Summary: Am I Being Too Subtle? by Sam Zell

Concise Summary:

Am I Being Being Too Subtle is billionaire Sam Zell’s autobiography. He tells his story from his roots as the child of Jewish immigrants who fled from the Holocaust to his life today as one of America’s leading real estate moguls. The key lessons are: 1) Always assess your downside; 2) Have a clear vision and set lofty goals; and 3) When assessing real estate deals always keep in mind your replacement costs (the cost to build from scratch).

I first heard of Sam Zell only very recently when he was interviewed about the economic impacts of the recent coronavirus crisis. I was curious so I looked him up on Wikipedia and was intrigued by his story, so I decided to dive deeper and read his book “Am I Being Too Subtle? Straight Talk From a Business Rebel” which was released not too long ago in 2017.

Key Lessons & Notes

Below is a summary of the key notes and lessons I took from Sam’s story.

If you love what you do you are more likely to succeed

People often ask me, “When are you going to retire?” And I answer, “Retire from what?” I’ve never worked a day in my life. Everything I’ve done has been because I’ve loved doing it, because it was enthralling.

This theme of loving what you do so that it doesn’t seem like work is a recurring theme of successful people. This most reminds me of Warren’s Buffett’s quote that he “tap dances to work” every morning and is the reason that he is still at the helm of Berkshire Hathaway at almost 90 years old.

It can take time and experimentation to find something that feels like play even though it is generating income, but the payouts can be huge as exemplified by Zell and Buffett.

I would venture that most great entrepreneurs simply love what they do—whether it’s problem-solving, building something from the ground up, or a passion for their product or service.

Bob and I both saw business as a puzzle to be solved, and we both had an insatiable intellectual curiosity.

Choose the right co-founder

We brought in my buddy Bob Lurie, who became our first employee, to help us. Bob was famous for carrying IBM punch cards in his breast pocket and always using them to make lists. He was a calm, pragmatic, behind-the-scenes planner who kept a mental record of every detail. Bob was a strong complement to my lack of interest in operational detail, as well as my energy and intensity.

Most successful businesses are founded by more than one founder and many VC firms typically avoid investing in single founder led companies. Choosing the right co-founder is critical to a businesses’ success. Often the best combination is where the founders each bring complementary rather than overlapping skill sets.

Gino Wickman, in his books “Traction” and “Rocket Fuel”, has defined the ultimate combination as Visionary and Integrator, which is often defined in the roles of CEO and COO respectively. The Visionary is the dreamer, strategist, someone who is interested in the big picture and ideas. The Integrator thrives in details, operations, systems and execution – he takes the wild ideas and dreams of the Visionary and makes them reality. Bob Lurie and Sam Zell exemplify this typical Visionary-Integrator pairing.

Here’s another quote exemplifying exactly what Gino talks about:

He was Mr. Inside, the operator. I was Mr. Outside, the salesman. I was the optimist, and he was the pessimist, until, of course, I was the pessimist, which compelled him by nature to take the opposite position.

It’s also a great demonstration of how they each brought out the best in each other, this interplay between optimist and pessimist, with one of the partners always there to keep morale high. I experience this often with my co-founder and I think this is really important for our success, to allow us to keep going even when things get tough.

Over the years it seems that Zell has focused his role down to the functions he is best at, which is clearly stated in the quote below:

I often say I’m chairman of everything and the CEO of nothing. I stick to what I’m good at—vision, direction, strategy. That’s where I add the most value. I spend almost my entire day listening to other people. I ask questions, I probe, I raise possibilities.

This quote also shows the importance of evaluating and knowing your strengths and then letting your strengths shine so that you are operating in your zone of genius.

Grit is critical to be a successful entrepreneur

I remember this event so clearly because it was at this point in my career that I fully realized the value of tenacity. I just had to assume there was a way through any obstacle, and then I’d find it. This is perhaps my most fundamental principle of entrepreneurialism, and to success in general.

Being an entrepreneur can be tough. You are creating something from nothing and typically experience many highs and lows. To get through it all as Sam says, you need to be tenacious and dogged.

Keep doing what works

Sam Zell is now a billionaire and one of the richest men in America. But he started small and from nothing.

At college he needed money so he got by managing student housing as an undergraduate. He saw that he could do this successfully so he expanded so managing more student housing.

Since he was involved in managing real estate, he saw other opportunities in real estate and made an initial small real estate investment. And he just kept rolling from there – seeing what works, doing more of that, seeing new opportunities and dipping his toes into new industries.

The moral of the story of course is that it’s hard to get a hit if you don’t step up to bat.

Always assess your downside

I realized that the basics of business are straightforward. It’s largely about risk. If you’ve got a big downside and a small upside, run the other way. If you’ve got a big upside and a small downside, do the deal.

This is one of the key themes of the book. Sam is always focused on what is the worst case scenario.

He uses the following framework:

What’s the outcome if everything goes wrong? What actions would we take? Can I bear the cost? Can I survive it?

Below is a good example of risk analysis in action:

“Well,” he said, “it’s pretty bad now, and if we fail to fix it you could lose some operating capital. But I don’t see a station in Denver ever being worth less than $4 million. I mean, the building, the transmitter—the physical assets alone are worth close to that.” “Okay, great. How good could it get?” The answer, in short, was very good. So I said, “Go do it.”

Do yourself first and then delegate

I let the bank run the Vigoro deal, and it drove me nuts. I realized that I didn’t know enough to be able to protect myself, and that meant I was displacing—and increasing—the risk. Further, as a huge perpetual consumer of capital, I respected the fact that there is no more consistent source of capital than the public markets. So I went to school, so to speak, and I learned everything there was about doing offerings. Eventually, I got to the point where I’d run the book on my IPOs. I’d manage the process, and on some deals I’d be up until three in the morning the day of closing, allocating stock to the various players. That meant I had to learn who all the players were, including which ones had a track record of being real investors rather than flippers.

Have a strong vision of the future

In fact, my thought was that I was going to create the General Motors of the housing industry.

This is a recurring theme of successful entrepreneurs. They have a big dream and set lofty goals.

When buying a company focus on eliminating waste vs growth

Buying another company based on the perception of opportunities for cross-selling and other intangible benefits generally represents a much higher level of risk than I believe is justified… I concentrate on eliminating redundancies, which measurably reduces the capital required to run the business.

Redundancies are much more predictable and transparent than theoretical opportunities to add value.

On real estate

I have always believed that every day you choose to hold an asset, you are also choosing to buy it.

The most reliable measure of our buildings’ value remained—and had always been, in my opinion—replacement cost. Replacement cost mattered more to me than rents or comparable prices or vacancies or economic growth or stock price. This was because replacement cost determined the price of future competition.

…our primary target was high-quality office buildings, which we bought at significant discounts to replacement cost.

We believed the real money in real estate came from borrowing long-term, fixed-rate debt in an inflationary scenario that ultimately depreciated the value of the loan and increased the position of the borrower.

The right connection can skyrocket your career

That meeting with Jay was the beginning of the most influential relationship of my career…

On finding your spouse

We were completely compatible—we shared the same roots, had all the same references to culture and family. And most important, we shared the same values.

It took Sam until Wife Number 3 (Helen) to find the right match, but he clearly emphasizes here the importance of shared values.

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