Sam Zell Unplugged Rocks CU Law School
It was close and registration was free, so I went over to CU, where Sam Zell, serial entrepreneur, infamous dealmaker, owner of the private investment firm Equity Group Investments and, according to Forbes, the 68th richest American, was speaking today at noon at the Wolf Law Building.
As advertised, Zell, a gregarious man with a big smile, pulled no punches whether talking about the characteristics of a good entrepreneur, the economy and our current administration’s efforts to control it or the state of the journalism industry, all things he spent time expounding upon during his one hour and eight minute interview session conducted through the Colorado Law School.
Zell began in the real estate industry, but among other things, he created Jacor, a radio broadcast company with many stations, which he sold for a hefty profit to Clear Channel Communications in 1999. His Equity Group is the largest owner of apartment buildings in the United States, and as Prof. Scott Peppet pointed out in his introduction, he sold his Equity Office Properties Trust for $39 billion last year on the day before the stock market started going down.
He had taught a class earlier in the morning, and he reiterated what he told students then: the three years he spent in law school were the most incredibly boring three years of his life, but law school taught him to think, to learn how to ask questions, skills he says he uses every day of his life, something a room full of law students certainly wants to hear.
When asked what makes a good entrepreneur, he said that failure cannot be part of your vocabulary. He said self-confidence (“whether justified or not”) was important, but even more significant was to be able to identify problems and come up with a solution. The two most underrated traits of entrepreneurs, he explained, are the ability to execute, whether by yourself or by delegating to someone who can, and building relationships with the people with whom you work.
Zell said he thinks the economy is “flattening — that’s different than recovering,” he added. He called Barack Obama “a president in training” and unsuitable for the job. And he targeted Senator Barney Frank, who he said pressed Fannie Mae to ease credit requirements in 2000, as the trigger to the current crisis. He also denounced the speed with which Congress was working to make changes, arguing that there will be many unintended consequences. “We need a period of relaxation,” he said.
Of course the subject came around to his ownership of the Tribune Company, which owns the Chicago Tribune, the Los Angeles Times and the Chicago Cubs and which, given the amount of debt he took on to buy Tribune, has been criticized as Zell’s worst decision.
Zell doesn’t see it that way and took particular pleasure skewering journalism and newspapers. “People are just finding out how profitable newspapers were,” reminding everyone that until recently it wasn’t unheard of for newspapers, which had a monopoly on information at the time, to show profits of 30-40 percent.
Today, he says, you can get the same information from other places, and besides, newspapers, still thinking as a monopoly, have become incompetent and arrogant. “It’s a business that has made little progress,” he said, “and is using metrics that are no longer relevant.” One of those is home delivery. There is still a market for home delivery, he said, but not according to the current structure. Selling a newspaper at a machine for 75 cents but delivering the same product to your doorstep for half that price is insane, and a business model that will have to change in the future.
He questioned the future of newspapers sharing content with the Associated Press because, he says, AP, which today sells that same content to Yahoo and other search engines, is actually a competitor. When asked what newspapers should focus on, he said a couple of times, “local, local, local. I’m not going to the Chicago Tribune for news about Afghanistan. But for news about the Cubs, I would.” He said that, despite journalist’s objections, shorter stories were better because newspapers’ own research indicated people didn’t like longer stories and wouldn’t read them.
He got some good laughs out of a story he told about his plan to put ads on the front page of The Los Angeles Times. “I thought that God was going to strike me dead,” he said of the response from journalists, “and the building would fall down around us,” he said to applause and laughter. “But we did it, and we’re still putting papers out every day, as far as I know.”
When asked if newspapers should be charging for content, he said that could be a model, but not until newspapers decide what they want to provide that nobody else can. “Newspapers need to understand who their customers are and appeal to their customers.”