. The arrangement was that I’d get 50 percent of any legal business I brought in.

So I left Yates & Holleb and opened my business in a spare office at my brother-in-law Roger’s law firm at 10 South LaSalle Street. That was the precursor to the investment firm I still run today.

My investment thesis was still based on targeting small, high-growth cities where there was no competing capital.

growing. And the largest fixed costs of real estate—taxes and utilities—were lower in these second-tier cities, so the net margins were significantly higher. I had about twenty investors, including my father, a few of his colleagues, and some attorneys from Yates & Holleb.

From Toledo, we went into Tampa, Orlando, and Jacksonville, Florida; Arlington, Texas; and Reno, Nevada. Don Chisholm, my co-investor from Ann Arbor, introduced me to the opportunity in Reno.

Cash on cash. Income earned on cash invested. Not dependent on appreciation, just cash. And with a high rate of return, so we would be paid for the risk of an unknown market. We did that deal, and we ended up buying three or four other buildings in Reno. Then we did some more deals in Florida with the same sellers.

I like doing deals with the same people. You get to know each other and build a mutual sense of trust. Today, a lot of what I do originates from associations that go back ten, twenty, thirty, even forty years. Anyway, the

Everyone knew the Pritzkers. They were one of the most prominent business families in Chicago, and they had started the Hyatt Hotel chain. Jay Pritzker was legendary in the investment world. He had built and now controlled a staggering empire. Jay was one of only a few people who would make a decision overnight to invest huge amounts of money. His liquidity and financial relationships made him the go-to guy of his era.

“Look,” Stan said, “Jay is an extraordinary human being, and you need to meet him.” So, the next morning I went over to see Jay.

got there about nine in the morning, and I didn’t leave until four thirty that afternoon.

That meeting with Jay was the beginning of the most influential relationship of my career, apart from the ones with my father and Bob Lurie.

Jay was the smartest financial guy I ever met. He taught me how to look at deals and how to focus on what would either make them or break them.

He introduced me to new ways of looking at opportunities and transactions. He became my mentor and my friend. We thought so similarly we could have been related. In fact, Jay, who was nineteen years older, used to joke that when he was my age, he used to play the f...

By the time I got through both of those projects, I realized development was more complex and risky than I had thought. In addition to problems with the blueprints, city regulators can change the game midstream with new fees and costs; the economy can shift, causing tenant demand to evaporate during the time it takes to get the building up; banks can come down on you; and on and on.

As a result, I was cured of any inclination to become a developer. I think that to stay in that business, most developers must get 50 percent of their returns from real cash flow and the other 50 percent from the intangible benefit of seeing their phallic symbols rise out of the ground. Otherwise I can’t see the reward.

My takeaway was a whole new respect for simplicity. Developme...

steps, and every step meant one more chance for something to go wrong. When Jay and I liquidated the Tahoe investment years later, I noticed that we had forgotten something critical, so I called him. “Listen,” I said, “the deal is closed, but I just realized we never drew up a formal partnership agreement between the two of us. If the IRS ...

At the same time, I had no doubt that if it all went south at any time, Jay would have my back. Jay taught me to use simplicity as a strategy.

He had an uncanny ability to grasp an extremely complex situation and immediately locate the weakness.

I like to say my father taught me how to be, law school taught me how to think, Jay taught me how to understand risk.

Jay’s level of intellectual rigor really appealed to me.

A discipline. It brought me back to seventh-grade social studies where I learned how to create an outline. It was the same core concept, just applied at a more sophisticated level. I still apply it today.

There I was, twenty-nine years old, on a mountain with Jay Pritzker, and he was having a heart attack. All of a sudden this important guy was my responsibility. What was I supposed to do?

I began making a series of calls to Jay’s doctor and people in the Pritzker organization. I watched helplessly as the local doctor examined him, not knowing the quality of care Jay was getting. I told his doctor in Chicago that he needed to get out to Snowbird immediately. He responded, “How am I supposed to get there tonight?” And I told him, “I don’t care if you have to charter a plane, just do it.” He said, “Okay, I’ll call you back.” Fifteen minutes later, he called me back and said the Pritzker School of Medicine at the University of Chicago Hospital was going to equip a plane with oxygen and other supplies and he’d be there that night. The plan was to take Jay home where he would be assured of getting the best possible treatment.

Ultimately, Jay ended up staying in Utah and getting excellent treatment there, and he recovered. Two months later, he was back in business, and we went on to do more deals together.

When he died of heart trouble in 1999 at age seventy-six, it was a great personal loss for me and for everyone who knew him well.

Zeckendorf’s autobiography was packed with colorful stories, but what fascinated me most was his strategy. Zeckendorf viewed assets as a sum of parts, so he could increase the value of the whole. Various parts were more valuable to different buyers, so Zeckendorf could maximize the value of his holding overall, in effect making 1 + 1 = 3.