I wasn’t really sure what to expect from Sam Zell’s new memoir Am I Being Too Subtle? Straight Talk From a Business Rebel.* First off he book is not too long at 227 pages (hardback). On the contrary you could argue it is too short. Substantial events get covered in a matter of pages if not paragraphs.
One of my favorite themes in the book is Zell’s pioneering use of the REIT structure. He recognized from the outset that the real estate industry did not have a good reputation with the stock buying public. He argued that REITs needed to be all about “transparency, predictability and accountability.” One could argue that as a full-blow S&P 500 sector they have done just that. Zell writes:
The simple genius of public REITs is that they turn bricks and mortar into transparent and predictable liquid assets. And because they are required to distribute at least 90 percent of their taxable income to shareholders each year, they tend ot provide high dividends. By virtue of their lower leverage, the commercial real estate industry as a whole is much less cyclic and volatile. Just look at the way it weather the Great recession of 2008, in contrast to single-family real estate. I couldn’t be more proud of the industry I grew up in and that gave me so much, and I consider my role in this evolution one of the biggest accomplishments of my career. (pp. 126-127)
The rise of REITs was just one of many macro themes that Zell saw coming. What I found fascinating with Zell was his intellectual flexibility. He not only saw themes coming, like a change in rules that made companies with NOLs or net operating losses, much more valuable. He profited from those themes and, by and large, knew when those themes were played out. Zell was always keen on cashing out at an opportunistic.
There are a lot of compelling anecdotes in the book. In one near the end of the book Zell tells a Merrill Lynch banker that he wanted to pay 25 basis points more on a tranche of convertible bonds for Itel. The banker was, not surprisingly incredulous. Zell knew that making those buyers an early, easy profit would make them more receptive to future deals. From the book:
My definition of a “win” is not binary It is not a zero-sum game. Negotiation that leads to a winner and a loser rarely leads to a successful transaction or another one down the road. That’s how it’s been throughout my business career. Sometimes my team argues with me-they can’t believe we’re leaving money on the table. But I want to create an environment where everyone wants to keep playing. (p. 220)
Staying in the game. Keep playing. Those are great mottos for anyone in business or investing. If you do those things you never really have to retire. As Zell recently said in a HuffPo interview:
People often ask me when I’m going to retire. My answer is, ‘Retire from what? I love what I do. The reason I’m good at what I do, is because it’s not a burden. It’s a joy. It’s what gives me fulfillment.’
We should all be so lucky…
*I received a copy of Am I Being Too Subtle? Straight Talk From a Business Rebel from the publisher. See also a conversation with Zell at HuffPo.