Sam Zell was recently on Tim Ferris’s podcast and my buddy Sean and I got to talking about a comment he made regarding WeWork. Sean was kind enough to let me borrow Sam’s book Am I Being Too Subtle? which I enjoyed. Through his company Equity Group Investments and various other ventures Sam Zell has made some very interesting deals and became a billionaire in the process. The way Sam approaches life, business, and risk is similar to many of the coaching I have received so far. Below are some key takeaways.
Shem Tov
Which translates to “a good name,” meaning a person’s reputation and relationship is everything. This was a lesson Sam’s father ingrained in him from early on. I have had similar teachings of being a man of your word, do the right thing. Character is such a critical factor to long term success in business or real estate in specific. I can’t tell you how many times people warmly received me because they had done business with my own father for decades or how some people prioritize our work a little bit above other people’s because we’ve been a stand up guy to work through the difficult times, praising people for their good work, or simple referrals.
One of the more important chords that struck with me is him talking about his partners. It wouldn’t surprise me that since this is the standard he strives for he looks for the same qualities in his partners which he does mention about with his partner Bob Lurie and the local boots on the ground in his international ventures.
Risk/Reward
Sam didn’t really use these words, but it’s something I picked up during my equities trading days. Before we get into a trade we try to identify what’s our downside versus our upside. The simple fact is things don’t always go the way you want. Often we have to ask ourselves what’s the worst case scenario and is that something we can stomach. Sam mentioned that he worries about the downside all the time or worst case if he had to liquidate the assets how much protection does he have. I do feel some people often see only how much they can make or the see a stock price keeps going up and up to the right and it will just keep going forever. For those that lost money in bitcoin, sorry… hopefully the tuition you paid on that will pay dividends in future investments for you.
Supply & Demand
Sound investments often comes down to the simple supply and demand. What is in high demand? What is in short supply? When they get out of whack that’s when prices start to change and opportunities arise.
Sam Zell
Quotables
“You don’t go wheeling and dealing for the money, you do it for fun. Money’s just a way of keeping score.”
“You don’t have to love me, but you do have to respect me.”
“A refugee never forgets.”
“I didn’t know where I was headed, but, as always, I was very eager to get there.”
“Indifference to rejection is a fundamental part of being an entrepreneur.”
“I like doing deals with the same people. You get to know each other and build a mutual sense of trust.”
“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.”
“Our thinking was that if you dress funny and you’re great at what you do, you’re eccentric. But if you dress funny and you’re just ok at what you do, you’re a schmuck.”
“If you’ve got a big upside and small downside, do the deal. Always make sure you’re getting paid for the risk you take, and never risk what you cannot afford to lose. Keep it simple. A scenario that takes four steps instead of one means there are three additional opportunities to fail.”
“The essence of being an entrepreneur… to not just recognize problems but to provide solutions.”
“We narrowed our universe by targeting good asset-intensive companies with bad balance sheets, a thesis similar to real estate. We liked asset-intensive investments because if the world ended, there would be something to liquidate.”
“Liquidity equals value”
“I am not a reckless person, but taking risks is really the only way to consistently achieve above-average returns–in life a well as in investments.”
“Global markets require good partners, aligned interests, and common objectives.”
