Fostering Entrepreneurship

An Interview with Sam Zell, Chairman, Equity Group Investments, L.L.C.

EDITORS’ NOTE Sam Zell is my personal philosophy is that graduated from this program are now highly the Chairman of Equity Group involvement is as important as capi- sought after because of their unique set of Investments, L.L.C., the private tal. If you really want to make a dif- experiences. investment firm he founded in ference, you can’t do it with passive at northwestern university’s Kellogg 1967. He is also Chairman of investments. I was never interested in school of management, I created a pro- Equity International, which he putting my name on buildings; that gram focused on risk. In my business, I’m co-founded in 1999. Zell’s in- seemed too easy to me. I wanted to constantly balancing risk and return, and vestments include interests in fi- work at it, to create a program. so I working to understand the ramifications of nance, energy, transportation, have been, and continue to be, in- my assumptions. I’ve always felt that my communications, health care, and volved in a number of educational focus on understanding the downside has real estate. He is the Chairman endeavors, such as the Wharton real given me a better-than-average track record of five public companies listed estate Center, which I endowed and as an investor. I also see that a shared under- on the New York Stock Exchange. Sam Zell continue to infl uence. standing of risk isn’t as pervasive as it should Zell is also Chairman of Tribune In a similar manner, I have been be. In any given scenario, there are a lot of Company. Previously, he served as Chairman very involved with the university of michigan. materials and all kinds of random queries, for Equity Offi ce Properties Trust. He serves on I believe our society has suffered from not fo- but there isn’t nearly enough discussion of the JPMorgan National Advisory Board; the cusing on fostering entrepreneurial instincts. risk – how to assess it, take advantage of it, President’s Advisory Board at the University entrepreneurs drive our economy and the and protect oneself against it. of Michigan; and with the combined ef- growth of this country. You’re known as a contrarian. Did forts of the University of Michigan Business Historically, our business schools had been you have those moments where you didn’t School, established the Samuel Zell & Robert H. focused on the numbers, not necessarily what know if what you were doing would work? Lurie Institute for Entrepreneurial Studies. He they mean. We had been training our best and sure. most of the people on the Forbes 400 is a long-standing supporter of the University our brightest, and at the same time, not expos- made their fortunes by turning right when ev- of Pennsylvania Wharton Real Estate Center, ing them to what I would call the entrepreneur- eryone else was going left, and I was one of and has endowed The Samuel Zell and Robert ial element. them. Lurie Real Estate Center at Wharton. Zell is a so in the late ’80s, I worked with the In the late ’80s and early ’90s, I was buy- graduate of the University of Michigan and the university of michigan business school to de- ing office buildings at 50 cents on the dol- University of Michigan Law School. He began velop a nationwide contest for someone to lar. I kept looking over my shoulder to see his career in real estate as an undergraduate. write a syllabus on entrepreneurship. each year, who my competition was, but there was no one the winner received $25,000 and a one-year ap- there. I couldn’t help but question whether I COMPANY BRIEF Equity Group Investments pointment to the university of michigan busi- was wrong. (www.egizell.com; EGI) is a private investment ness school to teach the course he/she had Fear and courage are very closely related. company. Its founder, Sam Zell, pioneered the created. We did that for six or seven years and When you have nothing and you’ve signed for public equitization of the commercial real es- it was extremely successful. everything, you can afford to lose because you tate industry through the creation and lead- That program evolved into the creation didn’t have anything to begin with. ership of Equity Residential , Equity LifeStyle of the university of michigan entrepreneurial The problem is that as you become more Properties, Equity Offi ce Properties Trust, and Center, which educates students on the entre- successful, you become a better credit risk Capital Trust. EGI’s investment portfolio en- preneurial elements of our society, how to make and therefore, you’re more likely to be good compasses a broad range of corporate and real investments, how to start companies, and how for whatever obligations you take on. so your estate interests, a small sampling of which in- to be part of growing companies. Today, the risk scenario changes. oftentimes, how you cludes: Anixter International, Covanta Energy, program is expanding into other schools within deal with issues is as driven by reputation as by Rewards Network, Kuwait Energy Company, the university. For instance, the engineering fi nancial situations. WRScompass, Equity International, and school has now created its own entrepreneur What’s the next growth opportunity Starwood Hotels & Resorts. program. you’re looking at? my goal at the university is to create a vi- emerging markets. While the u.s. is the There is so much need out there today. Do brant center of ideas that serve as a magnet to most unique, adaptable society in the world, its you target specific areas where you can young people who have an inclination toward engines of growth are likely to become more make the most impact or do you focus on a entrepreneurship. muted in the near future, as is the growth of number of things? I also founded a program at an interdisci- other developed countries. For strong risk/re- my job is to make the money; my wife’s plinary center in Israel, and each year, we take ward scenarios, I am looking to the emerging job is to give it away. she spends much of her around 20 students and put them through the markets and their enormous potential, which is time on philanthropic endeavors. but there are experience of creating a company, develop- driven largely by expanding young populations a few areas in which I have personally devoted ing the marketing, and doing the research. The and the aspiration of a growing middle class – a signifi cant amount of my time. school is in its 10th year and students who including entrepreneurs.• volume 34, number 2 Leaders 57