Thursday, September 30, 2010

Chicago real estate billionaire Sam Zell on jobs, M&A, Obama

"Chicago real estate billionaire and Tribune Co. publisher-in-bankruptcy Sam Zell was in Philadelphia on Monday, where he spoke to hundreds of students in a packed auditorium, plus a second lecture hall connected by video, at the University of Pennsylvania. Excerpts:

Innovation: "Build a better mousetrap and the world will come to you? That's a crock... There are many examples of (simple) products that have done much better than truly better products. It's all about being easy to execute...

Business education: "Econ 101, Supply and Demand... Nothing else really matters."

Liberal arts: His fellow University of Michigan graduate Arthur Miller's play, Death of a Salesman, did a "disservice" to American business: "He demonized the salesman as a womanizer, a drunk, as somebody staying in these dingy motel rooms and attempting to pitch his wares.. Truth of the matter is, nothing gets bought, everything gets sold, and an entrepreneur has to be a salesman... advocating ideas."

Who needs a degree: "There's a lot of people in college today that shouldn't be there." At one of his firms, Anixter International, "we make complex fasteners, we can manufacture them right outside of Chicago and be competitive with China. We're running two shifts. If we could, we would run three shifts. Except we can't find enough people in the Chicago area who know how to read plans, who can work in a manufacturing scenario... So we're going to set up a program at a local junior college to solve that.

"Here we are, 9% employment, or maybe 16%," depending on how you count, "and I'm sitting here with 300 jobs we could fill tomorrow" if there were trained candidates. While recent college grads go unemployed.

Mergers: Successful mergers "identify the redundancy" and cut extra people and facilities. That's why mergers work. There are no benefits from "synergy," a word that is supposed to describe how partners are greater combined than whole, but actually represents "mental masturbation."

Entrepreneurship: "If you aren't testing your limits every day then you aren't really discovering what you can do... The definition of a schmuck is someone who reaches his goals. An entrepreneur is someone who never reaches his goals... constantly adjusting his goals to reflect the current situation... testing his limits. Not more than one or one and a half percent" of people are entrepreneurial.

President Obama: "I'm from Chicago. Barack Obama came to my house for dinner. He's a brilliant man. But he's an ideologue. When you're an ideologue you don't see (business reality). There's no question he doesn't see it."

Obama's America: "We have a political situation in the U.S. today that for the first time in my life represents a challenge to the entrepreneur... to the freedom that our society has created. This never has been a society of people who aren't striving, who aren't trying to make a difference. What has made America different is our individualism...

"I'm very concerned that the current political environment and current situation is geared toward making the entrepreneur an endangered species."

What Obama should do: "Obama could start by announcing he's going to do nothing for the next 24 months... If I were President Obama I would repeal health care, I would repeal the Dodd (bank reform) bill, I would go back to where we were in January '09."

What he wrote to Obama aide Rahm Emanuel when Obama took power: "Dear Rahm, I met you in 1992. At the time you were working for the Clinton campaign. You sat me down and said, 'Sam, understand, the theme of the campaign is, 'It's the economy, stupid.' Well, guess what? It's the economy, stupid, and you ought to do nothing more than focus on jobs and the economy.

"He wrote back, 'You want to delay healthcare, you want to delay cap-and-trade?' I said, 'You bet...'"

The slow economy: "The economic 'malaise' is the result of the fact that people who have the ability (to invest), both resources-wise and emotionally, are uwilling to take the risks because there is no certainty, there is no conviction, on the part of the government, to leave us alone. Every time you turn around, the government has a new 2000-page bill" that limits business. "That's going to destroy America."

Where to invest: Even smart investors lose if they don't pay attention to "what risks they're taking. I'm buying (U.S.) distressed debt (because) I don't have any confidence in tomorrow for what the U.S. is going to do. "

"On the other hand, I'm buying equity outside the U.S. where it's much clearer where we're going. Confidence is the No. 1 ingredient. This administration... by bashing the business community... by destroying Las Vegas, by destroying the meeting business in this country (by limiting bankers' travel junkets during the bank bailouts)... those are all stupid gratuitious acts that have materially impacted the confidence level in this country..."

How to get more people working: "Unemployment will only be solved by the private sector. As soon as you see this administration get its foot off the neck of the private sector, you will see growth returning in the United States."

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