On February 10th, Equity Group Investments founder and chairman Sam Zell joined Dean Sally Blount ’92 to discuss the lessons he’s learned throughout his life as an entrepreneur. Zell grew up north of Chicago and told the audience that he got his entrepreneurial start as a teenager “importing adult magazines” from the Loop to his northern suburbs at a marked-up price.
Zell went on to earn his BA from the University of Michigan in 1963 and his JD in 1966. In 1968, Zell founded Equity Group Investments, which he grew into three of the largest public real estate companies in the United States: Equity Residential, Equity Office, and Equity Lifestyle. In 2007, the Blackstone Group purchased Equity Office Properties Trust for $39 billion – at the time, the largest LBO in history.
Zell credits much of his entrepreneurial success to being open to the ideas of others. “No one is afraid of me and therefore everyone challenges me,” said Zell. His three favorite words – “Take Me On” – encourage his employees, regardless of seniority, to disagree with him. Zell believes that through this Socratic method of investing “you understand risk and are able to [better] adjust for it”.
Another of Zell’s favorite anecdotes is that, until two years ago, he didn’t know his office had a door. “I’ve had the same office since about 1983 and about two years ago, I discovered that it had a sliding door”. Zell never knew it was there because his door has never been closed. This complete lack of “hierarchical access” encourages open dialogue between him and his employees and results in a more thoughtful consideration of risk and more creative investment ideas.
In terms of his views on real estate, Zell focused on liquidity – stating that “liquidity is value”. For this reason, Zell looks favorably upon the REIT model, because it provides a solution to the traditional liquidity challenges involved in owning real estate assets. As Professor Therese McGuire noted in her response to Zell’s speech, REITs are “genius” because they “turn very illiquid assets – buildings – into liquid assets” in the form of REIT stock.
According to Zell, no one has ever left a meeting wondering what he meant. His Brave Leader Series talk was no exception. Zell says what he thinks, frequently without filter, and encourages those around him to do the same.