#243 Francis Greenburger Real Estate Billionaire

Summary Notes


In "Risk Game," Francis J. Greenberger, a pioneering real estate entrepreneur and literary agent, recounts his remarkable journey from discovering best-selling authors in the slush pile to becoming known as the "Co-op King" of New York City. Greenberger's tenacity and willingness to embrace unconventional methods, such as accepting unsolicited manuscripts or converting rental buildings into co-ops, led to his financial success, despite facing numerous rejections and industry skepticism. His story is also one of personal triumph and tragedy, detailing his struggles with family loss and the importance of adaptability and maintaining strong relationships. Greenberger's life, marked by both professional accolades and profound personal losses, illustrates the resilience required to navigate the volatile worlds of publishing and real estate, and the unyielding passion that drove him to continue working until the very end.

Summary Notes

Initial Conflict with Author Jim

  • Speaker A recounts a phone call with a difficult author, Jim, who questions their competence as an agent due to their involvement in real estate.
  • Speaker A discovered Jim from unsolicited manuscripts and worked hard to sell his first novel despite numerous rejections.
  • Jim's first book eventually won an award and sold well, but he demanded Speaker A choose between real estate and being his agent.

"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 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."

The quote highlights the tension between Speaker A and Jim, illustrating the challenges of managing relationships with demanding clients.

Determination and Success in Publishing

  • Speaker A took over their father's agency and sought new clients by accepting unsolicited manuscripts, a rare move for an agent.
  • They found Jim's manuscript, a thriller about a political assassination, and faced 27 rejections before finding an editor who showed interest.
  • After Jim revised the book, it was rejected again, but Speaker A's persistence paid off on the 38th submission with a generous advance and eventual success.

"Most agents would have certainly given up at this point, but I can be extremely stubborn when I have a hunch about something."

This quote emphasizes Speaker A's perseverance and belief in their own judgment, which is a key theme in their approach to both publishing and real estate.

Introduction to Francis J. Greenberger's Autobiography

  • The book "Risk Game" is an autobiography of Francis J. Greenberger, recommended to Speaker A multiple times.
  • Speaker A finds the book unexpectedly engaging and indicative of Greenberger's unique character.
  • The book covers Greenberger's career, including his highs and lows in real estate and his personal life.

"This book has been recommended to me probably five or six different times... And I was less than halfway through the book when I realized this book is nuts."

The quote captures Speaker A's initial skepticism and subsequent surprise at the content and character of Greenberger's autobiography.

Real Estate Challenges and Entrepreneurial Spirit

  • Greenberger describes the ups and downs of developing a major project, 50 West, during the 2008 financial crisis.
  • Despite market optimism, the Lehman Brothers bankruptcy led to a halt in construction and a struggle to manage finances across his properties.
  • Greenberger's emotional resilience and determination are highlighted as he deals with the crisis and his own depression.

"I knew all too well that markets can turn on a dime... Even so, I completely missed the signs of this disaster that I experienced through the very expensive prism of 50 West."

This quote reflects Greenberger's awareness of market volatility and his candid admission of oversight during a major financial crisis.

Human Nature and Real Estate Business

  • Greenberger emphasizes real estate as a human-centered business, fraught with irrationality and bureaucracy.
  • He encountered challenges with banks and liquidity during the financial crisis, illustrating the precarious nature of real estate financing.
  • Greenberger shares maxims about listening to others, the futility of logic against bureaucracy, and the importance of negotiation in real estate.

"Logic is no match for bureaucracy. One rule of real estate is that everyone renegotiates."

This quote succinctly conveys Greenberger's understanding of real estate dynamics and the importance of adaptability and negotiation.

Advice on Real Estate and Competition

  • Greenberger warns against competing with inexperienced but wealthy individuals in real estate, as they can drive up prices without understanding the market.
  • He stresses the importance of saying no and making judicious decisions to avoid failure in a cutthroat industry.
  • Historical perspective is provided by referencing John D. Rockefeller's similar observations about competition from desperate and unwise competitors.

"Saying no is the most important judgment that you make."

The quote encapsulates Greenberger's philosophy on decision-making in real estate, emphasizing the power of refusal in business.

Family Dynamics and Early Business Acumen

  • Greenberger had a complex relationship with his parents, particularly his father, whom he found to be a poor businessman.
  • At the age of 12, Greenberger demonstrated his business skills by negotiating better terms with a client for his father's agency.
  • Greenberger's early experiences shaped his desire for financial independence and control, leading to his first business exporting books at 14.

"My father leaned back in his chair and gave me a look that was not easily discernible. Part confusion and part dismay."

This quote illustrates the dynamic between young Greenberger and his father, highlighting Greenberger's precocious business sense.

Greenberger's Personal Philosophy and Independence

  • Greenberger chose to emotionally distance himself from his family's turmoil while taking control of financial matters.
  • He viewed childhood as unsuitable for him, focusing instead on work and business opportunities.
  • Greenberger's drive to succeed financially was fueled by his father's financial mismanagement and the desire to avoid similar pitfalls.

"Childhood didn't suit me. My intentions weren't focused on school. I hardly even showed up."

The quote reflects Greenberger's early disinterest in traditional education and his inclination toward the practical world of business.

Early Entrepreneurial Ventures and Personal Motivations

  • Jim narrates the story of a successful entrepreneur who began with a book business.
  • The entrepreneur's drive for money was rooted in the desire for stability, not opulence.
  • The entrepreneur's family's financial instability left a lasting impression, influencing his aspirations for success.
  • Detailed notes on the entrepreneur's teenage life were considered excessive by the reader.

"My dream was never wild opulence, but rather the luxury of stability." This quote reflects the entrepreneur's desire for financial security over extravagant wealth, highlighting the underlying motivation for his business endeavors.

"I could not understand at this point why this book was recommended so much." The reader expresses confusion over the book's popularity due to the detailed accounts of the entrepreneur's personal life, suggesting that the reader expected more focus on business insights.

Transition to Real Estate and Independence

  • At 19, the entrepreneur stumbles into real estate while working at his father's agency.
  • He demonstrates savvy business acumen by subletting office space for a profit.
  • The entrepreneur grapples with his father's desire for him to take over the family business, eventually choosing to forge his own path.
  • The entrepreneur's father's declining health and eventual death have a profound impact on him, solidifying his independence.

"My first real estate deal, which happened purely by chance, was a complete success." The entrepreneur's initial foray into real estate was serendipitous yet successful, indicating the beginning of his career in the industry.

"Freeing myself from this parental obligation was the right decision." The entrepreneur's decision to pursue his own interests over his father's wishes represents a key moment of personal and professional independence.

Business Philosophy and Success in Literature

  • The entrepreneur takes over his father's literary agency with a focus on sellable literature, contrasting with his father's intellectual approach.
  • He signs authors who achieve significant success, such as Dan Brown and Brad Thor.
  • His business philosophy is results-driven and pragmatic, leading to the revitalization of the agency.

"My feel for the business of books was direct and results based and ran contrary to my father's meandering intellectual or literary approach." This quote illustrates the entrepreneur's practical business approach, which diverges from his father's more traditional literary focus.

Real Estate Strategies and Market Insights

  • The entrepreneur capitalizes on the overlooked niche of small office spaces, demonstrating his ability to identify and exploit market gaps.
  • His real estate strategy involves subletting and scaling successful formulas rapidly.
  • He recognizes the potential in New York City's real estate market during the 1970s, despite its challenges.

"Discovering an unmet need in the market is a tremendous start to any business." The entrepreneur emphasizes the importance of identifying unmet market needs as a foundation for successful business ventures.

"I was filling a gap in the rental market for one room offices that I had discovered." This quote conveys the entrepreneur's firsthand experience as both a consumer and provider in the market, which informed his business strategy.

Lessons in Real Estate and Business Partnerships

  • The entrepreneur learns the importance of careful partner selection through challenging experiences.
  • He benefits from being naive, as it allows him to make unconventional deals that others avoid.
  • The entrepreneur values mentorship, which accelerates his learning curve in the real estate industry.

"The problems of buildings are the problems of people." This quote draws a parallel between the issues faced in real estate and those in business, emphasizing the human element in both.

"Be careful when picking partners." The entrepreneur's struggles with business partnerships underscore the critical nature of choosing the right collaborators.

Building a Real Estate Empire

  • The entrepreneur's real estate empire is built on the principles of survival, growth, and compounding.
  • Despite financial stress, he manages to expand his portfolio and wealth significantly over time.
  • His approach to real estate combines a passion for the industry with strategic business practices.

"Then it was 20 buildings and as many employees as I managed." This quote depicts the rapid expansion of the entrepreneur's real estate holdings, illustrating the scale of his success.

"On paper, I was a millionaire. In real life, though, I was skating on razor thin margins that a busted toilet could threaten." The entrepreneur acknowledges the precarious nature of his wealth during the growth phase, highlighting the risks and challenges of building a business empire.

Real Estate Investment Strategies

  • Jim discusses the long-term value appreciation of real estate investments, highlighting a case where a building's value increased by 200 to 500 times over 35 years.
  • The importance of holding onto assets rather than selling them quickly is emphasized, as well as the challenges of managing cash flow in different market conditions.
  • Jim reflects on the advice from older mentors about selling buildings to solve cash problems, but he prefers to retain his properties.

"And so he gives examples later in the book that, like a building he bought, held onto 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."

This quote illustrates the significant long-term appreciation potential in real estate and the value of patience and foresight in investment strategies.

Real Estate Entrepreneurship and its Challenges

  • Real estate entrepreneurship involves constant judgment against market conditions, addressing concerns like funding, banking, investors, occupancy, and operational costs.
  • The industry is described as challenging and anxiety-inducing, with unpredictable factors affecting business plans and outcomes.

"You are constantly putting your judgment up against a marketplace."

This quote highlights the dynamic and competitive nature of real estate entrepreneurship, where constant market analysis and strategic decision-making are crucial.

Integrity in Real Estate

  • Jim discusses the temptation to cut corners in real estate and the stern advice from his mentor, Milton, about the importance of following the law.
  • Milton's advice suggests that short-term gains from bending rules can lead to long-term destruction of assets.

"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."

This quote emphasizes the importance of integrity and lawful conduct in real estate, warning against the long-term consequences of unethical practices.

Managing Debt and Real Estate Difficulties

  • Jim learned key skills from his mentor, such as managing debt, which is fundamental to real estate.
  • The mentor also imparted that nothing in real estate is easy, underlining the complexities of the industry.

"Number one, I learned from him the important skill of managing debt, which is fundamentally what the real estate business is all about."

This quote underscores the critical skill of debt management in the real estate business, highlighting it as a core aspect of industry success.

Co-op Conversion Strategy

  • Jim, known as the "co-op king," revolutionized his wealth by converting rental buildings into co-ops, selling apartments instead of collecting rents.
  • He recognized a market opportunity in co-op conversions for buildings in lower-income areas, which was contrary to the prevailing belief that only wealthy people would buy co-ops.

"Coopping one of my buildings would be nothing short of revolutionary."

This quote captures the innovative and transformative nature of Jim's co-op conversion strategy, which significantly impacted his business model and wealth.

Rapid Expansion and Credit Facilities

  • Jim experienced a drastic shift from struggling for cash to having an abundance, leading to a $50 million line of credit and later a $100 million limit.
  • The ease of obtaining credit marked a significant change in his business operations, allowing for rapid expansion and acquisition of new properties.

"A 24 year old loan officer put through a $50 million line of credit for me."

This quote illustrates the sudden and substantial financial support Jim received, which facilitated the expansion of his real estate empire.

Control and Internalization of Business Processes

  • During the "Go go 80s," Jim's business grew rapidly, and he emphasized the importance of maintaining control over key business processes by having in-house departments.
  • He preferred to manage these processes internally to align with his company's priorities and avoid high external fees.

"Having all those in house resources was unusual for a real estate company at the time. But this let me control my own destiny."

This quote reflects Jim's strategic approach to business growth, focusing on internal control to steer his company's direction effectively.

Personal Fulfillment and Business Structure

  • Jim realized the importance of aligning his business structure with his personal desires to spend time on activities he enjoys.
  • He hired a chief operating officer to manage the company's operations, allowing him to focus on tasks that aligned with his passions and strengths.

"Bringing in Bob as a chief operating officer allowed me to rebalance my own agenda so I could become a doer again."

This quote highlights the personal realization Jim had about the importance of structuring his business in a way that allows him to engage in work he finds fulfilling.

Financial Crisis and Survival

  • Jim faced a financial crisis following the Tax Reform Act of 1986 and the stock market crash on Black Monday in 1987, which led to a severe credit squeeze.
  • He emphasizes the importance of confronting problems head-on and being transparent with stakeholders to find solutions.

"You have to hold on. You've got to survive to be able to take advantage of that, optimize your survival."

This quote conveys the critical need for resilience and adaptability in the face of economic downturns and the importance of strategic problem-solving to ensure business survival.

Angel Investment and Financial Recovery

  • An angel investment made in a private company proved to be a saving grace for Jim's financial troubles, mirroring a similar situation faced by Elon Musk in 2008.
  • The investment provided a significant return, which was essential in keeping Jim's business afloat during tough economic times.

"I got $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."

This quote demonstrates the pivotal role that a strategic investment can play in rescuing a business from potential bankruptcy, highlighting the importance of diversification and seizing opportunities.

Elon Musk's Financial Maneuvers

  • Elon Musk seized approximately $15 million from SolarCity shares.
  • Musk invested in a startup called Everdream founded by his cousin, which Dell acquired.
  • Musk described the acquisition of Everdream as critical to his financial survival.

"It was like the fucking matrix, Musk said, describing his financial maneuvers. The Everdream deal saved my butt."

The quote indicates the crucial role the Everdream deal played in Musk's financial stability, likening it to a complex and pivotal moment akin to scenes from the movie "The Matrix."

Tragedy in Francis' Life

  • Francis experienced the loss of his two-year-old son, Alexander, who drowned in a pool.
  • The event occurred while Francis was playing tennis, and Alexander managed to bypass several safety measures.
  • Francis expressed deep grief and daily crying for a year following the tragedy.

"Then came the blackest day of my life... 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."

The quote captures the profound sorrow and irony of Alexander's death, doing something he loved, and the impact it had on Francis' life.

Francis' Resentment Towards His Wife

  • Francis blamed his wife, Judy, for their son's drowning.
  • He criticized her for being untidy, late, and self-involved.
  • Francis' grief led to resentment and a breakdown in their relationship.

"I resented her for that and so much more. I held her accountable for our son's drowning."

The quote reflects Francis' emotional state, unfairly placing blame on Judy as a way of coping with his grief.

The Impact of Loss on Work and Life

  • Francis took time off work after his son's death and found his patience and tolerance diminished.
  • He felt he would never fully recover from the loss of his son.
  • Francis and Judy tried to have another child, which added to the strain on their marriage.

"I wasn't there by 04:00 on most days at the office, I had had it."

The quote illustrates how the tragedy affected Francis' professional life, highlighting a decline in his work commitment and emotional well-being.

Adoption and Marital Strain

  • Francis and Judy decided to adopt, but it did not resolve their marital issues.
  • Francis felt disconnected from Judy's lifestyle and her approach to motherhood and their marriage.

"The adoption didn't solve our problems. It was Judy and the way she lived that I could no longer relate to."

The quote conveys the ongoing marital discord and Francis' inability to reconcile with Judy's behavior and values.

Francis' Investment Strategies

  • Francis discusses his investment strategies and the importance of diversification.
  • He emphasizes the importance of investing in people (fund managers) rather than specific companies.
  • Francis shares his criteria for choosing fund managers, focusing on their intelligence, integrity, and personal investment in their funds.

"I don't pick investments. I pick jockeys, not horses."

The quote encapsulates Francis' investment philosophy, prioritizing the quality and commitment of fund managers over the businesses they invest in.

Coping with the 2008 Financial Crisis

  • Francis reflects on his experiences during the 2008 financial crisis and the importance of being prepared.
  • He stresses the need for cash reserves and adaptability in the face of economic turmoil.
  • Francis offers advice on real estate investment and the dangers of not accounting for fluctuating interest rates.

"Disaster usually arises when short term profit takes precedence over lasting value creation."

The quote summarizes a key lesson from the financial crisis, emphasizing the need for long-term planning and value creation over short-term gains.

Personal Reflections and Life Lessons

  • Francis shares his life's journey, including his successes, failures, and personal tragedies.
  • He stresses the importance of relationships and the irreplaceability of loved ones over wealth.
  • Francis expresses his desire to continue working and his belief in optimism and adaptability.

"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."

This quote highlights the significance Francis places on personal relationships and their enduring value compared to material wealth.

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