Sam Zell is a multi-billionaire who built up the largest commercial real estate holding in the US, was responsible for turning Real Estate Investment Trusts into a mainstream asset class, and has invested in countless major public companies.

The book starts with the incredible story of his Jewish parents escaping to America as refugees before World War 2, then follows Sam through the different phases of his long investment career – sharing unconventional wisdom along the way.

The book starts strongly and tails off towards the end, which left me questioning how much I got from it. On going back through my Kindle highlights though, I found countless valuable lessons — and here are some of my favourites…

“If you ain’t the lead dog, the scenery never changes”

“Frankly, there’s no substitute for limited competition. You can be a genius, but if there’s a lot of competition, it won’t matter.”

Sam made his fortune in real estate markets that nobody else was thinking about, so he could buy at low prices and control the market.

He says he’ll never enter a market where he’s less than number two, and preferably number one.

This reminds me of Richard Koch’s Star Principle – the market leader gets to charge higher prices (because consumers will prefer them anyway), and have greater economies of scale because (by definition) they’re selling the most.

“Every day you hold an asset, you’re also choosing to buy it”

Sam’s saying that when someone offers to buy one of your assets for a price higher than you’d pay for it today, it makes sense to sell. You can then deploy the cash in a more attractive investment elsewhere.

This is a challenging one for lazy “buy and hold” investors like me, because I’m always thinking “well, at some point in the future it’ll be worth more than it is now, and I’m collecting the income in the meantime”.

“I read risk for a living. I’m very focused on understanding the downside”

Sam has made some big bets, but he’s always focused on investments where there’s a limited, knowable downside and a big potential upside.

I am not a reckless person, but taking risks is really the only way to consistently achieve above-average returns—in life as well as in investments.”

“With today’s access to an overwhelming amount of information, most of it drivel, you have to focus on what’s meaningful.”

Sam talks in the book about one of his mentors, from whom he learned to zero in on the one or two most important factors that would make or break any deal.

Every deal has a couple of things that everything else hinges on: if they work out fine then everything’s great, and if they don’t then nothing else makes any difference anyway. If you can identify those factors and weight them in your favour, you won’t risk getting caught up in lots of irrelevant detail.

“Supply was going up and prospects for demand were not good. I was certain that we were heading towards as massive over supply and a crash was coming.”

Sam has repeatedly avoided getting caught in market crashes by spotting the signs and getting out early – which isn’t easy to do, because you look stupid if you’re wrong and the crash doesn’t come.

He seems to spot market tops and bottoms by seeing the big picture and looking at fundamental patterns like supply and demand. This involves self-honesty and avoiding wishful thinking: it’s easy to convince yourself that “this time is different” because you badly want it to be.

“If you dress funny and you’re great at what you do, you’re eccentric. But if you dress funny and you’re just OK at what you do, you’re a schmuck.”

Sam was wearing jeans to the office way before anyone else would dream of doing it, and has been known to turn up for meetings in his motorbike leathers.

“I simply don’t buy into many of the made-up rules of social convention. The bottom line is: If you’re really good at what you do, you have the freedom to be who you really are.”

This belief is reflected in the corporate culture he’s built – where exceptional people are free to do what they do best, while still being able to have fun and be themselves.

“I’m seventy – five; I work out every morning at 4:45, I’m at the office by 6:30 a.m., and I don’t get home from work until 7:00 at night.”

Getting up early and having a disciplined exercise regime is a common factor across virtually every autobiography of a successful business leader I’ve read.

This continues to be true way past typical retirement age, and decades beyond the point where they had enough money not to have to think about it ever again. Is this driven by greed? I don’t think so: another common factor is they love what they do, and can’t think of any way they’d rather spend their time.

Summary

There are countless lessons you could take from this book: I’ve not even mentioned Sam’s prodigious reading, his philanthropy, or his thoughts on corporate culture.

So it’s worth reading in full to identify the lessons that stand out the most to you, but mine were:

  1. Look for markets with little or no competition, and make sure you’re #1.
  2. Don’t get attached to your investments: when an offer to sell comes along at the right price, take it.
  3. Risk is unavoidable, but focus on understanding the downside.
  4. Focus on the one or two key factors that the success of every deal depends on.
  5. Identify big-picture trends, and stay on the right side of them by keeping yourself honest.
  6. Be great at what you do, then you don’t have to hide who you really are.
  7. Have fun – work hard every day because there’s nothing you’d rather do.

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