Sam Zell — Strategies for High-Stakes Investing and Dealmaking (#407)

“If I can’t run it, then I don’t want to own it.” — Sam Zell

Welcome to another episode of The Tim Ferriss Show, where it is my job to sit down with world-class performers of all different types to tease out the habits, routines, favorite books, and so on that you can apply and test in your own life. This time, we have a slightly different episode. I will not be the one doing the deconstructing. Instead, we have a takeover by my very good friend, Peter Attia.

As longtime listeners of the podcast know, Dr. Peter Attia (@PeterAttiaMD) is a former ultra-endurance athlete, a compulsive self-experimenter, and one of the most fascinating human beings I know. He is also one of my go-to doctors for anything related to performance or longevity.  Peter also hosts The Drive, a weekly, ultra-deep-dive podcast focusing on maximizing health, longevity, critical thinking, and a few other things. Subscribe on Apple Podcasts, Spotify, or wherever you listen to podcasts.

In this episode, we have Peter interviewing Sam Zell, a legendary dealmaker and investor.  Sam is the Chairman of Equity Group Investments, and he was recognized by Forbes as one of the “100 Greatest Living Business Minds” in 2017. He holds a place on New York Stock Exchange’s “Wall of Innovators” for his role in building the $1 trillion REIT industry. Sam is also the author of Am I Being Too Subtle?: Straight Talk From a Business Rebel. 

This is one not to miss. Please enjoy!

You can find the transcript of this episode here. Transcripts of all episodes can be found here.

Listen to the episode on Apple Podcasts, Spotify, Overcast, Stitcher, Castbox, Google Podcasts, or on your favorite podcast platform. 

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What was your favorite quote or lesson from this episode? Please let me know in the comments.

SCROLL BELOW FOR LINKS AND SHOW NOTES…

Want to hear the last time Peter was on the podcast? — Listen to our conversation here. In that interview, we discuss Centenarian Olympics, goblet squats, metformin for longevity, xenon gas for performance enhancement, archery, tearing phone books in half, and much more. (Stream below or right-click here to download.)

SELECTED LINKS FROM THE EPISODE

• Equity Group Investments
• Am I Being Too Subtle?: Straight Talk From a Business Rebel by Sam Zell
• 100 Quotes On Business From The 100 Greatest Living Business Minds, Forbes
• 5 Types of REITs and How to Invest in Them, Investopedia
• Kristallnacht, The Holocaust Encyclopedia
• The Molotov-Ribbentrop Pact (August 1939), Jewish Virtual Library
• The Invasion of Poland (1939), Simple History
• 36 Hours in Vilnius, Lithuania, The New York Times
• Curaçao: The Caribbean Getaway That Sets You Free, Curaçao Tourist Board
• Transit Visa Signed by Chiune Sugihara, Facing History and Ourselves
• Trans-Siberian Express, The Holocaust Encyclopedia
• Discover Vladivostok, Pacific Russia Tourism Alliance
• The Bolshoi Theatre
• Marshall Field & Company, Chicago, The Department Store Museum
• How the Nazi Concentration Camps Worked, The New Yorker
• The Effects of the Holocaust on the Children of Survivors, ThoughtCo.
• West Toledo Apartment Complex in Midst of $1.8 Million Facelift, The Blade
• Law of Supply and Demand, Investopedia
• 7 Reasons It’s Finally Time to Live in Research Triangle Park, Forbes
• Life After Death, Forbes
• The Samuel Zell and Robert Lurie Real Estate Center, The Wharton School of The University of Pennsylvania
• The Samuel Zell & Robert H. Lurie Institute for Entrepreneurial Studies and Center for Venture Capital and Private Equity, University of Michigan
• The Giving Pledge
• Ann & Robert H. Lurie Children’s Hospital of Chicago
• Eisenhower Paved the Way for REIT Investors to Enjoy Durable Dividends, Forbes
• Sam Zell Talks About the Evolution of REITs, Nareit
• Fish in Poker: How Not to Be a Fish at the Tables, Casinos for Money
• Savings and Loan Crisis, Investopedia
• The 2007-08 Financial Crisis in Review, Investopedia
• Housing Bubble, Investopedia
• From Cassandra with Love by Samuel Zell, Journal of Applied Corporate Finance
• Cassandra — Cursed Prophetess of Greek Mythology, Greek Boston
• The Performance of Real Estate as an Asset Class by William Goetzmann and Roger G. Ibbotson, Journal of Applied Corporate Finance
• Investors Lose With ‘Hope Notes’, The Wall Street Journal
• Canary in a Coal Mine, Bird Note
• What is a Leveraged Buyout? Introduction to LBOs, Sell Side Handbook
• Real Estate Tycoon Sam Zell Slams WeWork: ‘Every Single Company in This Space Has Gone Broke’, CNBC
• Regus
• Enron Scandal: The Fall of a Wall Street Darling, Investopedia
• Team of Rivals: The Political Genius of Abraham Lincoln by Doris Kearns Goodwin
• Star Wars
• Dotcom Bubble, Investopedia
• 50 Ways to Leave Your Lover by Paul Simon
• Genghis Khan to Gucci: Retail Potential in Mongolia, RETalk Asia
• Syria Crisis, CNN
• Life in Aleppo, Syria (Post War Reconstruction), Drew Binsky
• Grasberg Mine, Tembagapura, Indonesia, Atlas Obscura
• FAANG Stocks, Investopedia
• 5 Ways The Fed’s Interest Rate Decisions Impact You, Bankrate
• What Happened When China Joined the WTO?, The Council on Foreign Relations
• Sam and Helen Zell, Philanthropy Today
• Speech on Campus, American Civil Liberties Union
• Maybe Not a Role Model for a B-School?, Inside Higher Ed

SHOW NOTES

• Sam details the long journey his parents took to escape Poland just hours before the German invasion in 1939 and arrive in Chicago via Russia and Japan by 1941, and how lucky he really was to have been born in the United States. [10:04]
• Taking the risk to leave everything behind by making a choice that history proved to be the right one, did Sam’s father ever articulate to him, in explicit or implicit terms, his decision-making process? [22:32]
• Has Sam always been one to do what he thought was right, no matter how unpopular it might be? Did his family’s close call with extermination factor into his own outlook? [25:44]
• Why did Sam pursue an education, and then a career, in law — and then swiftly abandon it? How did he turn what could have been a huge waste of time into a unique opportunity, and how did this lead to him setting up his own business? [31:08]
• How Sam diverged from his father’s real estate investment strategy to land successful deals in untapped and overlooked markets. [39:46]
• Sam recalls the first real estate deals he made with his father and the level of thought that went into them. [42:50]
• What was the only real takeaway Sam brought out of Econ 101 class in college, and what was his philosophy around purchasing assets that were already capable of deploying yield versus developing assets? [47:10]
• When did Sam start to appreciate the operational side of risk, and how did he manage it? [49:33]
• The variables that can delay a project and teach an unwary developer a very expensive lesson about inflation. [50:24]
• How did Sam meet Jay Pritzker, the man he considers “the smartest risk guy” he ever met — and what did he teach Sam about risk? [52:04]
• Is there an asset class for which these lessons about risk don’t translate? [56:40]
• Where did Sam meet Bob Lurie, and how did they discover the “complementary skill sets but shared values” that made them ideal business partners? [57:55]
• Sam talks about dealing with the shock of Bob’s death from cancer in 1990, and how he and Bob’s wife committed to the philanthropy that would be his posthumous legacy. [1:03:24]
• What’s a real estate investment trust (REIT), and what is Sam’s role in the creation of what has become a more than one trillion-dollar asset class? [1:07:35]
• What disaster did Sam foresee as early as 1988 that turned him into a “Cassandra” among real estate investors, and what factors made it seem inevitable? [1:14:05]
• What made the recession in 2008 different from other financial crises tied to real estate? [1:20:05]
• Does Sam believe the state of commercial real estate occupancy or glut in supply and demand is a “canary in the coal mine” for the US economy? [1:24:22]
• What is a leveraged buyout (LBO)? [1:25:12]
• Why does Sam think of office-sharing firm WeWork as “the Enron of real estate,” and what tipped him off years before anyone else seemed to see it? [1:25:54]
• Why Sam would never buy a business he couldn’t run, and why it’s important for everybody involved in a business to have some skin in the game. [1:29:31]
• What’s the secret to Sam’s collection of loyal business collaborators — many of whom have worked with him for 20 to 30 years? [1:31:06]
• How did Sam facilitate the needs of an employee who decided that she wanted to go to divinity school, and what is she doing today? [1:33:47]
• Why and when did Sam get in the habit of giving year-end gifts that get remembered, and what’s changed about the process over the years? [1:34:43]
• A big part of how Sam mitigates risk is to know as much as possible about his world. As a lifelong learner, how does he stay abreast of what’s going on in that world? [1:37:48]
• According to Sam, a typical CEO of a Fortune 500 company travels 250 hours a year. He travels 1,000, but insists that he doesn’t take what most people would consider vacations. Where does he go, and what motivates him to go there? [1:41:26]
• What does Sam mean when he says “We suffer from knowing the numbers,” and how does he find a balance between knowing too much and not knowing enough when it comes to business? How would he teach someone to find their own balance? [1:44:14]
• Now in his 70s, what are Sam’s plans for retirement? [1:45:48]
• Is Sam optimistic about where the US economy appears to be headed? Does it seem overly interwoven with the fate of China’s economy, or can it prosper with or without China? [1:46:46]
• How does a first-generation kid like Sam inspire and encourage his kids to excel with the same intensity that his own parents directed at him? [1:53:04]
• Outside of the day-to-day concerns of the business world, what problem is Sam most interested in solving? [1:55:05]

PEOPLE MENTIONED

• Bernard and Rochelle Zell
• Chiune Sugihara
• Perry Mason
• Jay Pritzker
• Robert Lurie
• Ann Lurie
• Dwight D. Eisenhower
• Paul Fegan
• Abraham Lincoln
• Bee Gees
• Paul Simon
• John Grisham
• David Baldacci
• Helen Zell

The Tim Ferriss Show is one of the most popular podcasts in the world with more than one billion downloads. It has been selected for "Best of Apple Podcasts" three times, it is often the #1 interview podcast across all of Apple Podcasts, and it's been ranked #1 out of 400,000+ podcasts on many occasions. To listen to any of the past episodes for free, check out this page.