Sam Zell — Strategies for Investing and Dealmaking | The Tim Ferriss Show

1. 0:00 – 4:33

   Intro

   1. TFTim Ferriss0:00

      Optimal minimal. At this altitude, I can run flat out for a half mile before my hands start shaking. Can I ask you a personal question? Now would seem an appropriate time. What if I did the opposite? I'm a cybernetic organism, living tissue over metal endoskeleton. The Tim Ferriss Show. This episode is brought to you by FreshBooks. Longtime listeners of this podcast know that I've been talking about FreshBooks for years. It's the all-in-one invoicing and payments and accounting solution. It came about because I was doing a revision of The 4-Hour Workweek for 2009, looking at new software solutions that could help people, help my readers, and FreshBooks came up over and over and over again. Many entrepreneurs, as well as contractors and freelancers I work with all the time, use FreshBooks more and more every day. Why is that? Well, most people, especially entrepreneurs, business builders, hate wasting time doing things inefficiently. Painful invoicing with different cobbled together solutions, including Word or Excel, can fall into that category. If you want to avoid that pain, what can you do? Give FreshBooks a try. FreshBooks is accounting software that makes invoicing and other bookkeeping tasks so easy you can save up to 200 hours per year. That's a lot of hours. Here's how it makes running your business easier. You can automate bank reconciliation in just a few clicks. You can give your accountant access to the information they need to do your taxes. This is a huge one. I've realized how important this is and how much it makes life easier when you get this done with many things. You can accept credit card and ACH payments right on invoices to get paid two times faster. And of course, you can create, customize, and send branded and professional looking invoices in about 30 seconds. With plans starting at just $15 per month, FreshBooks is designed to grow with your business. And right now, FreshBooks is offering my listeners, that's you guys, a free 30-day trial with no credit card required. Simply go to freshbooks.com/tim and enter Tim Ferriss in the How Did You Hear About Us section. That's Ferriss with two Rs and two Ss, of course. Check it out. Go to freshbooks.com/tim and start your free 30-day trial today. Freshbooks.com/tim. This episode is brought to you by Brave, the next generation web browser. I love Brave. And if you haven't heard about it, here is the skinny. Brave was built by a team of privacy-focused, performance-oriented pioneers of the web. And I do mean pioneers. Brave was co-founded by Brendan Eich, E-I-C-H, and Brian Bondy. Brendan was previously the co-founder of Mozilla Firefox and the creator of JavaScript. Brave now has more than 10 million monthly active users, and I'm one of them. Why? Why would I use Brave? Because Brave gives you unmatched speed, security, and privacy. And when I say unmatched, I mean the difference is hard to believe. And here's why. Every time you download a webpage, when you go to any webpage, you are not just downloading the text and images, you are also downloading web junk. This includes trackers and scripts that run in the background, slowing your downloads and wasting your time by an average of five seconds per page, while also draining your battery faster and costing you extra in data charges. There is a way to have the best experience web can offer, and that is by using Brave. Brave is up to six times faster than other browsers, and it's truly incredible how much faster everything is. I have used Brave, for instance, to get on airplane Wi-Fi when other browsers crash. I have used it to watch YouTube videos when it's just suspended in loading forever on other browsers. It's not subtle at all. There's a huge difference. Other browsers act like a vacuum cleaner for your data. So this is on the security privacy side. You're being profiled and tracked across the web. So what, you might ask? Well, data collected about you can be used to manipulate both your decisions and countrywide decisions like elections. And if you want more on that, listen to my episode with Tristan Harris. Brave is a way to protect yourself and remove the surveillance economy. Brave also includes options, which I use quite often, such as private window with Tor for those seeking advanced privacy and safety. This browser feels intuitive. It's super easy to use. You can import your bookmarks with one click, and all your favorite Chrome extensions are also available with Brave. And it doesn't have to be either/or. You can use multiple browsers for different things. Now, listeners of this show, The Tim Ferriss Show, can easily upgrade their browser for free. And

2. 4:33 – 7:35

   Format change: Peter Attia takes over the interview chair

   1. TFTim Ferriss4:33

      all you have to do is go to brave.com/tim. That's brave.com/tim. I use Brave all the time, and I strongly suggest that you at least test it out. So go to brave.com/tim and give it a shot. Hello, hello, hello, Nelly. This is Tim Ferriss. I figured I'd mix up the intro. Welcome to another episode of The Tim Ferriss Show, where it is my job each episode typically to sit down with world-class performers of all different types, from all different industries, from all different fields, to tease out the habits, routines, favorite books, influences, and so on, that you can, in some fashion, emulate or test and apply in your own life. This time around in this episode, we have a slightly different format, which I'm super excited about. I will not be the one doing the deconstructing. Instead, we have my good friend Peter Attia taking my place. Now, Peter Attia, for those who don't know, is the common ingredient in two of the most popular episodes on my podcast of the last, say, 100 episodes. Specifically, those are episode number 352, Dr. Peter Attia versus Tim Ferriss, and episode number 398, Peter Attia, MD, Fasting, Metformin, Athletic Performance, and More. If you want to try one of those out after you hear Peter do his thing here, I would suggest going to number 352, where we talk about mental and emotional health and different tools that can apply there. Coming back to This episode though, in this episode, we have Peter interviewing Sam Zell, Z-E-L-L, a legendary deal maker and investor. And as of the time of this recording, Sam's net worth stands at around $5.24 billion. As many listeners know, and many probably don't know, Dr. Peter Attia, on Twitter and Instagram @PeterAttia, A-T-T-I-A, MD, is a former ultra endurance athlete, so he's done swimming races of 25 miles, et cetera, a compulsive self-experimenter, so we get along well, and one of the most fascinating human beings I know. He is also one of my go-to doctors for anything related to performance and longevity, because blending the two is quite a sophisticated and subtle business. Peter also hosts The Drive, a weekly ultra deep dive podcast focusing on maximizing health, longevity, critical thinking, and a few other things. He really gets into the weeds with specialists on his show. Topics include fasting, ketosis, Alzheimer's disease, cancer, mental health, and much more. You can subscribe to The Drive on Apple Podcasts, Spotify, or wherever you listen to podcasts, and you can find links to all of this in the show notes for this episode at tim.blog/podcast and just search Attia, A-T-T-I-A. I will let Peter take it from here to give Sam's full bio and introduce the episode. This is one not to miss. I really enjoyed it and hope you do as well. Thanks for listening.

3. 7:35 – 10:08

   Sam Zell’s background and why this conversation matters

   1. PADr. Peter Attia7:35

      My guest in this interview is Samuel Zell. Sam is the chairman of Equity Group Investments. He's also the chairman of five companies listed on the New York Stock Exchange. He's a legendary entrepreneur and investor who's active across a broad range of industries, including energy, manufacturing, logistics, healthcare, communications, and of course, real estate. Sam was recognized by Forbes as one of the 100 Greatest Living Business Minds in 2017, and he holds a place on the New York Stock Exchange's Wall of Innovators for his role in building the $1 trillion REIT industry. He's the author of an amazing book, Am I Being Too Subtle? which after I read the book, is the reason that I wanted to interview him. Through this conversation, we cover a lot. We start with arguably the most important and transformative aspect of Sam's life, which is his parents' escape from Poland on the last train out in World War II and how this played an enormous role in his upbringing. We talk about his early businesses and the lessons that he learned along the way, in particular how he used these lessons to assess risk. We talked about his ability to assimilate large volumes of information and how that allowed him to basically play an amazing role inside his business in predicting the market crashes of '91 and 2008 with respect to real estate. We talk about the incredible loyalty within his organizations. I won't elaborate much more on this other than to say it's by most standards quite unique, and I was surprised as I got to know Sam just how much the people that surround him share incredible loyalty to him. In fact, after we recorded the podcast, we went out for dinner and eventually wound our way back to his place, and his driver gave me a ride back home, and I couldn't resist the opportunity to just sort of pick his brain and talk a little bit about that, and I was kind of blown away by the way in which he talked about Sam. And I really got the impression this was not something he was saying just because he felt he needed to say that. We talked about how Sam takes in and processes so much information and how this sort of insatiable curiosity has really been the cornerstone of his success. We end with Sam's thoughts on the current state of the economy, which is something I just couldn't resist the opportunity to pick his brain about. This is one of the most in-depth interviews Sam has given, and it's a real privilege and honor to have been the one sitting across from him. So without further delay, please enjoy my conversation with Sam Zell. Sam, thanks so much for making time today, and thanks for coming over.

   2. SZSam Zell10:06

      My pleasure.

4. 10:08 – 14:35

   Parents’ escape from Poland: information advantage and decisive action

   1. PADr. Peter Attia10:08

      There's so much I want to talk about, but I can't resist sort of starting at the beginning, which is the story before you even came along, before you were born. You've written very eloquently about this in your book, and it's clear that it's shaped more of you than probably most people would realize if they just met you or even saw all of your accolades. Tell me a little bit about your parents and how they wound up coming to the United States.

   2. SZSam Zell10:32

      My parents lived on the German-Polish border in the '30s, and my father was a grain merchant. And the Jewish community in Poland at that time was very, very limited and had very little exposure to the outside world. But my father, because he was in the grain business, was dealing with businessmen all over Europe. And so he had a much better understanding of how the world had changed and the risk that was occurring to the Jewish people. Events like Kristallnacht that were never reported in Poland, he knew about, and he became alarmed at what was happening and began planning to leave Poland and go to the United States. He saved up money. One of the stories I tell in the book is the story of him basically getting money out of Poland and getting it to Israel or to Palestine at the time, and so he, in effect, he went on a vacation to Egypt and Israel or Palestine, and basically, there was the Jewish organization that allowed Polish Jews to get money out of Poland. And so one day, a guy showed up at my mother's house who had, in effect, my father had told her, "Look, if some guy shows up and he can prove to you that I know him, give him all the money that's in the armoire upstairs." And, and in between, my mother received a letter from my father, and it was a typical rosy letter, having a great time, everything is terrific, and when she opened up the letter, she found a ripped piece of paper inside the envelope And then a week later, a guy shows up at her door with the other half of the ripped piece of paper, and that proves to her who he is, and she gave him all of the money. And 48 hours later, the money was on deposit at Barclays Bank in Tel Aviv, and that money eventually became the currency that they used when they were escaping from Poland. So it's now 1939. It's August 23rd, 1939, and the world is stunned by the announcement of the Molotov-Ribbentrop Treaty, which was a treaty executed between Germany and Russia. And basically, Stalin and Hitler had made a deal, and my father looked at that treaty and said, "This is basically an agreement to split up Poland." And so my father got off, he was on a train, turned around, went home, got my mother, and said, "We have to leave." And he moved my mother and my older sister, who was like two, a couple hundred kilometers from their town, went back and tried to convince other members of the family to come with him. Without exception, they all turned him down. He was like 34 years old. I think they all thought he was typical over-enthusiastic young man, didn't understand, didn't remember that in-- when World War I happened, the Germans invaded Western Poland, and the locals found that to be terrific. They were much happier under the Germans than they were under the Poles. The Germans were educated. The Germans were cultured, music, art. They thought it was fabulous, and they all said, "This is an alarmist young man. He didn't understand as soon as the Germans come back, it's gonna be terrific again." And my father instead knew about Kristallnacht, knew about all of the anti-Jewish activities in Germany, and he couldn't convince anybody to go with him. And so finally,

5. 14:35 – 20:43

   The route east: Vilnius visas, Japanese transit papers, and arrival in the U.S.

   1. SZSam Zell14:35

      at 4:30 in the afternoon of August 31st, 1939, he got on a train and started going east. And at 6:00 a.m., the Luftwaffe bombed the railyards, and that was the beginning of both the Germans and the Russians invading Poland from either side. He then continued and just all he wanted to do was keep going east, keep going away from Germany. And there are times my mother told stories about her pleading with him to stop. "Okay, we're far enough away from the border. Everything is gonna be fine." Instead, all he said was, "We gotta keep going." And they went by every conceivable form of transportation from bus to train to wagon cart to whatever and whichever methodology they could. They kept going east. And along the way, there were other refugees just like them, all moving east. And eventually, they got to Vilnius, which was the capital of Lithuania, and that's where the Russian army was, and that's where they paused. And they spent a few months in Vilnius trying to get adjusted. And at that time, there were a lot of other refugees in Vilnius, and so there was a community, and they shared information. They were all confronted with the same challenge, which was, "How do we get out of here?" And most important, "How do we get visas to get out of here?" While they were in Vilnius, the Dutch ambassador, who had come out of Poland, was on his way back to the Netherlands but couldn't go west, so went east and stopped in Vilnius, and he gave out visas to Curaçao. Curaçao is an island in the Caribbean off the coast of Venezuela, and it was a Dutch protectorate, and they had historically had an open visa policy to anybody 'cause they were trying to populate Curaçao, particularly with Europeans. And so all of these refugees got visas to Curaçao. But the problem still became, how do you get from Vilnius to Curaçao? And obviously, the only way you could go was east. And obviously, the answer became the Japanese. And they found a consulate in Kaunas, which is the second-largest city in Lithuania, and they told him their story, and he took pity on them, and they literally created something they called a transit visa. Now, there is no such thing as a transit visa, but they created it, and they found a wood artisan who made a woodcut, and they created these visas. And Sempo Sugihara, who was the consul, ended up signing almost 2,000 of these. And in the meantime, he sent a notice to Tokyo and asked permission to grant the visas, and they came back and said no. And then he sent them a second question, and while he was waiting for them to respond is when he filled out all the visas. And when the response came back, they basically took him and relocated him, but the people had these visas. At the same time, the Russian government was desperate for hard currency, and so they decided that, as only Russian entrepreneurs, that they had a train and that they could sell, in effect, train passes from Vilnius overnight to Moscow and then 11 days and 11 nights on the Trans-Siberian Express to Vladivostok, where you could take a boat to Japan. And my parents, for two hundred and thirty-nine dollars per person, bought transit on that train, went overnight to Moscow, spent the night in Moscow, actually went to the Bolshoi Ballet, and then the next morning got on the train and spent the next eleven days and eleven nights on the train with their two-year-old daughter going to Vladivostok. And then eventually boarded a boat and ended up in Japan, and then spent six months in Japan trying to get their visa to the United States, which they finally got in May of 1941, and they arrived in the United States May 18th, 1941, at six AM in Seattle. Interestingly enough, as only the life of an immigrant could reflect, they arrived at six AM in the morning and six PM they took their first English class because they were gonna become Americans, and this was the most important thing in their life. So this was kind of the background, and I was born September 28th. So literally, I was born ninety, a hundred days after they came to this country. And typical of my mother was late with me. And so the day I was born, she went to Marshall Field's, which was the major department store in Chicago, and started walking up and down the stairs hoping that this would precipitate the baby. And eventually that night at ten o'clock, the process started. And so they got dressed, went downstairs, got on a streetcar, and rode the streetcar to the point where they had to get off and change to go to the hospital. But the other streetcar didn't come, and it was eleven o'clock at night, so they walked the last six blocks, and then I was born very shortly thereafter. But when you come from that kind of a life and you hear the stories all over again for all of your young period of time, it gives you a very different perspective on life.

6. 20:43 – 25:44

   Early worldview: freedom, optionality, and “anything is possible”

   1. SZSam Zell20:43

      The idea of somebody literally picking up and leaving where they were is just extraordinary, how anybody could have the self-confidence. I mean, he didn't know where he was going. He had a wife and a baby daughter, and all he was doing was going away from the threat. So it made me very aware of how lucky I was. He must have told me a hundred times how lucky I was that I was born in the United States, how the streets of the United States were paved with gold, not monetary gold, but freedom, and that was really what it all meant. And he over and over again lectured me on how important it was to understand how unique an experience it was to live in a country where you really had the freedom to make decisions. You had the freedom to work harder or work less or change professions or do whatever it is you wanted to do as long as you didn't disturb your neighbor. So this was an extraordinary background for everything that eventually happened to me, and without question, very much influenced how I made decisions going forward. 'Cause more than anything else, what it told me was that anything was possible, that you didn't start with a set of limitations. You started with the entire spectrum was available, and it was how good you are, how committed you were, how hard you were willing to work that really was the limiting factors, not the society.

   2. PADr. Peter Attia22:32

      Did your father ever articulate to you in explicit or implicit terms his decision-making process around... 'Cause when I hear that story, Sam, I think of a huge asymmetry of risk. So if you go back to the moment, the committed step, which is when your father had to decide to leave or not to leave. Now, he couldn't have known that the train track was gonna be bombed in twelve hours, and this, if I recall, this was the last train out of Poland. This, I mean, you didn't leave any margin there. There's a very asymmetric risk issue, which is to be wrong, to leave unnecessarily has a downside, but to stay incorrectly has another downside. Obviously, the latter has a much bigger downside. In other words, it's a very asymmetric risk. So from a risk perspective, your father made the right decision, not just because history turned out to make it right, but simply on the basis of first principles. Your whole life, which we'll talk about as we continue this discussion, is so based on understanding risk. Does that lesson stand out to you in terms of teaching that element of risk? Did your father ever articulate it that way?

   3. SZSam Zell23:38

      I don't think he ever articulated it that way because I don't think he ever thought about it as risk and reward. I think he thought about it as survival. I think he thought about it and said, "What am I giving up?" When he looked at the society that he was leaving, and particularly at his age, I think he really thought that he was making a major decision for creating optionality and freedom for his future. And I think that he had heard enough of what was going on in Germany and Austria at the time that I don't think he had any doubt of how big the risk was and how critical it was to exit, and yet he was unable to convince everybody else. But everybody else Were settled, they had their professions, they were living in this relatively small city, and most important, had very little exposure to the outside world. I mean, we live in a day of twenty-four/seven sound from the cable TV stations, and we live in a world where there's newspapers every day that come from all over the world, and we can't really relate to-

   4. PADr. Peter Attia24:53

      Yeah

   5. SZSam Zell24:54

      ... the idea of a society where information was literally limited. And the further you got from the point you were standing, the less dependable the information was. So he was functioning with a lot of information that his siblings and his friends didn't have. No different than when we talk about being a risk-taker. What I talk about often is how critically important it is to be as knowledgeable as possible. That all my life I've basically focused on reading and digesting information because the well-educated, up-to-date you are, the better you are to be able to assess judgment and assess risk.

7. 25:44 – 28:40

   A childhood encounter with Holocaust footage and its lasting impact

   1. PADr. Peter Attia25:44

      When we had dinner a while back, you told me a footnote to the story you just told, which is years later, I don't remember how old you were, you may have been five, six, seven, eight, you came out of your bedroom one night and your parents and maybe some other friends I think were huddled around a small movie projector, and they were watching something. Tell us that story.

   2. SZSam Zell26:05

      I think I was maybe six years old, and we lived in Chicago, and we lived in what's commonly referred to as a railroad apartment, which is you had a living room at the one end and a kitchen at the other end, and then it was a long row of bedrooms and bath. And my bedroom was at the far back next to the kitchen. And my parents had a group of immigrants that had their own little organization called the Harmony Circle Club. And once a month, they would get together in one of the other one's living room and talk about information, and particularly information about Poland and when they all were refugees from Poland, and all Jewish and all trying to get information. I don't know why I got up that night, but I got up that night and I snuck into the, right near the f- where the living room was, and they were watching an eight-millimeter movie. And I, I remember looking at the movie and as I'm sitting here talking, I can tell you that I can represent the images that I saw, and the images were of trucks and dump trucks, and on the back of the dump trucks in the bins were bodies and bones and heads and, and somehow or other, they had all been dumped in the back of these trucks. And then I learned for the first time that this was all about the Holocaust, and these were smuggled out movies that were made of what was going on in these camps in Poland right before the end of the war. And I sat there and I fr- at first I couldn't conceive of what I was watching. And then when I talked to them about it afterwards, I never told them that I snuck out to watch, but we, we talked about things over the dinner table, et cetera. And I began to understand that these concentration camps literally were created to wipe out a population and as efficiently as possible kill them and then put them in dump trucks and find some place where they could be dumped and lime tossed on the bodies and buried accordingly. So it was an incredible thing for a six-year-old to watch and most important of all, what I felt about it was that but for the grace of God, it could've and should've been my parents. And in fact, most of their siblings ended up murdered in these concentration camps.

8. 28:40 – 31:08

   Teenage years: standing apart, pressure to excel, and becoming independent

   1. PADr. Peter Attia28:40

      When you think about sort of your teenage years, you have a really unique set of personality traits, Sam. One of them is you pretty much do what you think is right, whether it's popular or not. Was that trait evident when you were growing up? Was that trait evident, for example, during adolescence when most of us succumb to the need to sort of be approved by others and do what others think is the right thing to do?

   2. SZSam Zell29:07

      Well, I certainly was no different than any other teenager, but the fact that I wasn't any different didn't really change the fact that I was very different and lived in a house where the closeness to which they came to being exterminated was very much aware for everybody all the time. I grew up in a house where my parents took the position that whatever I was doing, I was lucky I was doing it and I had to do more of it and I had to study harder and I had to excel. And other parents didn't have these kinds of influences on their children. So became obvious to me at a relatively young age that I was different and that as much as I wanted to be accepted and as much as I wanted to be like everybody else, I also recognized that I wasn't and that I couldn't. And that at first it was very frustrating and very much of a challenge, and I didn't really know what to do with it. And then eventually I just came to the realization that I had to be my own thing and I had to be who I was, and that other people had different ideas and different objectives and that was fine, but I couldn't accept what everybody else was thinking about. I also grew up in a world where the rest of the kids that I grew up with, they were kids, but I grew up in an environment where they didn't really give me much of a chance to be a kid. And in fact, whether it was a six-year-old watching Holocaust movies or, or listening to my father telling me, "You went to a basketball game last week. Why do you have to go again? And why are you so focused on having fun? You gotta be studying, you gotta be getting better, and you gotta be able to take on what's going on." Well, needless to say, I didn't listen to everything he had to say, but living in that kind of an environment was very, very different than what my peers were doing.

9. 31:08 – 39:46

   Law school as a safety net—and the moment legal practice didn’t fit

   1. PADr. Peter Attia31:08

      So after college, how did you decide on law school? What other things did you think about? What-- Did you have any sense of what you wanted to do?

   2. SZSam Zell31:14

      Oh, that was a very easy decision. My father's view was very simple. You gotta have a profession. No matter what, you gotta have something that you can quote a hang your shingle out on. And law school seemed like a very logical thing for me to do. Academically, it was very difficult to achieve. And so I went to law school not because I wanted to practice law. I went to law school so I had a degree, and that if I didn't work out at whatever it is I was doing, I would be able to, in effect, still practice law and make a living. And that's what he more than anything stressed that I had to do.

   3. PADr. Peter Attia31:53

      So your first stint in the law firm was a pretty short one.

   4. SZSam Zell31:56

      Yeah. Well, actually, the better part of the story is that I had forty-four interviews. Forty-four. Talk about rejection. And I got rejected by forty-three. And I sent all the letters, and I made all the appointments and followed up on it. And what I didn't understand was that... And it was actually made very clear to me when toward the end of this process, I had an interview with a big fancy firm, and I got through the first interview. I was very excited 'cause I had been used to people rejecting me. And then I had a second interview at the firm and went really well, and they set up a meeting for me with the senior partner whose name was on the door. And I remember going in to see him. I walked into his office, and it was a typical, uh, wood-paneled lawyer's office with books all over the place, and he was on the phone. And he gesticulated with his hand and said, "Sit down." And I sat down, and he finished the phone call. Then he got up, and he closed the door to his office. And he said, "Tell me about your deals." And I looked at him, and I said, "Tell you about my deals? I want a job." He said, "We would never hire you. You wouldn't last more than three months." I said, "What are you talking about?" I said, "I wanna be a lawyer. I mean, what about Perry Mason?" And he laughed, and he said, "You don't understand." And of course, the truth was I didn't understand. And so I basically asked him about it and he said, "Do you understand? You put on your resume all the things that you did while you were in law school and while you were an undergraduate. And you built a real estate business. You managed hundreds of apartments. You bought buildings. You refinanced buildings. You wrote a manual on property management, and you're literally just graduating from law school. How would anybody like you wanna sit there and draft contracts all day?" And I just looked at him and I said, "Well, I don't understand." He said, "The reason you've been rejected like this is because everybody looks at you and says, 'This is a guy who's gonna do something else.' And why would we wanna train him if he's gonna be gone very shortly?" I'll never forget that interview and, uh, ultimately did get one job actually with a firm that was kind of half entrepreneur, half law firm. I got there the first day, and I had this tiny office that was like six by six. They gave me a contract to do between a linen supply company and a dormitory at Northern Illinois University. And some client with a firm was-- built the dormitory, and they were s- entering into a contract with a company that provided linens. They wanted me to write the contract. Well, for anybody who's been to law school, they know that the day you get out of law school, you don't know anything about being a lawyer. You may know a lot about theoretical conflicts of interest and broad concepts of the law, but how to draft a contract? Not a chance. Particularly if you went to a good law school where, in effect, they look down on any, quote unquote, "lawyer vocational training." And so I went and I asked the guy who was sitting in the next office, and he gave me some form books and said, "Here, this thing gives you a base." And so I started working on the form books, and I-- it was terrible. So I submitted the first draft after a couple of days, and it came back and it looked like the senior partner who had reviewed it had slit his wrists 'cause he used a red pen on it, and the whole thing was full of red this and red that, and I'm looking at it and saying, "I just went through three years of law school and this is what ends up?" And so I then redid it again and finally submitted it to him. And before he responded to me, I went into his office on Friday morning and I said, "Could I speak to you for a second?" He said, "Sure." And as only a twenty-four-year-old would have thought, I looked at him and I said, "You know, I really don't think this is a good use of my time." And I'll never forget the look on his face when he looked up at me and he said, "What are you saying?" I said, "I don't think this practice of law is good use of my time." He said, "Well, what are you gonna do?" I said, "Well, I'm just gonna go back and pick up where I left off in business in Ann Arbor, and I'm gonna try and build a real estate business." And he looked at me and he said, "You're gonna do what?" And I explained to him that that's what I was gonna do and that I thanked him very much for the opportunity. And he said, "Well, I've got a suggestion for you." He said, "Why don't you just stay here and the law firm will do the legal work on your real estate, and we'll invest with you and help you get started." And I thought about that and I said, "Well, gee, that's a terrific opportunity." And so, uh, I said fine. And the next day came back to the office and I was no longer a lawyer, and I was chasing deals They at the time had a policy in this law firm where they would give everybody 50% of any business they brought in and the methodology behind that was that we're trying to in effect encourage young lawyers to be a little entrepreneurial and maybe they get an estate from somebody in the family who died or a contract but the whole idea of quote-unquote hustling business and so they in effect offered me the same objective and of course I started creating huge amounts of business and so I don't know maybe four weeks later they came to me and they said well we had this deal where we gave you 50% but that was really under the assumption that maybe you bring in one deal and so you get one positive experience but the volume you're doing I mean we can't afford to give you 50% so we're gonna make it 35 I said okay so then three or four weeks later they came back and they said well you know we made this deal with you at 35 when we were assuming you were gonna bring in this amount of business and now you've brought in twice as much and we got to cut it down to 25 I said okay so we'll cut it down to 25 and so in effect at the end of the first year I think that this is 1966 and at the end of the first year I think that my quote-unquote job paid me $7,600 after I passed the bar on a per annum basis and I think I made $75,000 as a result of my percentage of the business I brought in well that was a huge number and I was obviously thrilled about it and then they gave me a bonus and the bonus was $200 and I said I remember it was the most depressing thing I what I wanted was recognition what I wanted was them to understand that I was really instead by virtue of paying me $200 they were telling me that what I was doing wasn't very valuable and I remember I was so depressed I didn't know what to do and I went to the gym and I shot free throws for an hour or two hours just to try and get this buzz out of my head but then I realized that I had to leave subsequent to that not too long thereafter the end of the year I was gone and set up my own shop

10. 39:46 – 47:49

    Early real estate principles: competition, overlooked markets, and cash-on-cash returns

    1. PADr. Peter Attia39:46

       So let's go back to some of those early deals because in many ways that's sort of where you cut your teeth on your principles that principles that have sort of guided your career through some of the largest deals in real estate history. Can you recall sort of a representative deal from those days? What was your sort of overarching principle on real estate?

    2. SZSam Zell40:05

       Well, I think that one of the most significant things that happened was that while I was in law school, I went home and I sat down with my father. And my father had been a very successful businessman and had joined other people in investing in quote-unquote commercial real estate opportunities. So I came to him and I said, tell me about your deals. And he kind of proudly looked at me and said, sure. And he started describing to me the deals he had invested in. And when I listened to him, I realized there was a consistent theme to what he was talking about. And basically, he was investing in deals that were in major American cities, New York, Chicago, Los Angeles, San Francisco, but nowhere else. And second of all, he was getting what he was very proud of was a 4% return. And I had been doing deals in Ann Arbor where I was getting 16, 20, 25%. And I just didn't understand. And then I realized or I came to the conclusion that what he and his buddies were doing were investing in what was already existing proven commodities, which were the major cities. And that in effect, if I were willing to invest outside of those major cities, I was in a competitively better position. Whereas he was investing in New York, Chicago, and Los Angeles, et cetera. I ended up investing in Ann Arbor and Madison, Wisconsin, and Tampa and Jacksonville and Orlando and Reno, Nevada and Arlington, Texas, all of which were small cities, growth cities, and ones where there was no competition. And it dawned on me that when it was all said and done, the single most important criteria as an investor was what was your competition. And to the extent that you were able to operate and invest in arenas where there was little or no competition, you got much better deals. And where there was more people, a lot more deals and a lot less attractive returns as a result. And so that's when I kind of learned about, or I didn't really understand what I was learning at the time. But what I really concluded was that competition was terrific, particularly for somebody else. But for me, the real goal was to find situations where I could operate in a competitive environment that gave me the edge. And that became a principle of everything that I did. And so whereas the first major deal I did was an apartment building in Toledo, Ohio. And you got to understand that part of the time, not too different from today, Toledo wasn't a very popular place. And I was keenly aware of that. But what I realized also was that because Toledo was a car manufacturing center and because it was referred to often as the armpit of the nation and a very negative environment, that also meant that no insurance company that made all the loans for real estate was going to underwrite a deal in Toledo when the statistics, the city was shrinking, et cetera. But all I looked at was the fact that I was able to buy one of the few apartment buildings in town, so I didn't have any competition. So that deal was one of the most successful deals that I had ever done, simply because there was no competition, and therefore, where there's no competition, you can produce exceptional margins. And that was a great first lesson.

    3. PADr. Peter Attia43:52

       And how did you price it? Are you pricing this based, at the time, that is, are you thinking about this just on the basis of cash yield, or were you factoring in some sort of equity improvement in this real estate?

    4. SZSam Zell44:04

       That assumes a much greater knowledge level for me than was conceivable at the time. All I looked at was, how much were we investing? What was the cash-on-cash return? The first deal, the cash-on-cash return was nineteen percent. This was in the same environment where I'd seen my father was investing money at four. And my father had just sold a number of interests in deals, so he, in effect, I brought him this deal, and he looked at it askance and basically said, "Yeah, come on, this is bullshit." But he called up a friend of his who was a property manager and said, "You know, my son Sammy has brought this deal, and it's ridiculous. It's nineteen percent, but would you take a day and go look at it?" So the guy went and looked at it, came back, and said, "You know, it's a terrific deal. And I've adjusted all the numbers and become much more conservative, but it's still an eight percent return in an environment where four percent was the standard." So he recommended that we go ahead with it. And he put some of his own money in it. And so we did the deal. And sure enough, it produced nineteen percent, just like I said it was gonna.

    5. PADr. Peter Attia45:18

       But that was the first deal your dad came in with you?

    6. SZSam Zell45:20

       Yeah.

    7. PADr. Peter Attia45:20

       And how did that feel?

    8. SZSam Zell45:21

       Actually, it's the second deal. The-- My father, when I was in school, I ended up buying a square block, kind of house by house, and I didn't have the money, but I had enough to tie up the properties, and he eventually came and put up money and helped me get that first thing done. But this was the first, quote-unquote, investment deal.

    9. PADr. Peter Attia45:43

       And is that something that... Did you pause for a moment, I guess, and take some pride in that in a way that was like, "Wow, here I am. I'm now indirectly sort of helping my family support itself as well"? Or was that just sort of below the radar of how you thought about it?

    10. SZSam Zell45:57

        Couldn't even imagine thinking that way. All I thought about was, here was a transaction that made sense. I thought it was terrific from a, a yield point of view. It never dawned on me that this wasn't what everybody did. By the way, that's kind of a theme in what I do in that what I did was I never really understood that what I was doing was so unique. I just thought I was kinda making it up as I went along. And I went from that deal to one in Orlando and one in Tampa and one in, uh, Reno and et cetera, et cetera. And after the first deal was the last time I ever had any trouble raising money. So that first deal required two hundred and eighty thousand dollars of equity, which in 1959 was, or 1968 or whatever it was, was a lot of money. But once I'd done that one transaction, people lined up to invest with me. Probably they were enthralled by the fact that how could a twenty-five-year-old be actually doing this? I didn't even knew that every other twenty-five-year-old didn't do it as well. Never even crossed my mind. I just kind of did what I thought made sense.

    11. PADr. Peter Attia47:11

        And you're sort of realizing this principle though already, right? Which is being where everybody else is is sort of not the place to be. I mean, you've written about this a lot. As we sort of fast-forward for a moment, I wanna go back to this, but even if we stand here today, now of course, everybody looks at Sam, you've created an asset class that we haven't even got to yet that we're gonna talk about. But you really come back to very fundamental principles when you speak about things. You talk about supply, you talk about demand, you talk about competition as though those things still apply. Whereas many people today sort of think that, come on, that was Econ 101. That mattered when there was a huge sort of gap.

11. 47:49 – 52:05

    Supply and demand basics, execution risk, and avoiding development complexity

    1. SZSam Zell47:49

       When I took Econ 101 at the University of Michigan, I walked into the first classroom and written on the blackboard was supply and demand. And I have to be honest with you, I'm not sure that there was ever anything else in Econ 101 that I learned that was relevant. That if you understand and are focused on how supply and demand affects pricing, how it affects decision-making, how it affects risk, it's the governing principle of everything. But it's also simple.

    2. PADr. Peter Attia48:21

       What was your philosophy around purchasing assets that were already capable of deploying yield versus developing assets?

    3. SZSam Zell48:32

       Well, at that time, there were a lot of, quote-unquote, "income-producing assets" that were available. I've always been a great believer that there's a lot of, quote-unquote, "execution risk" that has to be fit into your thought process when you're making a decision. In that particular time, again, keeping it very simple, if I could establish a definition of cash flow and in effect... I would literally... I remember going to developers and saying, "It's real simple. Take the bottom line, multiply it by six, and that's what I'll pay." Now, I didn't know that that was a very high price. I was creating a price structure that was very attractive to me. I just thought, "Gee, I wouldn't do this unless I got a sixteen percent return," so six times cash flow made perfect sense. And that's the way I thought about it. That's the way I thought about how do I raise money? In the same manner. What was attractive enough to get somebody to entrust their money to me?

    4. PADr. Peter Attia49:34

       When did you start to appreciate the operational side of risk? So in those early small deals, like your first deal in college where you're basically buying homes on a block and renting them back to students, I assume you're the one rolling up your sleeves, you're the one doing the heavy lifting. At some point as you start to scale this enterprise, you have to now trust other people to help you operate this business. How did you make that transition, and how did you manage that risk?

    5. SZSam Zell50:01

       Again, I think you're giving me way too much credit.

    6. PADr. Peter Attia50:04

       [laughs]

    7. SZSam Zell50:04

       I just don't think I thought about it that way. I mean, I thought about the fact that somebody had to cut the lawn, and I knew that if I grew the size of the business, it wouldn't be me who had to cut the lawn. And not being the one cutting the lawn or cleaning the hallways or whatever was certainly as much of an objective as making money.

    8. PADr. Peter Attia50:24

       So did you ever go into deals where you were the developer now and you were gonna take that sort of construction risk as well?

    9. SZSam Zell50:30

       I did that in the late '60s when I built my first apartment project in, in Lexington, Kentucky, and when I also built the project that ultimately led to my relationship with the Pritzkers, which was this project in Lake Tahoe. In both cases, they were development projects, and they were from the ground up. And in both cases, I was very disappointed at how difficult it was. And I kept looking at it and saying, "This doesn't make any sense." You're taking all this risk. You're starting to build something when you don't know what the market's gonna be like when you finish it. Either you're putting it up for rent or you're putting it up for sale. Depends on what the conditions are when you finish. You're subject to variances in costs. I mean, there's no greater lesson of inflation than designing a project and finding out that it costs twenty percent more than you thought it was gonna cost because the costs have gone up in the meantime. So all the variables and the weather and all the things that happen and contractors making mistakes, and when they made a mistake, there was nobody else to blame it on. And the fact that they made a mistake was too bad, but I was the guy who had to live with that mistake and, and live through it. So I kept looking at all the variables and saying, "I don't understand. Why would anybody be a builder when you're taking on all these variables and the best thing that happens is at the end you produce the same thing that you got when you bought an existing stream of cash flow?"

12. 52:05 – 57:56

    Meeting Jay Pritzker and refining risk: focus on the downside and the deal’s “step seven”

    1. PADr. Peter Attia52:05

       You mentioned Jay Pritzker a moment ago. How did you meet him?

    2. SZSam Zell52:07

       I had a friend of mine who was a, a national broker of real estate. And he and I were friends, and he called me one morning and he said, "I was in Atlanta yesterday with Jay." And I said, "Jay who?" And he said, "Jay Pritzker." And I said, "Oh, yeah, I heard of them. They're very wealthy people in Chicago." He said, "Jay is really extraordinary, and, uh, Jay is looking for somebody to come work for him who is under thirty, a lawyer, and a successful real estate entrepreneur." And I said to this guy, I said, "Well, if somebody actually met those criteria, why would they wanna work for Jay or frankly work for anybody else?" And he says, "You're being too glib. This is an extraordinary guy. You really need to meet him." And so I said, "Okay." So he called Jay, and, and the next morning I went over to Jay's office at nine o'clock. We just hit it off. And I sat at his desk from nine o'clock until four thirty. And meanwhile, he took calls, and he made deals, and I listened, and we talked about everything back and forth. And when we got to lunch, he sat me down and he said, "This is an incredible opportunity for you, Sam. You can come work for me and do real estate deals, and you get to keep five percent of everything you do." And I looked at him and I said, "Gee, that sounds like a Pritzker deal." And he didn't laugh. But I said, "You just need to understand that if I have all of the characteristics that you really want, then you shouldn't be able to hire me." And ultimately, at four thirty that afternoon, I said to him, "You know," I said, "rather than spend all this time where you keep trying to convince me I should come to work for you, why don't we just do a deal together?" And so we did a deal together, and that was the first of maybe ten or fifteen deals that we did over the years in various different places and different kinds of structures that led me to spend a lot of time with him and find him to be one of the most intriguing individuals and frankly the smartest risk guy I ever met.

    3. PADr. Peter Attia54:14

       What did you learn from him about risk?

    4. SZSam Zell54:16

       Boy, it-- I'm not sure I know where to start, but I think it ends with the fact that you had to be realistic. You had to be able to look at it and say, "What could go wrong?" You know, if I learned anything from him, I learned that everything, if it went too well, you could survive. The only time you couldn't survive is if it didn't go so well. So focusing on the upside was interesting but not productive. Focusing on the downside was what risk was all about. And to the extent that you could quantify the downside, to the extent that you understood what the risk it was you were taking, your chances of survival were much better. I think the key ingredient of that is focusing on what is the risk you're taking. I think a lot of people get in a lot of trouble because they do a transaction, and they don't understand what the risk they're assuming is when they do the transaction. And what he taught me more than anything else was look at the deal and figure out where is the vulnerability, where is the assumption you've made that has to be right in order for the deal to work. And we were working on a deal and then in 1969, and it was very complex, and I put together a very complex presentation and sat down with him, and it took me twenty-five minutes to explain how we were gonna do this and do that, and do this and do that. And at the end, he looked at me and he said, "Well, step seven is the only step that's really relevant. That's where the risk is. If you can satisfy yourself that step seven," in this case it was a multi-use complex, and the risk really was could you release the office space? If you could lease the office space, everything else worked. So all the other things that I did to, to mitigate this, to mitigate, they're all irrelevant. Only real issue was could you or could you not rent the office space? If you could, the deal was gonna work. If you couldn't, all the other stuff didn't matter. And the ability to zero in on what it is that represents the decision-making risk, that's really where it all comes down. And that's really what I learned from him.

    5. PADr. Peter Attia56:40

       And Sam, is it safe to say that those lessons apply across all asset classes? I mean, is there an asset class where that logic doesn't stand front and center for you? If you're someone like me who's thinking about where to invest 401k dollars, do you still think about it through that lens?

    6. SZSam Zell56:58

       I don't know how you can think about it any other way. I mean, if you're investing 401k dollars, you're basically trying to provide for your retirement or for your future. So then the question becomes, okay, what stands between you and achieving the objective? And if you can understand what it is, then you can quantify the risk. Can I rent the office space? If I can rent the office space, if I can bet on Raleigh, North Carolina being a growth area because of the research triangle, that's the assumption. That's what makes you decide to invest in Raleigh or somewhere else. There's always some epiphany point that is what motivates you to make the decision, and that's the ultimate judgment you make. This is why I'm doing this. Why is a critical ingredient, and why usually connects to the word risk.

13. 57:56 – 1:07:36

    Bob Lurie partnership: complementary skills, shared values, and the impact of loss

    1. PADr. Peter Attia57:56

       Where did you meet Bob?

    2. SZSam Zell57:57

       Bob and I pledged the same fraternity at the University of Michigan in 1959. We were both part of a twenty-one guy pledge class. I didn't know him very well. We then both worked on a campus-wide thing called Soft Shell, and we got to know each other a little better. But basically didn't really know each other at all until we were friends and they were like all of my fraternity brothers, but I wasn't really a big fraternity guy. And then when I was a senior, and I had started this real estate business, I was in the house one night for dinner and he said, "You know, I heard you were renting apartments and kind of running a little student housing project." And I said, "Yeah." And he said, "That's really intriguing. If you ever need anybody else to join you, you should call me." And literally a couple months later, we got our third building. So there were two of us together, and we now needed a third guy. So we talked about it and we offered Bob the opportunity to join us, and he did. And eventually... And Bob was an engineer and very, very organized character. So he, in effect, started turning what was literally, uh, hardly a business. It was two guys trying to get a free apartment and, uh, helped us turn it into a business. And then when I graduated from law school, I was confronted with this incredible decision of what was I gonna do. At that point, I think I made a quarter of a million dollars my senior year in law school. It's just an enormous amount of money, and I was a big deal in a small pond and, and the question was, should I stay in Ann Arbor? I obviously had done very well there, and I knew everybody. And I went back and forth about it, and I finally said, "You know, I have to find out how good I can be. I have to find out what I can do, how far can I push and test my limits." And so I decided that I was gonna sell everything in Ann Arbor and move to Chicago and see if I could build a career. Eventually, it came time to figure out who I was gonna sell the business to, and Bob became the obvious person 'cause he was gonna stay there. I basically sold him the business. And the last thing I said to him was, I said, "When you get tired of screwing around and you wanna come play with the big boys, call me." We laughed and I laughed, and then I moved to Chicago. And we continued kind of a very, uh, touch base relationship, but not much. And then about three years later, he called me and he said, "Sam, do you remember the last thing you said to me?" And I said, "Yes." And he says, "Well, I'm ready." And I said-- without hesitation, I said, "Come on." And so he moved to Chicago, and I was very sensitive to the fact that I didn't want him... If he was gonna be my partner, I didn't want him to ever work for me. And so I said, "Instead of paying you a salary, I'll give you an opportunity to own a piece of the deal." And as time goes on, we'll increase that to the point where we eventually become partners, 50/50 partners. And literally, that's what happened. We started out at eighty-five/fifteen, and then we were seventy/thirty, and then we were sixty/forty, and then we were fifty/fifty. And it all became an example of transferring of, of risk because he, in effect, began taking on the risks that I was taking, and we built the business together.

    3. PADr. Peter Attia1:01:33

       I remember hearing somebody once talk about great partnerships. I wish I could remember who said this. And the gist of what they said was excellent partnerships are when you have... They just used the example of two people. Obviously, partnerships can be more than two people. But they said when you have two people who have complementary skill sets but shared values. Did that describe you and Bob?

    4. SZSam Zell1:01:53

       Yeah. I've never heard that phrase, but I think that's exactly right. In other words, our skill sets were very different. I mean, he was really an engineer. I mean, he literally, uh, if the books didn't balance, the numbers didn't trade it, he would just stop until they tied out. And I would be, "Well, they're close enough," you know, "and next." And I would be willing to go talk to anybody and chase down anything and, and he was a homebody. But we had a unique relationship, and we could finish each other's sentences. We understood each other. And later on, I kind of understood also that a very important part of our partnership was that we didn't have much of a social relationships. So we didn't have the classic partner of the wife who says, "How come they got this and we got that?" We basically had independent social lives. We both had wives. We both had children. But we focused our time together on our enterprise. And once a year, we had dinner, the four of us, and we had a wonderful time, but we never really tried to connect the personal day-to-day relationship with the personal relationship to building a business. So we spent ninety-nine percent of our time focusing on building our business relationship and very little time, and we ended up with completely unrelated social relationships.

    5. PADr. Peter Attia1:03:24

       Were you one of the first people that Bob told when he was sick?

    6. SZSam Zell1:03:27

       Yes, I was. But to be honest with you, I didn't understand it.

    7. PADr. Peter Attia1:03:33

       Do you remember what he said to you?

    8. SZSam Zell1:03:35

       Yeah. I mean, he'd come down with a relatively aggressive form of cancer, that he was gonna get chemotherapy. And, uh, I just assumed that he would suffer a little bit and he'd be fine, and then we'd go on. And as this was in September of '87 that he told me that. We went on and he had surgery and he had various issues and suffered a lot, but then came back and I just never assumed that anything was other than just gonna be painful process, but there was never a terminal end to it. And then in February of 1990, he came down to the office on a Saturday and he hadn't been to the office for a month. And he said, "I came down today 'cause I wanted to talk to you." And I said, "Okay." He says, "I want you to know that I'm gonna die." And I looked at him and said, "You're gonna die?" That wasn't on the list of options that I thought was possible. He said, "No. No." He said, "You don't understand. I've been trying to tell you for a couple years now that this is very serious and very rampant and that not too many people survive this." And he says, "And it was obvious to me that you just didn't accept that as a possibility and you needed to know that we're at the end here now and I've gotta prepare for it." I'll never forget that morning as long as I live because it was so shocking to me 'cause it just... I never even thought that dying was an option, that, that there could be a terminal event here. I mean, you know, when I got a cold, he got sick and we got... You know, I, I didn't really connect it. But it was from that point forward that we started to prepare and he eventually died in June of 1990.

    9. PADr. Peter Attia1:05:24

       Did his loss change anything in you with respect to your horizon, your risk, your desire to do the work? Or were you able to compartmentalize that and sort of move forward? I mean, how did you think about losing a partner who was your equal at that point?

    10. SZSam Zell1:05:42

        I think that as I think back on it, I think that all I could think about was our legacy and I think that I was more motivated rather than less motivated and that I wanted to do more because as far as I was concerned, everything that I did represented me and represented him. And later on when I endowed the Real Estate Center at Wharton, I endowed it under Samuel Zell, Robert Lurie. And when we did the Entrepreneurial Center at Michigan, I did it under Samuel Zell and Robert Lurie because everything I thought I was doing, I always thought I was doing for us and that I thought what I did and how I did it reflected as much who I was as I wanted the world to remember who he was.

    11. PADr. Peter Attia1:06:32

        His wife has really carried on quite a legacy. I mean, I actually heard of Bob even before I'd heard of you many, many years ago through his wife's legacy of their philanthropy.

    12. SZSam Zell1:06:43

        Yes. Well, first of all, the two of them before Bob died spent a lot of time talking about philanthropy and they both decided it's very, uh, chic today to talk about the giving pledge. But this was 1990 and nobody heard of the giving pledge. But these two people said, "You know, we have a fortune that we've made and we have to give it away and we wanna give it all away and we don't wanna burden our children with any significant inheritance or the burdens that come with it." And so in effect, before he died, they kind of had an, a pact as to what they were gonna do and she happened to be a nurse. So particularly focused on medical and eventually Lurie Hospital and, uh, a lot of other things that she did that were all involved in medical and created a wonderful legacy for him.

14. 1:07:36 – 1:14:44

    Building the modern REIT era: liquidity, public trust, and a prediction few believed

    1. PADr. Peter Attia1:07:36

       So I wanna shift gears for a moment and talk about an asset class that many people take for granted today called REITs, which I'll have you explain to folks. But what I think is most interesting is the role that you've played personally through your firm in actually creating something that we now really take for granted. So maybe spend a second explaining what a REIT is, and then let's kind of hear about basically the creation of what's now a more than trillion-dollar asset class.

    2. SZSam Zell1:08:02

       It all began in 1958 when President Eisenhower signed something called the Cigar Bill, and it was some kind of legislation that had to do with cigars, and I don't know what it was.

    3. PADr. Peter Attia1:08:18

       [laughs]

    4. SZSam Zell1:08:19

       But somebody had added a provision that created the, quote, "real estate investment trust." And the idea was that they wanted to create a vehicle that effectively created an opportunity for small investors to own pieces of large real estate projects. And the REIT concept basically said whereas a corporation is subject to double taxation because REITs or real estate was illiquid, they eliminated one of those two steps so that in effect, the REIT law allowed the creation of a vehicle that didn't pay corporate tax but only paid tax on the distribution. And the requirement was that in order to qualify for a REIT, you had to distribute most of the income. So that was created in 1958, and they were-- I don't know how many there were, but there were probably 10 or 15 that were created over the next give or take 25 years. The industry never grew very much, and by the time 1991 came around, the entire industry was only $7 billion. And the reason was that the private real estate market was so much more attractive that the REIT world up until that point only attracted people that came from insurance companies or non-entrepreneurial scenarios. And effectively, it was just kind of a byproduct of the real estate industry, but all the action was on the private side.

    5. PADr. Peter Attia1:10:05

       In other words, people weren't buying pieces of REITs. People were actually doing private investments in real estate directly.

    6. SZSam Zell1:10:12

       Yeah, I mean, that's what I did. And I was, you know-- We built a major real estate company. We had huge office apartments, retail, uh-

    7. PADr. Peter Attia1:10:20

       But ordinary people like me could not have participated in that type of deal.

    8. SZSam Zell1:10:24

       Would've been very difficult. So the idea was that you'd create these REITs, and then the classic description was the little old lady from Pasadena who wanted to own a piece of a New York office building. But effectively, because it was so unattractive compared to the private real estate side, it attracted very, very few significant players. It attracted very limited amount of capital, and it was kind of a backwater of the real estate business. And then in 1989, we ended up with a very serious oversupply of real estate, and that led to, uh, a couple insurance companies went broke, the savings and loan industry went broke, and little by little, all of the sources of capital that had funded the private side disappeared. So people like me were sitting there saying, "You know, where is the capital gonna come from for the real estate industry in the future?" Somewhere along the line, the thought process became, "Well, it's gonna be real estate investment trusts, and in effect, we're gonna have to access the public markets in order for the real estate industry to continue going forward." And so we began studying it and actually working with Merrill Lynch on the first of the, quote, "modern era, era of REITs." I became very involved in the process and because I recognized that this was the solution, and that ultimately this, if done right, would ultimately fulfill the ultimate dream, which was, quote-unquote, "liquid real estate." 'Cause ultimately, real estate was illiquid, and that was a big problem. So if you could create liquid real estate, then the scope of what was available was dramatically more available than ever before. And in 1993, in October, the National Association of Real Estate Investment Trusts, which was really a, another backwater organization whose sole objective was to protect the REIT law as written in 1958 with no understanding of the bigger scale questions and liquid real estate and what this was all about. In 1992, at the National Association of Real Estate Investors conference, I think they had 20 people. Between 1992 and 1993, as more and more people became more and more knowledgeable, when we had our conference in October of 1993 in New Orleans, we had 1,500 people. They'd never seen that many people involved in anything to do with real estate. And the National Association of Real Estate Investment Trusts asked me to give the keynote speech I remember working on the bullet points for the speech as I was flying into New Orleans, and I basically got up there and I said to them, I said, "Guys," I said, "we have a horrible track record as a real estate industry dealing with the public." Because up until then, the only reason that there was any kind of a public real estate trust or real estate anything was because there were no other options. In other words, you know, so if you wanted to dump some properties, you created a real estate investment trust, and you took the worst of your properties and sold it to the public. And this public were the fish, you know, the old poker story of if you're sitting there and you don't know who the fish at the poker table is, it's you. Well, that's how they did it, and it was not driven on what were the basics of real estate or cash flow. It was basically driven on commissions.

    9. PADr. Peter Attia1:14:05

       So it was very shortsighted.

    10. SZSam Zell1:14:07

        Because all the action was on the private side. And I basically said, I remember in that speech, I said, "I was driving around Houston in 1984, and I saw a bumper sticker, and the bumper sticker said, 'Please, God, give us one more oil boom. I promise we won't screw it up this time.'" That's where the real estate industry was in 1993, and we had an extraordinary opportunity to take this and make it into something really significant. But we had to be, in effect, custodians of the public's trust as opposed to them that took advantage of the public's trust.

15. 1:14:44 – 1:25:54

    Seeing downturns early: raising a distressed fund, and why 2008 differed from prior real estate crashes

    1. PADr. Peter Attia1:14:44

       Now, speaking of, you started this story by talking about the savings and loan crisis in the early '90s. You wrote a letter in the late '80s, and I don't think you necessarily predicted the S&L crisis, but you certainly foreshadowed the circumstances that led to it.

    2. SZSam Zell1:14:59

       Yeah, I wrote an article for NYU's Real Estate Center.

    3. PADr. Peter Attia1:15:04

       This is what, '88 you did this?

    4. SZSam Zell1:15:05

       This is '88. I sat around trying to figure out a title for the article, and I ended up coming to the conclusion that the right title for the article was From Cassandra With Love. Now, Cassandra was this lady in Troy who was cursed by the gods by making true predictions that nobody would believe. And I then sat down and wrote out an article that basically predicted what was gonna happen to the real estate industry and what the future was. True to form of Cassandra, nobody believed me. Everybody said, "Oh, Sam the pessimist again. He's trying to discourage other people so he can have more of the market." I mean, you know, just all kinds of non-recognition or non-willingness to accept what to me was simple logic. But it reflected what has been a kind of a hallmark of my career, and that is my ability to sit down and think through where is tomorrow and how can I identify where tomorrow is going and how can I position myself to take advantage of that. And that article led me to lead the whole conversion of the real estate industry to the real estate investment trust industry and create liquidity. In that speech in October of 1993, I predicted that we would be $250 billion in 10 years and well on our way to a trillion, and everybody thought I was truly insane.

    5. PADr. Peter Attia1:16:32

       What is that number today?

    6. SZSam Zell1:16:34

       Just shy of a trillion dollars.

    7. PADr. Peter Attia1:16:35

       What is it that you saw in '88 that you knew was going to create a real problem in the next couple of years? Because again, it's easy, I think, now to say-- By the way, I'm gonna give you another question I'm gonna ask you in a moment just to, so I don't forget it as much as you. I wanna talk about the differences between '91 and 2008 because you, in many ways, saw both of these coming, though they were very different types of crises. So I wanna come back to that. But it's easy to look back at 2008 and say, "Well, of course there was gonna be a credit crunch because of X, Y, and Z," and it's easy to look back at '91 and draw the same conclusions. It's not that easy to say it before it happens, and it's hard to go back and sort of remember what you saw at the time without the knowledge of hindsight.

    8. SZSam Zell1:17:21

       Yeah, I guess all I can remember about that period was that this was the '80s when the Japanese invaded the US market. The Japanese came here and made the ultimate classic mistakes that all kinds of investors have made coming to the United States, and that is, well, what works in my home market obviously works somewhere else in a different market. The Japanese had flooded the market with capital. Occupancy levels across the country in every form of real estate were down. Supply was way out of whack. And it wasn't very hard to predict that this was the end of the world in terms of real estate. And I remember vividly when I started raising money for the first real estate opportunity fund in 1989, I was confronted with the challenge where I walked in and sat down with an insurance company or a pension fund and I said, "The end of the world is coming. Here's the oversupply, here's the this, here's the that." And they looked at me and said, "Wait, what are you talking about? We just heard from our MAI, our appraiser, that our portfolio has gone up in value." I said, "That's BS. That's not ever happened. Look at the numbers. Look at what the numbers are telling you and look at where tomorrow's numbers are." I remember giving a speech at that time and talking about the fact that the missing element was we didn't have enough tenants for all the occupancy that we were creating.

    9. PADr. Peter Attia1:18:46

       So you were raising a fund at that time-

    10. SZSam Zell1:18:48

        Yes

    11. PADr. Peter Attia1:18:48

        ... for distressed assets, basically.

    12. SZSam Zell1:18:50

        Yes.

    13. PADr. Peter Attia1:18:50

        You knew that the shoe's gonna fall. I wanna have lots of dry powder for when something happens.

    14. SZSam Zell1:18:55

        But nobody had ever raised a fund before, not for a distressed property.

    15. PADr. Peter Attia1:19:00

        And so you're talking about an asset class that people can't fathom at that point.

    16. SZSam Zell1:19:04

        In 1989, 80% of the institutions that I pitched to didn't have real estate as an asset class.

    17. PADr. Peter Attia1:19:11

        Let me make sure I understand what you're saying. You're saying in 30 years ago

    18. SZSam Zell1:19:16

        30 years ago

    19. PADr. Peter Attia1:19:17

        80% of pensions and endowments didn't have real estate-

    20. SZSam Zell1:19:21

        As an asset class

    21. PADr. Peter Attia1:19:21

        ... in their book of business?

    22. SZSam Zell1:19:22

        That's correct. They owned stocks, and they owned bonds, and that was it. And there were a couple of really far-out investors who had some real estate. But there was a very famous study by Ibbotson, I-B-B-O-T-S-O-N, that in 1992 reached the startling conclusion that real estate was a separate asset class. But prior to that, so here's this guy coming in, and worse than that, he didn't even wear a suit and tie, and he's pitching us in on the fact that the end of the world is coming, and get ready and be prepared and be part of a fund. And that first fund was unbelievably difficult to raise, and then the rest of them were very simple.

    23. PADr. Peter Attia1:20:05

        So what was different in '08? 'Cause I think for many people listening to this, I don't remember the savings and loan crisis 'cause I just wasn't really old enough.

    24. SZSam Zell1:20:14

        Sure.

    25. PADr. Peter Attia1:20:15

        But I remember learning about it when I became involved in credit risk more than a decade later, or about a decade later, and so it became a historical lesson. And it had some pieces that were similar to '08, but some pieces that were different. You lived through both of these, the-- therefore, you're in a much better place, I think, to explain where they were similar and where they were different, and why the second one ultimately was much bigger.

    26. SZSam Zell1:20:38

        Well, but that's not true.

    27. PADr. Peter Attia1:20:40

        Sorry. I should say why it had less containment.

    28. SZSam Zell1:20:42

        Well, the 2008 crisis was the first recession since World War II where real estate was not in oversupply at the beginning. That's really-- Now, the truth of the matter is the oversupply was in single-family houses. But that's a different class than commercial real estate. But commercial real estate, although it wasn't great in 2007, although I sold Equity Office in 2007, but by the time 2008 came, it was softening, but it wasn't in oversupply. Every other recession, '73, '81, '89, all of them were real estate recessions triggered by oversupply. So that made 2008 very different than all the rest of them. It also meant that this also occurred at a time when interest rates were going down.

    29. PADr. Peter Attia1:21:39

        Mm.

    30. SZSam Zell1:21:40

        So whereas in the past when there were oversupplies, there was an enormous incentive on the part of the lenders to get rid of it at any cost. In 2008, the cost of carry was going down, therefore the motivation to get rid of it was much less, and the lenders were willing to take less hits, therefore the opportunities as a distressed buyer in '08 and '09 were nowhere near as attractive as they had been in the other cycles.
16. 1:25:54 – 1:31:06

    WeWork, marginal supply, and governance rules: barriers to entry and “skin in the game”

    1. PADr. Peter Attia1:25:54

       Mm-hmm. Now, as we sit here today and record this, Sam, there's no one listening to this who hasn't been following the story of WeWork, but you were one of the first people to talk about WeWork through the lens of marginal supply. And in many ways, there are few people that can comment on that type of a business model more than you. What is it about WeWork that years ago had you scratching your head saying, "I don't understand this business"?

    2. SZSam Zell1:26:21

       Unfortunately, not understanding it was not one of my problems.

    3. PADr. Peter Attia1:26:24

       [laughs]

    4. SZSam Zell1:26:25

       I think, I think I understood it pretty well.

    5. PADr. Peter Attia1:26:27

       Well, you didn't understand why it could be viewed as so valuable.

    6. SZSam Zell1:26:31

       Yeah. Well, I mean, my first exposure to the WeWork model, which is basically leasing an office floor for 15 years and then breaking it up and then leasing it to small users at higher rates, the first example of that was a guy named Paul Fegin in the late '50s. In the late '50s and early '60s, no new office building existed without a floor or two leased to Fegin. And then supply became much more prevalent, and he went broke. And then somebody else did it again, and they went broke. And eventually, even today, the largest co-working company in the world, called Regus, they went broke. Why? Because if you're the marginal supplier, when things are good, everybody uses you, and when things start to soften, you're the first one to feel the impact. So the idea that WeWork was some kind of technology company, I didn't understand that unless maybe they came up with a special way to underwrite beer or something, but it was basically a giant promotional effort. You know, it's just the Enron of real estate.

    7. PADr. Peter Attia1:27:44

       You know, it's funny, hearing you describe it in marginal terms makes so much more sense for someone like me who doesn't have a great knowledge of economics, but knows enough. When you look at the marginal cost curve of oil, you realize the reason the tar sands get hammered first in 2008-

    8. SZSam Zell1:28:01

       Exactly the same thing

    9. PADr. Peter Attia1:28:02

       ... is once the marginal cost became below the cost of crude, you're hosed.

    10. SZSam Zell1:28:07

        Well, just think about it. What was WeWork's competition? It was this plug at Starbucks. In other words, the guy came and he, and he occupied a desk from you, but if things got tough, he went back to Starbucks and plugged his computer into the wall, and he was in the co-working space.

    11. PADr. Peter Attia1:28:25

        First of all, that insight to me is, it's a great example of how after the fact it's obvious, but before the fact you think, "How is that not more obvious?"

    12. SZSam Zell1:28:33

        But come on, how can it not be obvious? I mean, where did these guys come from? They came from Starbucks.

    13. PADr. Peter Attia1:28:39

        [laughs] That's just such a great way to think about it.

    14. SZSam Zell1:28:43

        I mean, the question that I keep asking people about WeWork was, just tell me the cash flows that WeWork generate, what do they come from? Do they come from profits in other businesses, or do they come from venture capital, which in effect doesn't have the discipline of profitability? And the answer was obvious, and it still is today. And by the way, when it's all said and done, any company that doesn't have a barrier to entry is vulnerable in any business. Just look at how many competitors WeWork has spawned. Now, most of them have been spawned because WeWork sold this technology concept, but the reality is that they're creating new WeWorks all the time, just calling them different things.

    15. PADr. Peter Attia1:29:32

        There's something else that I know in the tech space we've talked about before, which is governance, and this is something that you've said so many amazing things on governance, everything from at one end of the spectrum, which is you wouldn't buy a business that you couldn't run. On one level, you sort of have to be able to run a business that you're going to invest in.

    16. SZSam Zell1:29:48

        Yeah, I mean, that's why although we have been agnostic, and we've been in 25 different or 30 or 50 different businesses, but the standard has always been, if I can't run it, then I don't wanna own it. And so we don't do rocket engines. We don't do biotech. 'Cause if the proverbial hit the fan, I could always step in, and there have been numerous examples over the years where I've had to step in and take over and temporarily make something work. But if I can't do that, then that's above my pay grade. I'm disciplined enough not to get involved in things that I couldn't run if I had to.

    17. PADr. Peter Attia1:30:25

        Another principle of yours is sort of everybody has to have skin in the game.

    18. SZSam Zell1:30:29

        Well, I mean, to me, that's not a principle. That's just basic logic. I mean, if I'm depending on you to perform and you aren't at risk, I'm a fool. So every single thing I've ever done, including when I first started in business, from the first day, everybody who was at a decision-making position in my firms always had a piece of the action, and that piece of the action required an investment. Now, it might be a very small investment, but relative to their net worth, it was meaningful, and they had skin in the game.

17. 1:31:06 – 1:37:48

    Company culture and loyalty: accessibility, low hierarchy, and “the enemy is without”

    1. PADr. Peter Attia1:31:06

       Speaking of your firm Sam, you, you've, uh, you know, spoken to several people who have worked for you, and I know people in your circle. It's a little bit unusual in the, the extent of loyalty that has followed you. You tend to collect people. They don't really go anywhere.

    2. SZSam Zell1:31:21

       Yeah, I don't know whether collect is that... I never thought of it in terms of collection, but I think it's true.

    3. PADr. Peter Attia1:31:27

       But they don't leave, right?

    4. SZSam Zell1:31:28

       They don't leave. We have a long history of even if you went to my world today, you'd be shocked at how many people have been there for 20 and 30 years. And obviously, I take great pride in the fact that they have had the confidence level to stay with me all these years, and in many cases, in different roles. I mean, in other words, that's als- always been part of it. In other words, I'm, I'm really focused on the individual and his or her capabilities, and if I have trust in somebody and I have confidence in somebody, I'm just as comfortable having them do business A or business B 'cause I think in the end, the success or failure is really a function of how good a businessman you are, how good are you in making judgments, and that's what separates the men from the boys. So creating this long-term loyalty and connectivity is very important. How do you do it? I don't know. It just kinda happened to me, but I-- when I look around in my own world, I can't help but say that one of the key things that has separated and distinguished me from other people is that I have always been accessible. In other words, I make a joke of the fact that I've had the same office for 30 some odd years, and only four years ago did I discover there was a door on the office 'cause I'd never closed the door. So that means that I was available to everybody, and by virtue of being able to be accessible to everybody, I'm in effect lowering the overall risk because there's no excuse if Sam's available. In the same manner, I've never had much of a hierarchical structure, never even thought of it that way. Everybody wears the same thing to the work every day, and there's no secrets, and I know one of my favorite words is the enemy is without. In other words, we did a little drawing of a, a bunch of wagon trains circled, and the point being that the enemy is on the outside, not inside. Supposedly, Abe Lincoln created a team of rivals. Well, maybe running a government, you need a team of rivals. I don't know. But when you run a business, you don't need a team of rivals. You need a team of partners who are rivals to the outside, and that's always been a critical part of the way we think and the way we operate.

    5. PADr. Peter Attia1:33:48

       You told a story once about a woman working for you who came to you and said she'd had a change of heart and she wanted to go to divinity school. How did you handle that?

    6. SZSam Zell1:33:55

       Well, I mean, the answer is, in the end, nothing is more important than, in effect, facilitating people to test their limits, reach their goals. And she sat down with me and said, "I'm at a stage in my life where I really need to change how I'm thinking." And although I didn't necessarily envy her or wanna go to divinity school myself, I said, "Well, if that's what you wanna do, then how can we arrange your work schedule so you can go to divinity school, get a degree, and still stay relevant in the business world?" And that's what we did.

    7. PADr. Peter Attia1:34:30

       What does she do today?

    8. SZSam Zell1:34:31

       Still works for me, and she doesn't do any holy roller stuff. But in effect, that experience is very relevant to what she does and her alma mater and her activities and other things, which is wonderful.

    9. PADr. Peter Attia1:34:43

       We have a mutual friend, which is how we met, and one day I was in his office, this is probably five years ago, and I saw something in his office and I was like, "That's an incredible piece of artwork." And he said, "Oh, it's a Christmas present from Sam Zell." And I would learn later when you and I met that there's more to that story. So tell me a little bit about how you think about these gifts.

    10. SZSam Zell1:35:06

        Well, I think you gotta go back to 1976. I'd been in business for, give or take, I don't know, eight years, and, uh, I'd started getting, you know, chocolates and grapefruits and all kinds of Christmas things, pens, pencils. And I felt motivated and felt that I had to somehow or other respond to all these people sending me this stuff. But the idea of me sending out a calendar with my name on it or a pen or a pencil, I just... It's just crazy. It didn't make... That wasn't who I was. And so I decided that what I was gonna do was I was gonna send out to people some memento of where my head was at that particular year. And so the first year, I sent out just a simple Lucite block with a Samism on it, which was, "We suffer from knowing the numbers." Every year, I kept coming up with something different that reflected where my head was at or where I thought we were going or what I thought was happening. And then when you do something for a very long period of time, it tends to get out of hand. And so by 1994, the idea was, "Well, let's do a music box." And so we did a little automaton with a music box, and it happened to be, uh, VG's song, but basically, uh, talking about where we were and, uh, and where the real estate industry was, and then we kept going, and we did that for another 20 years.

    11. PADr. Peter Attia1:36:32

        How much time goes into preparing that?

    12. SZSam Zell1:36:34

        Well, the answer is a lot. We ended up doing a lot of these very complicated automatons, and, uh, we ended up getting a group in California that did the models for Star Wars. movie to start doing these year-end gifts for me. Probably took about six months. The good news was we produced really exciting products. The bad news was that I was basically making a prediction where my head was at six months before it was delivered. History turns out that I was pretty good at that. I mean, probably the most significant example of that was December 31st, 1999, I sent out a piece that was basically calling an end to the dot-com boom, and it was basically the emperor has no clothes. And the song was Paul Simon's 50 Ways to Make a Billion. I basically made fun of the idea that people had just thought that it was just so easy, and let's just... And it all, the i- idea for that year's gift had come when somebody said to me, "You know, you must really be pissed off. You spent all those years becoming a billionaire, and these people became a billionaire overnight." And I said, "When it turns to cash, call me."

    13. PADr. Peter Attia1:37:47

        [laughs]

18. 1:37:48 – 1:45:58

    Information intake, curiosity, travel, and “we suffer from knowing the numbers”

    1. PADr. Peter Attia1:37:48

       You're kind of a lifelong student. Earlier, you alluded to the fact that a big part of how you mitigate risk is know as much as is possible about your world. Now, when you were investing in dime bag stores on the side of Ann Arbor blocks, the world was a lot smaller than it is today. So how do you stay abreast of your environment and the environment you invest in today? What do you do to learn?

    2. SZSam Zell1:38:16

       I read, and I read, and I read, and I read. I'm never without something that I'm reading. I read five newspapers a day. I read three magazines a week. I listen. I'm trying to observe. I'm trying to figure out. And when I think about it, I think about the fact that I have some kind of a unique capability to sift through volumes of information and only remember the parts that are relevant. I mean, I read maybe one and a half books every two weeks, and most of them are escapist novels. And when I read them, it's Grisham, it's Baldacci, it's whatever it is. It's just I'm very involved. I love reading them. And the day after I finish them, I can't remember anything about them. I don't remember who the protagonist was. I don't remember anything. But if there was a description of, uh, Berlin, I remember the description of Berlin because that, in effect, has potential relevance going forward. And so somehow or other, I'm able to get rid of the what I'd call the non-relevant information. Great stories, was very entertaining while it happened, but it's not relevant to tomorrow. And somehow or other, I'm able to hang on to and use that kind of unique information. So one of the stories that's applicable to this is I was on a motorcycle trip in Chile, and last day it rained like crazy, and we were-- we cut the trip short by a day, and we started coming home early. And I realized that we were gonna get home at three o'clock in the morning, and that didn't make a lot of sense. And so we're trying to figure out, well, geez, could we stop someplace on the way from Chile to Chicago, and where could we stop? And then I remembered that I'd read this protagonist escapist book where the final scene was a shootout on a golf course on an island in the Caribbean, and that this golf course was part of a resort that had an international airport inside the resort. And we ended up coming up with the name of the airport and the name of the resort, and we ended up landing there, spending the night, and then coming back to Chicago at four o'clock the next afternoon. But that was really typical. Somehow or other, the only thing about the story that I could remember was this unique scenario of international airport inside of a resort. I don't remember anything else about the book. I don't remember anything other than the shootout at the end. But the only thing that was relevant in the book to me in the future was the airport and the resort. Everything else was superfluous. But it's that kind of segmentation and absorption that I think contributes to the decision-making that I'm constantly making. I'm constantly adding and increasing my knowledge of everything in every direction I can. I mean, a number of years ago, I went to Ulaanbaatar. Why would I go to Ulaanbaatar? Well, Ulaanbaatar happens to be the capital of Mongolia, and I had read someplace that they had opened a Gucci store and another high-end retail store in Ulaanbaatar, and I said, "Why would they do that?" And it turned out that the country was in a giant resource boom. And so I said, "We gotta go look at it and see what's there." That's kind of the way I attack and look at all kinds of information. You can't be an entrepreneur unless you're really curious. You gotta see the problems. You gotta see the solutions, and you can't see them from afar. You gotta see them up front. That's why, you know, I end up traveling a thousand hours a year on my plane. The typical CEO of a Fortune 100 company travels two hundred and fifty hours a year. But I gotta see everything. And when I'm making risk decisions and I'm making decisions on partners, I wanna see them in their home territory. Almost anybody will come see me if I invite them, but that doesn't do me anything. It's also particularly relevant that if you go see them, you can decide when to leave.

    3. PADr. Peter Attia1:42:38

       [laughs] You mentioned obviously travel. You have been to some crazy places. You've been to places that most people don't think of as vacation destinies, like Iraq and Syria.

    4. SZSam Zell1:42:48

       Yes. I don't take vacations. As a matter of fact, that word is kind of foreign to me. I've never been one to sit on a beach. I, I don't know how to do that. I just wanna see stuff. And you know, one of the great stories that my wife and I talk about is that we went to Syria right before Syria came apart, and we went to Damascus, and we went up into the various parts of Syria, and we had one day that we just didn't have enough time, and so we said, "Well, we'll go to Aleppo next time." And, uh, in between, of course, Aleppo was destroyed. So that only motivates me more to constantly see stuff. And one of my great stories was I saw this video of the biggest copper mine in the world near Njinaja. It was run by a company called Freeport-McMoRan out of New Orleans. And I ended up at a conference sitting next to the CEO, and I said, "I just read about this incredible mine, and I wanna go see it." And he said, "Just tell me and I'll set it up for you." So we flew into the jungle where there was an airport literally built into the jungle just to serve the mine, and went up to the mine and saw stuff that I'll never forget. So it's curiosity. You can't be an entrepreneur, you can't be a risk-taker unless you're also just ape about knowledge, and you just gotta keep absorbing and, and separating out that which is relevant and that which isn't. It's very easy to get overcome by too much information, and therefore you can't make decisions. So you've gotta be able to sort it out.

    5. PADr. Peter Attia1:44:23

       And you alluded to that earlier when you talked about your very first Christmas gift, which had a quote about... What was the exact quote? Something about the num-

    6. SZSam Zell1:44:29

       We suffer from knowing the numbers.

    7. PADr. Peter Attia1:44:31

       Yeah. How do you draw that line? I'm a person, Sam, who will always err on the side of analysis paralysis. Maybe it's because I was an engineer, I don't know. And obviously, knowing none of the numbers is counterproductive. How have you navigated that balance? Or maybe asked another way, how would you teach somebody or help somebody find their own way?

    8. SZSam Zell1:44:54

       Well, the origins of that sentence, we suffer from knowing the numbers, really reflects the fact that there have been numerous times in my career when everybody else was doing stuff, and I wanted to do it, too, except I knew too much. I was too knowledgeable. And so if I didn't know as much, then I could make the same mistakes they were. But by virtue of knowing the numbers, it became the disciplinary factor that kept me from making a mistake and becoming part of conventional wisdom instead of an independent thinker.

    9. PADr. Peter Attia1:45:31

       Ah, so you actually are praising the knowledge there and not criticizing it.

    10. SZSam Zell1:45:35

        No, I'm not criticizing it at all. I'm saying that it's a burden. I mean, it'd be so much easier if I didn't know so much. Then I could just say, "Hey, everybody's buying the fang stocks. You know, jump on the bandwagon." But that's just not the way I think, and I've spent my whole life trying to separate what other people think is cool and what I know is something different.

19. 1:45:58 – 2:03:22

    Never retiring, macro outlook in 2019, and concerns about freedom of speech

    1. PADr. Peter Attia1:45:58

       So you're in your 70s, if I'm doing my math right, and you're not even close... I mean, you'll never retire. I've never asked you this question in other contexts, but I know the answer. Like-

    2. SZSam Zell1:46:08

       Retire?

    3. PADr. Peter Attia1:46:09

       ... you can't... Exactly. R- what does retire mean to you? Retire would mean stopping something that is-

    4. SZSam Zell1:46:13

       Retire from what?

    5. PADr. Peter Attia1:46:14

       Yeah, exactly.

    6. SZSam Zell1:46:15

       I mean, I haven't worked since the fourth day that I was in that law firm.

    7. PADr. Peter Attia1:46:18

       [laughs] Or as my dad used to tell me, "Make your vocation your vacation. You'll never work a day in your life."

    8. SZSam Zell1:46:25

       And that's exactly what I've done. I mean, I've spent my whole life, I've loved everything I've done. I've loved getting up in the morning. I never was... found myself getting up in the morning and saying, "Oh my God, I gotta go do this again." And I've tried very hard to focus my life on never doing anything I don't wanna do and never being any place I don't wanna be.

    9. PADr. Peter Attia1:46:46

       With all the lessons that stand behind you, lots of people think the US economy has been too frothy for too long, and lots of people, myself included, are wondering, "Oh my gosh, should I be sitting in all of these equities at this moment? Should my 401k be distributed this way versus that way?" I certainly won't ask you those types of granular questions, but on a more macro level, how bullish are you on the US economy at this point in time? And I guess just for context, we're having this discussion in October of 2019. So what's your view? You've been through every cycle, and you also have the luxury of seeing cycles both in and out of this country because of the nature of your work.

    10. SZSam Zell1:47:28

        Yeah.

    11. PADr. Peter Attia1:47:28

        What do you think about the world we live in today?

    12. SZSam Zell1:47:29

        Well, when all is said and done, you have to think from the perspective of what I call pure logic. For 25 years, and people ask me about interest rates, for 25 years, the United States, the risk-free rate of return was 5.6%. If the risk-free rate today was 5.6%, the country would be broke, as would the rest of the world. So you start with the assumption that the world we live in creates a set of limitations. I think one of those limitations today is that nobody can afford for interest rates to go up. So therefore, I think that, and with the amount of debt being created, that's even more the case today. So I think that, number one, I think we're probably... I don't think we're in a bullish environment Despite the fact that stock market today is at an all-time high, I don't think it's the same kind of an all-time high as it has been in other, quote, "frothy periods." I think we've pretty much come to the conclusion that growth is limited, and I think growth is limited, but I think growth is gonna continue to be positive. I'm very sensitive to the question which I get all the time about what inning are we in? But I also think that people aren't focused on what I think is an even more important question: when did the game start? So in the stock market, it was January or February of '09. But if you were in the real estate business, the real estate business was really terrible in January of '10 and January of '11 and January of '12, and only started beginning to get better in '13 and '14. So what inning are we in? When did it start? And I think the same thing is true of a lot of other things. So I guess what I would tell you is, I think that the environment is benign, not aggressive, not pessimistic. I think that our whole system is based on or built on growth, and we are in a period of substandard growth. And substandard growth, I think, is also recessionary, de- in effect, defers recessions. So I think it's very likely that we will continue to bounce along till the beginning of '21, and maybe even for longer, because in effect, the central banks don't have the tools with which to defend themselves, therefore they have to keep the process benign. And as you see, here we are in what's supposed to be the eighth or the ninth inning, and instead of the Fed raising rates, they're lowering rates.

    13. PADr. Peter Attia1:50:26

        Yeah, that's the weird thing, isn't it? It's sort of like having a fire department that's low on water.

    14. SZSam Zell1:50:32

        Well, that's one way to look at it, but I think another way to look at it is it, it's having a fire department who figures that the best way to solve, to mitigate the risk is to wet everything down before the fire begins.

    15. PADr. Peter Attia1:50:45

        Yeah, yeah, slow drip with sprinklers.

    16. SZSam Zell1:50:47

        Yes.

    17. PADr. Peter Attia1:50:48

        Well, I like the way you're thinking about that, and, and I like your optimism. In terms of the US's position globally, Sam, look, I mean, in the '80s, as you described earlier, everybody thought that Japan was coming to eat the lunch of the United States.

    18. SZSam Zell1:51:02

        Right.

    19. PADr. Peter Attia1:51:02

        Today, obviously, that sentiment has been replaced by China. Do you see the relationship between the US and China as much more complicated and much more interwoven, or do you see them as independent economic behemoths?

    20. SZSam Zell1:51:14

        Well, I guess you gotta start by the fact that I think that China has been taking advantage of the United States for twenty years. I think when China was admitted into the WTO, there was an assumption that by virtue of them being admitted into the WTO, that they were gonna behave differently. The reality is, they've behaved as every mercantilist since the beginning of time, and we have not had the, what I'll call independence or clearness of thought to understand what was going on, and only now are we, frankly out of necessity, creating the kind of environment that challenges China, and in effect says to them, "You can't continue to take advantage of us, and if you do, we're gonna change the terms of the game."

    21. PADr. Peter Attia1:52:03

        And of course, that's a very political question, which, and I don't think either of us wanna dive into. Do you believe that we are tethered to each other in some way from a sort of supply and demand standpoint? In other words, do you believe that the fate of one country rests somewhat with the other, independent of behavior change?

    22. SZSam Zell1:52:21

        Well, I think that there's little doubt that all of the countries of the world are much more connected today than they ever have been. Obviously, the two biggest by definition are much more connected. I don't think that we can ignore China's existence, nor do I think China can ignore our existence. And one way or another, we have to find a middle ground where China can continue to prosper and grow, but not in the mercantilistic, fortunately, like identifying five industries they're gonna pour capital into to take over AI and stuff like that. We can't afford to let that happen.

    23. PADr. Peter Attia1:53:04

        Sam, what advice would you give to someone like me? So like you, I'm first generation, and when I look at my kids, they are growing up in an environment that has more to offer, more opportunity, more privilege, more comfort than the environment I grew up in. I have to imagine the same is true for your kids. How do you think about instilling in our kids the lessons and virtues that first-generation kids had instilled into them without much thought on the part of their parents because they were the defaults?

    24. SZSam Zell1:53:36

        I guess no matter what you say, I think it comes down to, can you inspire your children? Can you encourage your children to excel? My message to my children has always been, "Go for greatness." I never fantasized of anybody, of my children working for me. If it turned out that one of my children had the talents necessary, that'd be great. But what I really communicated to them over and over and over again is, "Find what makes you happy. Find the challenge, and then excel at it. Be the best you can at who you are and with the talents that God has given you." That's the message that I've given to my children over and over and over again. Yes, I've been very successful, and yes, they're gonna have less challenge financially than I did. But Financial challenge is not the ultimate answer. The ultimate answer is, can you maximize what skills or genes or understandings you have and make a difference? That's what we're on this earth for, and that's what our responsibility is, and I, as a parent, am responsible to inculcate my children with that. And hopefully, what I've done financially and otherwise gives them the freedom to truly excel at whatever turns them on.

    25. PADr. Peter Attia1:55:06

        Last question, Sam. Outside of your business world, what problem are you most interested in? I know that your wife, who I've had the privilege of meeting, Helen, is very involved philanthropically. As you think about your priorities over the next twenty, thirty years-

    26. SZSam Zell1:55:22

        Let us pray

    27. PADr. Peter Attia1:55:22

        [laughs] Where do you see the ability to apply your problem-solving, your resources, to problems that go beyond your day-to-day problems within business? Which is, you're constantly a problem solver there.

    28. SZSam Zell1:55:37

        Well, I think maybe the best way to describe it to you is that I've been very focused on freedom of speech. I'm very, very concerned about America is truly unique. America is like no other country in the world. I've been the beneficiary of that, and the challenge that I have and the thing that I worry about most is, can we keep America capable of providing unique opportunities for people to test their limits and excel? And freedom of speech is one of the most important things, I think, and I've been very concerned about what's going on in the college campuses, what's going on in business, where politically correct is the standard that, in effect, I think challenges the freedom that has made this country great. And so that's probably the single biggest issue that concerns me more than anything else.

    29. PADr. Peter Attia1:56:34

        Do you think the pendulum is just going through a cycle and that we're just seeing a very extreme end of it with respect to that particular issue?

    30. SZSam Zell1:56:42

        I hope that's the case, but I'm not sure that is the case, and I'm not sure that the perpetuation of standards in universities or, or in the workplace is not changing our society in a way that ultimately is gonna be deleterious to the future and to the opportunity for our children and our grandchildren.

Episode duration: 2:03:22