#298 I had lunch with Sam Zell

Summary Notes


In "Zeckendorf," William Zeckendorf Sr. recounts his rise and fall in the New York real estate scene, detailing his innovative yet ultimately unsustainable financial strategies like the "Hawaiian technique." Despite early successes, such as securing the site for the United Nations headquarters, Zeckendorf's empire crumbled due to overextension and excessive debt. His story is punctuated by encounters with influential figures like Howard Hughes and Joseph P. Kennedy, showcasing the cutthroat nature of high-stakes property development. Reflecting on his bankruptcy, Zeckendorf appreciates a second chance at life and business, embodying a spirit of resilience and gratitude. Sam Zell, inspired by Zeckendorf's autobiography, adopted his asset valuation approach, proving its lasting impact on real estate investment strategies.

Summary Notes

Introduction to Meter and Tiny

  • Meter offers fast, secure, and reliable Internet and Wi-Fi services.
  • Meter simplifies the setup process for businesses, eliminating the need for upfront equipment costs and IT management.
  • Tiny provides straightforward cash exits for founders looking to sell their businesses.
  • Tiny caters to a wide range of business sizes and responds quickly to inquiries.

"Meter makes fast, secure and reliable Internet and Wi-Fi that's as easy to switch on as water or electricity."

This quote emphasizes the ease and simplicity of Meter's service, likening it to basic utilities.

"Tiny is the easiest way for you to sell your business. They provide straightforward cash exits for founders."

This quote highlights Tiny's business model of providing a hassle-free way for founders to sell their businesses for cash.

Sam Zell's Entrepreneurial Spirit

  • Sam Zell maintains a strong passion and curiosity for his work despite his age.
  • Zell's approach to retirement is non-traditional; he sees no reason to retire from something he loves doing.
  • Zell's enthusiasm and zest for life were inspiring to the speaker.
  • The idea of intertwining life and work resonates with entrepreneurs, as seen in Zell's career.

"Retire from what? I love what I do."

Zell's quote reflects his lifelong dedication to his work and his lack of interest in traditional retirement.

Historical Knowledge and Continuous Learning

  • Sam Zell has a vast knowledge of business, real estate, and entrepreneurship history.
  • Continuous learning and applying historical knowledge have been key to Zell's success.
  • Charlie Munger shares this trait of lifelong learning and historical knowledge application.

"There was not one thing that I could bring up that Sam did not already know."

This quote demonstrates Zell's extensive knowledge and preparation, which has been integral to his success.

Podcasting and Its Impact

  • Podcasting is seen as a miraculous medium with unpredictable reach.
  • The speaker received a direct message from Rick Gerston, leading to an opportunity to meet Sam Zell.
  • The speaker reflects on the authenticity of public personas like Zell's and Munger's.

"You really never, ever know who is listening."

This quote underscores the unpredictable nature of podcasting and its potential to reach influential listeners like Sam Zell.

Sam Zell's Personal Meeting Experience

  • The speaker shares the personal experience of having lunch with Sam Zell.
  • Zell's family history and escape from Poland during World War II was a topic of discussion.
  • Zell's insatiable thirst for knowledge and its impact on his life and career were highlighted.

"I'm going to be doing deals till I fucking die."

This quote from Zell encapsulates his passion for his work and his intention to continue indefinitely.

Advice from Sam Zell

  • Zell emphasizes the importance of optimizing for freedom over money.
  • The pursuit of freedom leads to enjoyment and success in one's work.
  • Zell advises against accumulating possessions and instead focusing on what truly brings joy.

"I never chased money. I chased freedom, and freedom got me the money."

Zell's quote reveals his philosophy of prioritizing personal freedom, which ultimately led to his financial success.

Sam Zell's Impact and Legacy

  • Zell sees it as an obligation to share his knowledge with other entrepreneurs.
  • He finds joy in helping others through his autobiography and speeches.
  • Zell's life demonstrates the importance of passion and fun in one's work.

"It's an obligation for me to share with other entrepreneurs what I learned."

This quote reflects Zell's commitment to giving back to the entrepreneurial community by sharing his experiences and knowledge.

Work Ethic as Play

  • Michael Jordan viewed his dedication to basketball not as work but as play.
  • Michael Jordan's mother noted his lack of motivation outside of sports.
  • The concept of work ethic is subjective and may be perceived differently by individuals.

"Michael Jordan's mom would say that outside of sports, he was actually kind of lazy, which was shocking. And his whole point, he followed up on that. Jordan followed up on that. He's like, oh, what you see as work ethic, I just see as playing."

The quote highlights the idea that what is considered a strong work ethic in one context may simply be an enjoyable activity for someone, as was the case with Michael Jordan and basketball.

Importance of Freedom and Enjoyment in Work

  • Sam Zell maintains a continuous work schedule because he focuses on freedom and enjoyment in his work.
  • The pursuit of interesting work and collaboration is a driving force for sustained effort.

"And it's because he's optimized for freedom, and he only did shit. That was fun."

The quote emphasizes the idea that personal satisfaction and freedom are key motivators for work, rather than traditional notions of work ethic.

Reading Recommendations and Their Impact

  • Sam Zell recommends reading William Zeckendorf's autobiography, especially for those in real estate.
  • Books can provide industry-specific knowledge and enjoyable narratives filled with valuable lessons.

"Zekendorf, which, again, if Sam Zell is telling you to read the book, if you haven't read the book, I talk about this in the episode, especially if you're in real estate. No brainer. You have to read the book."

The quote suggests that Zeckendorf's autobiography is an essential read for real estate professionals, as recommended by Sam Zell, and it contains valuable insights and stories.

The Value of Information and Knowledge

  • Sam Zell's father emphasized the importance of being born in a free country.
  • The value of information is highlighted as a life-saving and fortune-building tool.
  • Sam Zell would advise increasing knowledge in all areas possible.

"Your dad was voracious for information, and that saved his life. And yet, when you tell the story of you being a teenager, a young man, you were, like, 19 or 20 years old, and you were also voracious information."

The quote draws a parallel between the life-saving power of information for Zell's father and the wealth-building power of information for Zell himself.

William Zeckendorf's Career and Downfall

  • Zeckendorf's autobiography details his rise and fall in the real estate industry.
  • His personality and willingness to take on multiple projects led to his eventual bankruptcy.
  • The narrative provides both good advice and cautionary tales.

"We branched off in several directions at once. That is an entire story in one sentence and leads to his bankruptcy."

The quote encapsulates Zeckendorf's strategic error of overextension, which ultimately led to his financial downfall.

Personal Impact of Zeckendorf's Story

  • The autobiography of Zeckendorf offers a unique life and work experience.
  • Reading the book is likened to having a one-sided conversation with Zeckendorf.
  • The book provides a sense of completeness and lasting impact on the reader.

"My life is better off for having read this. I spent the last week going over a bunch of written material on Zeckendorf, and I feel like getting to that end, that completion is, first of all, it's not something that we see in modern day life."

The quote reflects the personal growth and satisfaction gained from reading Zeckendorf's life story, emphasizing the value of learning from others' experiences.

Zeckendorf's Early Life and Entrepreneurial Spirit

  • Zeckendorf discovered his entrepreneurial drive early in life.
  • He showed a willingness to challenge authority and pursue his own interests.
  • His decision to leave a stable job for the uncertainty of real estate showcases his entrepreneurial mindset.

"By the time I was eight or nine years old, I had discovered that if I acted up enough, I could get thrown out of Sunday school each weekend and spend the day fishing."

The quote illustrates Zeckendorf's early inclination to go against the grain and follow his own path, a trait common among entrepreneurs.

Zeckendorf's Sales Technique and Success

  • Zeckendorf's aggressive sales approach led to early success in filling a half-empty building.
  • His refusal to accept a low wage from his uncle and decision to strike out on his own marked the start of his entrepreneurial journey.

"I tackled the job by taking the elevator to the top floor of every building on Wall street. Then I would work my day or my way down, floor by floor, canvassing each office on each floor."

The quote demonstrates Zeckendorf's proactive and hands-on approach to sales, which was instrumental in his early success in real estate.

The Dangers of Debt and Overspending

  • Zeckendorf's downfall was partly due to his inability to control spending and his addiction to debt.
  • Despite his success, he did not heed the lessons of the Great Depression and over-leveraging.

"I was 23 years old, and I never had so much money before. It made me uncomfortable, and I thought we had better spend it quickly."

The quote reveals Zeckendorf's mindset towards money, which was a factor in his financial troubles, highlighting the importance of financial prudence.

Financial Management and Personal Life

  • William Zeckendorf's spending habits during the Depression were lavish, often spending $20,000 a year regardless of his earnings.
  • Despite business success, his personal life suffered due to a mismatched marriage, leading to divorce.
  • Zeckendorf's road to affluence was erratic, marked by debts and financial scrambling, yet he tried to invest whatever money he got.

"Though I didn't always earn it, I managed to spend close to $20,000 a year during the depression." "My personal life, though, was not nearly so successful as my business career." "Unfortunately, my road to affluence was erratic. I was often in debt, sometimes little more than two steps ahead of a sheriff, and forever scrambling for some way to turn an extra dollar."

These quotes illustrate Zeckendorf's financial imprudence and the contrast between his business acumen and personal financial management. The mention of his personal life's failure indicates the impact of his work-centric lifestyle on his marriage.

Entrepreneurial Knowledge and Historical Insight

  • Sam Zell has extensive knowledge of historical entrepreneurs, recognizing figures like James J. Hill without notes or external references.
  • Entrepreneurs like Charlie Munger, Warren Buffett, and Zell himself value the lessons from historical figures like Hill.
  • James J. Hill's quote on saving money as a test for success or failure highlights the importance of financial prudence.

"What's so fascinating about sitting down and talking to Sam Zell is that every single entrepreneur from history that I brought up to Sam Zell, there's not one thing that I could tell. Like, he knew who everybody was, even these obscure people." "James J. Hill understood in the 1800s. And this is what he said. 'If you want to know whether you are destined to be a success or a failure in life, you can easily find out. The test is simple and it is infallible. Are you able to save money? If not, drop out, you will lose. You may think not, but you will lose as sure as you live. The seed of success is not in you.'"

The quotes emphasize the value of historical knowledge and the entrepreneurial insight that saving money is a fundamental skill for success. Zell's recognition of historical entrepreneurs underscores the importance of learning from the past.

Early Career Struggles and Opportunities

  • Zeckendorf's early career was marked by numerous business endeavors that lacked significant progress.
  • At 33, he felt frustrated and as if he was "scrambling up straight walls," indicating the challenges he faced.
  • The partnership with Web and Knapp offered a turning point, providing a platform for growth and success.

"By 1938, I felt, listen to this. I think every entrepreneur has felt this before. I felt that all I was doing was scrambling up straight walls." "So web and knap is the company. It's private. He's going to take it over. He's going to buy out his partners for, I think, $5 million."

These quotes reveal the difficulties Zeckendorf faced in his early career and the pivotal moment when he joined Web and Knapp, which eventually led to greater success. The metaphor of "scrambling up straight walls" vividly describes the uphill battle of his early entrepreneurial efforts.

Financial Leverage and Syndication

  • Zeckendorf's strategy involved using little personal capital and syndicating projects with other investors.
  • Despite his financial struggles, he managed to syndicate and execute deals, reflecting his ability to leverage relationships and opportunities.
  • His work with the Astor family's estate significantly raised his firm's profile, establishing them as a leading real estate firm in America.

"We syndicated our projects with other investors, but my personal financial situation was unchanged." "On June 1942, we were engaged as exclusive consultants for the reorganization of the astor's holdings. The next morning, the New York Times printed on the front page the story. The front page coverage made us, overnight, the most important real estate firm in America."

These quotes show how Zeckendorf's approach to financial leverage and syndication was instrumental in his business dealings, despite his personal financial troubles. The Astor deal catapulted his firm to national prominence, demonstrating the power of high-profile projects to transform a business's reputation.

Real Estate Acumen and Brand Value

  • Zeckendorf understood the non-rational aspects of real estate, such as the value of a brand or property's history.
  • He capitalized on the brand value of the Astor properties, leveraging their reputation to enhance his transactions.
  • The foresight to recognize and utilize the invisible qualities of real estate contributed to his success.

"I soon learned that there was an invisible but tangible aura about the aster properties that made them attractive." "If the great Astor estate had owned them, they must have extra virtues, because old Aster had been so shrewd."

These quotes highlight Zeckendorf's insight into the intangible aspects of real estate, such as the perceived value of properties with a prestigious history. He used the brand value of the Astor estate to his advantage in business dealings.

Adaptability and Market Insights

  • Zeckendorf adapted his sales strategies to suit the needs of European refugees, maximizing profit by offering low down payments but higher overall prices.
  • His ability to respond to market changes and exploit opportunities was a key factor in his success.
  • The strategy of selling mortgages to financial institutions while retaining second mortgages demonstrated his innovative approach to finance.

"A number of refugees who had come to the United States from Hitler controlled Europe. These new buyers were far less interested in the total price of a property than what the actual down payment would be." "I sold for very low cash down payments, but steep prices on a sales price of, say, a million dollars for a property that would have sold on the cash market for $400,000."

These quotes show how Zeckendorf adapted his business model to the circumstances of post-war refugees, using their preferences for low down payments to secure higher overall prices. His approach to mortgage sales further exemplifies his financial creativity.

Recognition of Potential and Self-Belief

  • Zeckendorf's interactions with the wealthy elite led him to realize that he could compete at the highest levels.
  • His self-belief was reinforced by observing that inherited wealth did not necessarily equate to personal competence or intelligence.
  • This realization empowered him to pursue ambitious projects with confidence.

"My relationship with Aster gave me my first close look at in contact with a world which, because of its wealth and exclusiveness, fascinated and attracted me." "I found Vincent Aster, quite amiable, sometimes humorous, but not very bright. If he had not inherited his great fortune, he probably could not have done much on his own."

The quotes illustrate Zeckendorf's epiphany that he had the capability to operate among the most affluent and influential individuals, despite their advantages of wealth and status. His assessment of Vincent Aster's abilities underscored his own confidence in his entrepreneurial skills.

Negotiation Philosophy

  • Zeckendorf believed in not over-negotiating if the asking price was reasonable, valuing the preservation of good business relationships.
  • He considered that excessive bargaining could lead to lost business opportunities and soured relationships.
  • This philosophy emphasizes the importance of fair dealing and long-term thinking in business.

"I didn't try to bargain. In my judgment, a property is worth the asking price, I see no reason to try for less." "There is a much better flavor left in everybody's mouth when such haggling is avoided."

These quotes convey Zeckendorf's negotiation strategy, which prioritized smooth transactions and positive relationships over squeezing out every possible dollar. His approach suggests a balance between assertiveness and fairness in business dealings.

Pivotal Deals and Visionary Thinking

  • Zeckendorf's vision for X City, which eventually became the United Nations headquarters, showcased his ability to see potential where others saw obstacles.
  • His strategic acquisition of properties around the slaughterhouses and the negotiation of the UN deal while inebriated demonstrate his boldness and opportunism.
  • The success of the UN deal was a major milestone in his career, reflecting his ability to capitalize on serendipitous opportunities.

"It occurred to me that we actually have the ideal site for the UN." "I had a lot of champagne by that time...the property was being purchased, exclamation point. I couldn't believe it."

These quotes highlight Zeckendorf's visionary thinking in identifying the perfect location for the United Nations and his audacity in securing the deal under unconventional circumstances. The successful negotiation, despite his inebriated state, underscores his natural talent for deal-making.

Overcoming Challenges and Embracing Opportunity

  • Facing the desire of his partners to liquidate Web and Knapp, Zeckendorf saw an opportunity to take control and shape the company's future.
  • His perspective that problems are opportunities in work clothes illustrates his optimistic and proactive approach to challenges.
  • The decision to buy out his partners instead of liquidating the company marked the beginning of a new era of leadership and success for Zeckendorf.

"At first, I was upset by my partner's decision to liquidate... Problems are just opportunities in workflows." "I explained that when we delivered that he, which is the guy? What is his name? His name. There's so many asters, this is Vincent Aster that he's dealing with, that Vincent Aster could pay us what we were worth if we didn't deliver. He didn't have to pay us anything."

The quotes capture Zeckendorf's resilience and entrepreneurial spirit in the face of potential dissolution of his company. His ability to reframe the situation as an opportunity rather than a setback led to the consolidation of his leadership and the growth of the company under his direction.

Decision to Liquidate and Speculative Growth

  • Anil's partners wanted a conservative approach, while he sought speculative growth.
  • Anil saw the departure of his partners as an opportunity and bought them out for $5 million.
  • To finance the buyout, Anil went into deep debt, becoming the sole owner of the company.
  • Despite being in debt, Anil was not troubled and aimed for further expansion.

"I bought my partners out for over $5 million. And so to get that 5 million, he doesn't have the 5 million, as we already know right now. So he's got to go deep in debt." "But never, except for rare moments, have I ever had my head very far above the financial water, and never have I let this trouble me."

The quotes indicate Anil's bold financial moves and his nonchalant attitude towards debt, which foreshadows potential financial issues.

Reverse Merger and Public Listing

  • Anil conducted a reverse merger with a holding company to take his company public.
  • The public listing provided a vehicle for his ambitions and marked the beginning of "phase two" of his career.

"So he does this reverse merger with another holding company, and that's how he gets web and nap to be public."

The quote explains the strategic move Anil took to expand his business reach by going public, setting the stage for further developments.

Metaphor of Climbing and Social Elevation

  • Anil uses a mountain climbing metaphor to describe the journey of social and financial elevation.
  • High altitudes represent the interconnectedness of powerful individuals in society.
  • Being among the "denizens" at the top allows for rapid achievement of goals that would otherwise take much longer.

"Just as a man living in a mountain valley sees and is closely aware of only a few of the nearest great peaks above him, so it, too, is it with a man comfortably settled at some modest elevation in our own society. If he begins to climb, however, he will soon notice from his new perspective that there are actually a great many peaks on all sides around him."

The metaphor illustrates the perspective change and opportunities that come with climbing the social ladder, emphasizing the importance of relationships at the top.

The Hawaiian Technique and Expansion

  • Anil developed the "Hawaiian technique" which involved breaking up a property into components and finding investors for each.
  • The technique was a powerful tool for expansion and was a key part of the company's growth strategy.

"The hawaiian technique was so flexible that it became a very powerful tool. The hawaiian technique became the principal tool of the web and nap expansion."

This quote summarizes the innovative financial strategy Anil employed to maximize his company's growth and value.

Encounters with Howard Hughes

  • Anil had a bizarre encounter with Howard Hughes, who was an industrial genius and a paradoxical recluse.
  • The meeting with Hughes involved secretive and elaborate planning but ultimately did not result in a deal.

"So they get in the car. After a time, we found ourselves in a seedy section of town. We soon stopped in front of a flop house."

The quote depicts the odd and secretive nature of dealing with Howard Hughes, highlighting the eccentricities of some business interactions.

Joseph P. Kennedy's Business Tactics

  • Anil observed Joseph P. Kennedy's cutthroat business tactics in a deal involving the New York Herald Tribune.
  • Kennedy's strategy was to force financial distress on the Reeds to acquire their assets cheaply.

"Because that's the way Kennedy does business."

The quote reflects on the ruthless business strategies employed by some to gain an advantage, exemplifying the harsh realities of high-stakes entrepreneurship.

Downfall and Bankruptcy

  • Anil's company faced bankruptcy due to overexpansion and complexity, reflecting the adage that more businesses die from indigestion than starvation.
  • The company's numerous projects were not profitable and required constant cash infusions, leading to unsustainable debt.

"Zackendor's business went bankrupt, not from starvation. It went bankrupt by indigestion."

This quote encapsulates the downfall of Anil's company, attributing it to overextension and financial mismanagement.

Reflections and Second Chances

  • After the fall of his company, Anil started anew with General Property Corporation.
  • Anil's optimistic outlook post-bankruptcy emphasizes the value of resilience and the opportunity for a second career.

"I have come to realize that since the fall of Webb and nap, I have been privileged to live and to savor a second life and a second career."

The quote conveys Anil's positive perspective despite his previous business collapse, showcasing his determination to rebuild and succeed again.

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