Okay, picture this scenario. You're at a dinner
party. It's one of those nights where, you know,
the wine is flowing, the conversation is getting
a little intense, and the topic turns to genius
investor. Always a contentious topic. Right.
Someone immediately brings up Warren Buffett.
Value investing, patience, drinking cherry Coke.
You know, the slow and steady approach. Of course,
the Oracle of Omaha. Then someone else jumps
in with like Elon Musk, the visionary, the high
tech risk, the guy who's, you know, sleeping
on the factory floor. Two very, very different
archetypes of success. Exactly. But then you
chime in, you lean over the table and you say,
what about the guy who called himself the grave
dancer? The guy who turned dead buildings into
gold mines and then sold his entire empire for
thirty six billion dollars right before the world
ended in. And the room probably goes silent because
half of them think you're talking about, I don't
know, a supervillain from a comic book. Exactly.
And in a way, the story we are covering today
has all the beats of a supervillain origin story,
but it also has the beats of a classic pull yourself
up by your bootstraps American Dream success
story. It is messy. It's so incredibly complicated.
It is the story of Sam Zell. We're looking at
a stack of sources today, that is. It's heavy.
I mean, physically heavy. We've got biographical
records. We have these financial autopsies of
the 2008 crash. There are legal filings from
one of the largest bankruptcies in media history.
And we even have Zell's own writings. Right.
His book, Am I Being Too Subtle? Which tells
you a lot about the guy right there. Yeah. So
our mission for this deep dive is pretty specific.
We aren't just reciting a biography. We want
to figure out how a man develops a sort of sixth
sense for market timing. How do you know when
to buy when everyone is screaming sell? And maybe
more importantly, how does that same genius lead
you to make one of the most catastrophic business
mistakes of the 21st century? It really is the
ultimate case study in risk. I mean, Sam Zell
was a man who lived on the edge. financially,
legally, and, you know, personally. He passed
away in May 2023, and he left behind a legacy
that is equal parts textbook brilliance and cautionary
tale. So let's start with that name, The Grave
Dancer. Most CEOs hire these expensive PR firms
to make them sound friendly and approachable.
Oh, yeah. They want to be the visionary or the
builder. The connector. Sam Zell wrote an article
in 1976 titled The Grave Dancer, a guide to the
risky art of resurrecting dead properties. He
owned it. He just he put it right out. He didn't
just own it. He branded himself with it. And
to understand why, you have to understand what
the economic world looked like in the mid 70s.
It wasn't today's world of. you know, high speed
trading and complex algorithms. No, not at all.
The real estate market had crashed and crashed
hard. Developers were defaulting on loans left
and right. There were these half finished skeletons
of buildings all over American cities. It was
a wasteland. And most people, you know, rational
people look at a half finished building owned
by a bankrupt developer and they see a disaster.
They see a money pit. They run the other way.
Of course you do. Because a dead property is
a headache. I mean, it has liens, it has all
these legal issues, probably angry tenants, maybe
even structural problems. It's just a mess. But
Zell looked at it and saw a mispricing. He realized
that if he could buy the asset for pennies on
the dollar, literally below the cost of replacing
the bricks and the glass, he don't need the market
to boom. Right. He just needed the building to
function. he could make his money just by bringing
it back to life. So he, as the name suggests,
danced on the grays of the developers who got
overextended. It's such a vivid image, isn't
it? But before we get into the mechanics of how
he made billions doing that, and we will get
into the weeds of the strategy, I want to back
up. Because you don't just wake up one morning
with the guts to look at a financial disaster
and say, yeah, I'll take it. No. That kind of
risk tolerance, that feels innate, or at least
learned very, very early. It is innate, but it's
also inherited. I mean, if you look at the origin
story section of our notes, it reads like a spy
thriller. We throw the word survivor around a
lot in business. You know, he survived the dot
-com bubble. But Samsell's parents were literal
survivors of an apocalypse. We're talking about
World War II here, the real deal. Yes. His parents,
Ruchla and Bereksielunka. They were Jewish, living
in Poland in 1939. This is right at the onset
of the Nazi invasion. Now, just try to imagine
the atmosphere. It's just... Confusion, terror.
Most people in their community were hesitating,
maybe hoping things would blow over or they were
simply trapped with no way out. But Zell's parents.
They made a split second decision to run, to
just go. And they didn't just hop on a train
to France or take a boat to England, which would
have been the, I guess, the more common escape
route. No, those routes were closing faster or
already gone. This is one of the most fascinating
details in the biographical records. They went
east. They fled through the Soviet Union. And
to do that. They needed papers. They needed a
way out. This is where that name Shiori Sugihara
comes in. I've heard him called the Japanese
Schindler. That's a really fair comparison. And
honestly, he deserves a deep dive of his own.
Sugihara was a Japanese diplomat stationed in
Vilnius, Lithuania. He went against direct orders
from his government in Tokyo, and he started
handwriting transit visas for Jewish refugees.
Wow. He was writing them for 18, 20 hours a day
until his hands literally cramped up. He saved
thousands of lives. And Sam Zell's parents were
holding some of those precious visas. That gives
me chills. So the very existence of this future
billionaire real estate tycoon hinges on a rogue
diplomat signing a piece of paper in Lithuania
in 1940. It's incredible. It really is. It shows
you how fragile history is. Yeah. But getting
the visa was only step one. They still had to
cross Russia. And this is where the chutzpah.
which is a word we're going to use a lot regarding
Zelfirst, appears. They're traveling through
the Soviet Union, a place that is hostile to
practically everyone at that time. To avoid suspicion,
they didn't act like desperate refugees. I read
this note in the source material and I actually
laughed out loud. They pretended to be tourists
on a cultural trip. They pretended they were
traveling across the entire continent specifically
to see the Bolshoi Ballet. That is just, it's
beyond belief. The world is burning. You are
fleeing for your lives. You have the Nazis behind
you and the Soviets all around you. But you act
like you're just really big fans of ballet. Oh,
we're just here for the culture. It's a survival
mechanism. It's fake it till you make it. But
with, you know, life or death stakes. They travel
from Russia to Japan, then to the United States,
eventually settling in Chicago. Specifically,
they move from Seattle to Albany Park first.
And Sam was born in Chicago in September 1941.
So just four months after they arrived. Four
months. So he's born into this energy, this energy
of we beat the odds. We are smarter than the
system. Exactly. His father changed the name
from Zalonka to Zell. He started as a wholesale
jeweler, but quickly moved into real estate and
stocks. And Sam grew up watching this. He grew
up hearing the stories of the escape. He learned
very, very early on that rules are, well, let's
call them suggestions for other people. Right.
But for the Zells, survival meant outsmarting
the system. It was baked into his DNA. And that
manifested pretty early, didn't it? The Playboy
story is the classic anecdote here. It's almost
legendary in business circles. It is. And it's
funny. But it's also a perfect lesson in arbitrage.
So Sam is a teenager. He lives in the suburbs
of Chicago. He takes the train into downtown.
Now, think about the geography. What does downtown
Chicago have that the quiet suburbs don't? Newsstands.
Playboy magazine. Correct. And who lives in the
suburbs? Teenage boys who desperately want Playboy
but are too scared to ask their parents or they're
just unable to get to the city to buy it themselves.
So he sees a market inefficiency. A huge one.
So he buys the magazines for, what, 50 cents
a pop? Something like that. And he brings them
back to the suburbs. He's essentially acting
as a smuggler of, well, of culture. of a sort
he brings them to his hebrew school classmates
and sells them for three bucks that is a massive
markup i mean that's a 600 markup it's classic
arbitrage he found a market inefficiency a geographic
barrier to entry, and he exploited it. He wasn't
creating the content. He wasn't writing the articles
or taking the photos. He was just moving the
asset from a place of low value, the newsstand
where it was common, to a place of high value,
the Hebrew school locker room where it was contraband.
It's the same exact logic as shipping oil from
where it's plentiful to where it's scarce. He
just did it with centerfolds. It's incredible.
He did the same thing with photography. In eighth
grade, he took photos at the Brom. He realized
that the memory of the event was... a distressed
asset. People wanted it. And if he didn't capture
it, it was gone forever. So he cornered the market
on memory. Exactly. He developed them, sold them
to the students. He just he saw the angle. The
guy was just wired differently. I mean, most
kids are thinking about how to pass algebra or
who they're going to ask to the dance. He's thinking
about supply chains and monopoly power. And that
escalated when he got to the University of Michigan.
This is where the grave dancer really begins
to take shape. He wasn't just doing odd jobs
for beer money. He started managing an apartment
building. A 15 -unit building. In exchange for
free rent, right? That was the initial... At
first, yeah. That was the deal. I'll plunge the
toilets and collect the checks if I can live
here for free. A classic student job. But then
he looked at the math. He looked at the landlord's
headaches. Tenants calling at 2 a .m. about...
Leaky faucets, vacancies, all that stuff. An
operational nightmare. Right. And he realized
he could solve those problems for other owners
in exchange for a cut of the profit. He partnered
with his fraternity brother, Robert H. Lurie.
Okay, so this partnership, Zell and Lurie, this
is crucial to the story, isn't it? Because Zell
was the loud mouth, the front man, the guy on
the motorcycle, the personality. Right. Zell
was the deal guy. He was the rainmaker. He was
the one selling the vision to the property owners.
Lurie was the engineer. He was the operations
genius. He was the guy who made sure the toilets
actually got fixed on time, the heating systems
worked, and that the books balanced. It's a classic
Steve Jobs, Steve Wozniak dynamic, but for student
housing in Ann Arbor. It's a perfect analogy.
You need both. You need the vision and you need
the execution. So by the time Zell graduated
from law school, and I want to emphasize, he
went to and finished law school in 1966. What
were their numbers looking like? The numbers
are staggering. They were managing over 4 ,000
apartments. 4 ,000! That is a small city. That's
a huge operation for anyone, let alone a couple
of college kids. It is huge. And they weren't
just managing. They owned between 100 and 200
units outright. By then, they were netting about
$150 ,000 a year. In 1966 dollars. Which is...
what, over a million dollars a year in today's
money, something like that, all while being full
-time students. That is absolutely wild. Most
law students are just trying to pass the bar
exam and find a junior associate job where they
can make coffee. And this guy's running a massive
property management firm. Exactly. So he steps
out of law school, passes the bar, and he practically
never practices law. Why would he? He's already
a real estate mogul. But the key takeaway here...
Isn't the money, I don't think. It's the dirt
under the fingernails experience. What do you
mean by that? Well, a lot of modern finance guys
go straight from an MBA to a hedge fund. They
look at spreadsheets. They build complex financial
models. They treat buildings like bond yields.
They just see a number in a cell. Right. It's
abstract. Very. But Zell knew what a bad boiler
looked like. He knew what kind of carpet lasted
the longest in the student rental. He understood
the product. He had been the one getting those
2 a .m. calls. And that gave him a massive advantage
when he started buying graves. Because he could
look at a failing building. He could know exactly
how much it would cost to fix it because he'd
done it himself. He could see past the financial
statements to the actual grunt and mortar. That's
a huge edge. OK, so he has the operational chops.
Let's fast forward to the 1970s. The grave dancer
era really kicks off. The economy is in the tank.
We have stagflation. Interest rates are climbing.
Banks are panicking. In the 1973 -1975 recession
was brutal. It was the first major economic contraction
since the Great Depression. Real estate developers,
who are optimists by nature, had completely overbilled.
They always do. They always do. They borrowed
money assuming the good times would roll forever.
And when the music stopped, they were left with
half -empty office towers and apartments they
couldn't fill. The whole industry was on the
verge of collapse. Enter Sam Zell. Andrew Zell,
the banks were stuck holding the bag. A bank
does not want to own an apartment complex. They
don't have a maintenance department. They don't
want to deal with evictions or marketing. They
just want their money back. So Zell walked into
these banks and said, essentially, I will take
this headache away from you. That was the pitch.
But he didn't just buy them with cash, right?
He used these really creative structures. He
was a master of the workout. That's the term.
He would say to the bank, look, if you foreclose.
You'll be lucky to get 50 cents on the dollar,
maybe. And you have to manage it for two years,
which you're terrible at. If you let me take
over, I'll manage it. I'll turn it around. I'll
pay you back your principal over time. But I
keep the equity upside. So he's betting entirely
on his ability to fix the unfixable. He gets
the asset for almost no money down. And he was
betting on inflation. This is a technical point,
but it's so important to a strategy. Zell understood
that in an inflationary environment, hard assets
like real estate go up in value. Even if the
cash flow is bad today, the bricks are worth
more tomorrow. Right, because the currency is
worth less. Exactly. So he locked in long -term
fixed rate debt on these properties. And then
he just let inflation erode the value of the
loan while the property value skyrocketed. He
was genius. That is smart. It's using the macro
economy as a tailwind. But we have to talk about
the risk. Because it sounds easy in hindsight,
but there were moments where he was skating on
really thin ice. The Reno deal. Ah, yes, the
Reno hidden gem. This was 1969, so slightly before
the big recession plays, but it was a sign of
things to come. He found a building called Arlington
Towers in Reno, Nevada. It was the top of the
market there, tallest building in the city. He
bought it for $9 million. But the deal had, as
they say, hair on it. A lot of hair. The sellers
wanted a very specific and creative... Tax treatment.
Zell wanted the deal. So according to the biographical
records, his brother -in -law concocted a scheme.
It involved offshore transactions to shield the
sellers from taxes. Offshore transactions in
1969. That sounds sketchy even for back then.
It was. It was a really complex series of transfers
designed to look like one thing while being another.
The legality was described in the sources as
murky at best. And, well, the IRS eventually
audited it. They didn't like what they saw. And
this is where we see Zell the pragmatist versus
Zell the loyalist, a real crossroads. It was
a pinch point. The feds were circling. Zell made
a calculated decision. He cut a deal. He agreed
to testify about the entire scheme in exchange
for immunity from prosecution. And the brother
-in -law, the one who designed the scheme. He
went to prison. He served two years in jail.
Oof. That is cold. I mean, that's family. It's
ruthless. But from Zell's perspective, it was
survival. If he goes to jail, the empire collapses.
Everything he's built is gone. He chose the empire
over his brother -in -law. It's a dark chapter,
but it reinforces that grave dancer mentality.
You do what you have to do to keep the music
playing. It certainly adds a layer of, I don't
know, grit. to the persona. It's not just about
smart math. It's about navigating these really
treacherous waters and coming out on top. And
surviving. That's the key theme. He survived
that and he survived the recessions. He kept
building. He and Robert Lurie built what became
Equity Residential, this massive apartment company.
But then tragedy strikes in 1990. Robert Lurie
dies of cancer. He was only 48 years old. This
was a devastating blow, not just emotionally.
I mean, by all accounts, they were like brothers,
but operationally. Zell was the kite. Lurie was
the string. Without Lurie, Zell was untethered.
And this happened right as the early 90s recession
hit. Another recession. The timing was just brutal.
But this time, the stakes were way higher. Much,
much higher. By 1990, the numbers were astronomical.
Zell was personally guaranteeing loans. The sources
say he had roughly $600 million in personal guarantees.
Let's just pause on that for a second. A personal
guarantee means if the company goes bust, the
bank comes for your house, your car, your personal
bank account, everything. It's all on the line.
Everything. He was on the hook. He later described
this period as the most stressful of his life.
He was working 80 -hour weeks, juggling creditors,
trying to keep the liquidity flowing. And he
realized that the lone wolf cowboy model wasn't
sustainable anymore. He couldn't carry that much
risk on his own back. No, the numbers were too
big. So he changed the game again. He looked
at the public markets for a way out. This is
one of his biggest contributions to the financial
world, isn't it? He popularized the modern REIT,
the Real Estate Investment Trust. In 1993, he
took his apartment empire public as equity residential.
OK, so explain a REIT to me like I'm five. Sure.
Before REITs became popular, if you wanted to
invest in real estate, you had to physically
buy a building. That requires a ton of money,
lawyers, inspections, and it's really hard to
sell quickly. It's illiquid. Right. A REIT is
like a mutual fund for buildings. It's a company
that owns real estate. And you can buy shares
of it on the stock market, just like you buy
shares of Apple or Google. So it makes real estate
liquid. You can buy and sell it in a day. Exactly.
And for Zelle... It did something even more important.
It allowed him to raise a huge amount of cash
from public investors, money he used to pay off
those personal debts. So he traded ownership
for safety. That's a perfect way to put it. He
diluted his stake, but he eliminated that $600
million gun pointed at his head. He spread the
risk. And he grew the company massively in the
process. Massive. By the IPO, they had 22 ,000
apartments. A long, long way from that 15 -unit
building in Ann Arbor. But the real masterpiece,
the Mona Lisa of his career, you could say, came
a decade later. The sale of EQ office. This is
Section 3 in our notes. The sale of the century.
And this is the moment. that really cements the
legend. It's what everyone points to. It's 2006.
The real estate market is foaming at the mouth.
Prices are going up every single month. Everyone
is buying. Credit is cheap. You could get a loan
if you had a pulse. The bubble. We all remember
it. But inside the bubble, it just feels like
a party. It feels like it's never going to end.
Zell, however, is looking at the numbers. He
sees that the prices people are willing to pay
for office buildings make absolutely no sense
relative to the rent they can collect. The cap
rates were compressed to historic lows. It was
pure speculation. It was. So he decides to sell.
Not just one building. Not a few. The whole thing.
He puts his entire office portfolio, EQ office,
up for sale. And he finds a buyer in the Blackstone
group. Blackstone is the biggest of the big boys
in private equity. They're the whale. They are.
And they were hungry for assets. So in February
2007, the deal closes. Zelle sells EQ office
to Blackstone for $36 billion. Let that number
sink in. $36 billion. It was the largest leverage
buyout in history at that time. It was, and the
date is the most crucial part of the story. Early
2007. Right. Just months before the subprime
mortgage crisis triggered the Great Recession.
By late 2007, the cracks are showing. By 2008,
Lehman Brothers collapses and the global economy
just melts down. Commercial real estate values
plummeted. They fell 30, 40, sometimes 50 percent.
Just wiped out. If he had waited 12 months. Yeah.
Even six months. The deal would have evaporated.
Gone. The company might have gone bankrupt. Instead,
he walked away with billions and billions in
cash at the absolute tippy top peak of the market.
It is widely considered one of the greatest sells
in the history of Wall Street. And it wasn't
luck, was it? Our sources are pretty clear on
that. It was that same instinct from the Playboy
days. This asset is overpriced here. I'm getting
out. It's discipline. He had a famous saying,
liquidity equals value. He valued the ability
to get out more than the potential to squeeze
the last dollar of profit from a deal. And that
discipline saved him. But he didn't sell everything.
He kept the mobile homes, which I find fascinating.
Equity lifestyle properties. This is my favorite
part of his portfolio because it is so unsexy.
Mobile home parks. Trailer parks, essentially.
Yes. He owned over 400 of them. And here's why
they are a genius business model. If you own
an apartment building and you jack up the rent
by 20 percent, the tenant moves down the street.
It costs maybe $500 to move a couch and a bed.
Right. High turnover. But in a mobile home park,
the tenant owns the home, the physical box. But
Zell owns the land under it. To move a mobile
home costs thousands and thousands of dollars.
It often damages or destroys the home. So they
can't leave. They never leave. It is a captive
audience. The cash flow is incredibly stable
and predictable. It's an annuity. That is diabolically
smart. And it's recession -proof. When the economy
tanks, people downsize into mobile homes, demand
actually goes up. Zell didn't care about the
prestige of owning the shiny skyscraper. He cared
about the reliability of the check clearing every
month. It really fits his persona, doesn't it?
Unpretentious, cash flow heavy assets that other
people might, you know, look down on. Value is
value wherever you find it. And that philosophy
didn't stop at real estate. This is where we
see Zell the corporate raider. Right, because
once you have that much capital and that much
confidence from a sale like the Blackstone deal,
you start looking at other sectors. In 1991,
even before the big sale, he started the Zell
Chilmark Fund. The goal was to invest in distressed
securities, junk bonds, companies in bankruptcy.
He was applying the grave dancer logic to corporate
America. What were some of the companies on his
shopping list? It's a real nostalgia trip. Schwinn
Bicycle Company. The bike company, the one we
all had as kids. Yes, they were in bankruptcy.
He acquired them for $60 million in 1993. Four
years later, he sold the company for $86 million.
Not a bad return at all. Not bad for a side hustle.
He did it with the Revco drugstores. They were
in a messy bankruptcy. He invested $250 million.
When Rite Aid eventually bought the brand, he
walked away with $363 .8 million. So he also
got into radio with a company called Jicor and
department stores with Carter Hawley. The strategy
was always consistent. You buy the debt when
the company is on its back. That gives you leverage.
Then you take control of the equity during the
restructuring. You fix the balance sheet and
you sell to a strategic buyer. It worked in real
estate and for a while it worked in corporate
private equity. OK, so by 2007, Sam Zell is on
top of the world. He's the genius who timed the
market perfectly. He has billions in the bank.
He has this bulletproof reputation as the grave
dancer who can fix anything. And I feel like
this is the exact moment where hubris enters
the chat. It is the classic Greek tragedy arc,
isn't it? You conquer the world and you start
to think you can walk on water. Or in Sanzel's
case, walk on ink. He turned his eyes toward
the media industry. The Tribune Company. This
is an American institution. A shine. The Chicago
Tribune. Yeah. The LA Times. Newsday. The Baltimore
Sun. They owned the Chicago Cubs. They owned
Wrigley Field. It was corporate royalty. But
it was a distressed asset, a falling angel. It
was, absolutely. The internet was just eating
newspapers alive. Classified ads were moving
to Craigslist. Readership was dropping. Revenue
was in a nosedive. Zell looked at this and thought,
it's just another distressed asset. It's just
another building with bad management. I can fix
this. But a newspaper isn't a building. No. A
building doesn't have an editorial board. A building
doesn't have a sacred public service mission.
And a building's value isn't based on how many
people read it every morning with their coffee.
Zell applied his real estate playbook to a media
company and it was a catastrophe. Let's break
down the deal because the financial structure
here is infamous. It was an ESOP, right? An employee
stock ownership plan. Yes, and that sounds good,
doesn't it? An ESOP is usually a nice way to
give employees a stake in the company, but Zell
used it as a tax shield. It was a very complex
maneuver. By structuring the company as an S
-corporation owed by an ESOP, the Tribune company
would theoretically pay zero federal income taxes.
Okay, that sounds clever from a tax perspective.
It is clever. but the purchase price was $8 .2
billion. And here is the kicker, the part that
everyone always remembers. How much of his own
money did Sam Zell put in? I'm guessing to control
an asset. that big, at least a billion, maybe
two. $315 million? Wait, he bought an $8 .2 billion
company for $315 million. How is that even possible?
He used leverage, massive, massive leverage.
He loaded the company up with $8 billion in new
debt to pay off the old shareholders. So the
company is now swimming in debt and Zell controls
it for a tiny fraction of the cost. That sounds
like buying a mansion with a credit card and
then making the mansion pay the credit card bill.
That is exactly what an LBO, a leveraged buyout,
is. And if the mansion or the newspaper keeps
making money, it works. You pay down the debt
and you look like a genius. But if the revenue
drops... And this is late 2007. The revenue didn't
just drop, it fell off a cliff. The Great Recession
hit. Car dealerships stopped advertising. Department
stores stopped advertising. The cash flow that
was supposed to service that massive debt...
Just it vanished. But before the financial collapse,
there was a culture shock. Zell brings in his
people. He brings in Randy Michaels, the CEO.
Randy Michaels was a former radio DJ, a shock
jock executive. He had zero newspaper experience.
Putting a shock jock in charge of the Chicago
Tribune, I mean, that's a choice. It was a disaster.
The culture clash was nuclear. You have these
Pulitzer Prize winning journalists who take their
job as a public trust very, very seriously. And
then you have Michaels and his crew who, according
to the numerous reports, turned the executive
suites into a frat house. The notes mention poker
parties. Not just poker parties. They held these
lavish. beer and poker parties in the office
of Colonel Robert R. McCormick. McCormick was
the legendary publisher of the Tribune. His office
was a historic shrine to journalism. People were
reverent about it. And they were treating it
like a Vegas suite. It was a form of symbolic
desecration. It sent a message, the old rules
don't matter anymore. But the behavior went way
beyond disrespect. There were serious allegations
of a hostile workplace. Reports of executives
openly discussing the sexual suitability of female
employees. It was ugly. And meanwhile, they are
firing people by the thousands. 4 ,200 layoffs.
They are gutting the newsrooms to try and pay
the interest on the debt. So you have this bizarre,
toxic situation where executives are getting
huge bonuses and partying in the shrine, while
the actual journalists who create the product
are packing up their desks. The morale was non
-existent. And financially, it just couldn't
hold. No way. It lasted less than a year. In
December 2008, the Tribune Company filed for
Chapter 11 bankruptcy. One year. He bought it
at the end of 07, and it's bankrupt by the end
of 08. One year, it listed $7 .6 billion in assets
against $13 billion in debt. It was, and I believe
still is, the largest bankruptcy in the history
of the American media industry. So Zell loses
his $315 million. He does. Which, let's be honest,
for him was a bad day at the office, but not
a fatal one. He's worth billions. But the employees.
Their pensions, their retirement savings were
tied up in that ESOP. The stock became worthless.
They lost everything. That is the dark side of
leverage, isn't it? If you win, you win big with
other people's money. If you lose, the house
burns down, but the arsonist might just walk
away with singed eyebrows. And legally, it dragged
on for a decade. In 2019, Zell and other executives
settled a lawsuit for $200 million. The allegation
was fraudulent transfer. essentially, that they
structured the deal in a way that looted the
company's value while knowing, or they should
have known, that it couldn't survive the debt
load. They paid $200 million to make it go away.
Which is, you know, it's not a legal admission
of guilt, but it's an admission that things went
very, very wrong. The Tribune deal is the great
stain on the legacy. It proves that you can be
a genius in one sector real estate and a complete
fool in another media. He misread the industry,
he misread the culture, and he catastrophically
misread the economy. It's a slice of humble pie
the size of Wrigley Field. Speaking of which,
they had to sell the Cubs during all this, right?
They did. That was one of the few good assets
they could liquidate to pay creditors. They sold
the Chicago Cubs, Wrigley Field, and a stake
in Comcast Sportsnet Chicago to the Ricketts
family for about $900 million during the bankruptcy
proceedings. So the Ricketts family has Sam Zell's
bad debt to thank for owning the Cubs and eventually
winning a World Series. In a roundabout way,
yes. History is funny like that. Let's pivot
to the man himself, because we've painted a picture
of a ruthless calculator, but humans are complex.
And Sam Zell was... Well, he was a character.
He was not your typical country club billionaire.
He didn't play golf, he rode motorcycles. Very
fast motorcycles. Wells Angels. Yes. He organized
these trips. Every year, he'd get a group of
his high net worth friends, tycoons, CEOs, powerful
people, and they'd ship their motorcycles to
some remote part of the world, you know, the
Andes or New Zealand, and just ride. The image
of a bunch of billionaires in leather jackets
tearing through the mountains, it's like a movie.
It's wild. It speaks to his need for adrenaline.
He famously rode a Ducati to work in downtown
Chicago. There's a story in the notes about him
doing 145 miles per hour across the pampas in
South America. At 145 miles per hour, if you
hit a pebble, you're dead. There's no margin
for error. That's the point. He was addicted
to risk. Whether it was financial leverage or
motorcycle speed, he needed to feel the edge.
He also skied, played racquetball, played paintball.
He lived loud. And he spoke loud. Oh, the language.
He was famous for it. Salty is the polite word.
Vulgar is probably more accurate. He did not
care about politeness or corporate speak. He
titled his book, Am I Being Too Subtle? Straight
talk from a business rebel. Which is clearly
a rhetorical question. Subtlety was not his thing.
Exactly. He was a rebel to his core. He wore
jeans to board meetings. He wanted to disrupt
the stuffy corporate atmosphere. He enjoyed being
the bull in the china shop. But then you look
at his checkbook and you see a completely different
side. The philanthropy. It was massive. Yeah.
And very targeted. Right. He gave huge amounts
of money to education. The Zell Lurie Institute
at the University of Michigan. The Zell Lurie
Real Estate Center at Wharton. He wanted to teach
the next generation how to be entrepreneurs like
him. He was trying to clone himself in a way.
I think so, yes. He funded programs that taught
action, not just theory. He wanted to create
more deal makers. And he never forgot his roots.
He gave millions to Jewish causes. He donated
to the Herslia Interdisciplinary Center in Israel.
He named a high school in the Chicago suburbs
after his mother, Rochelle Zell Jewish High School.
He honored that struggle his parents went through.
It's that paradox again. The guy who would gut
a newspaper to save a buck is the same guy donating
millions to educate children and preserve Jewish
history. It's hard to reconcile. And politically,
he was just as confusing. He was generally a
conservative, a libertarian, really. He donated
to Restore Our Future, which supported Mitt Romney.
He disliked government regulation, which makes
perfect sense for a real estate developer. But
then in 2019, he donates to Lori Lightfoot for
mayor of Chicago. A progressive, black, lesbian
Democrat. It was the last person anyone expected
him to support. It shocked people. It did. But
his wife, Helen, was more liberal. Zell once
joked that he leaned right and she leaned left.
But the Lightfoot donation might have been pragmatic.
He's a Chicago guy through and through. He cared
about the city. Maybe he thought she was the
best choice for the city at that time, regardless
of party. Or maybe he just liked to fight her.
Lightfoot was known for being tough and abrasive.
That's a great point. He respected grit above
almost anything else. He probably saw a bit of
himself in her in that sense. So Sam Zell dies
in May 2023. He's 81 years old. He leaves behind
a net worth of roughly $5 .2 billion. A long,
long way from that refugee boat his parents were
on. When we step back and look at the whole arc,
the escape from the Nazis, the Playboy hustle,
the billions in real estate, the Tribune disaster,
the motorcycles, what is the takeaway? What's
the final lesson from his life? I think the takeaway
is about the nature of value, with a capital
V. Sam Zell had this unique, almost supernatural
gift for seeing financial value where others
saw garbage. He saw value in a bankrupt building.
He saw value in a trailer park. He saw value
in a complicated tax loophole. He also has a
but. But he also showed the limits of that worldview.
When you treat everything as just a financial
asset, when you treat a newspaper like a trailer
park, you miss the intangible value. You miss
the culture. You miss the human element. And
that can lead to absolute disaster. The grave
dancer strategy works great on graves. It doesn't
work so well on living, breathing institutions.
Precisely. He proved that high risk leads to
high reward, but it also guarantees that eventually
you will crash. He crashed the Tribune, but he
survived. He always survived. And that brings
us to the big question for you listening. We
are living in an era now where everything is
data driven. Algorithms make buying decisions.
High frequency trading dominates the market.
Is there still room for a Sam Zell? Is there
still room for the gut instinct cowboy who rides
a Ducati and buys things because he just feels
the market turning? Or was he the last of a dying
breed? And maybe more importantly, if there is
still room for them, should we let them buy our
newspapers? That is the question. Thanks for
diving deep with us today into the life of the
Grave Dancer. See you next time.