Sam Zell on Detroit, unions and privatizing U-M: 'Survival of the fittest will prevail'
Sam Zell - a University of Michigan alumnus, billionaire real estate mogul and investor - said he would like to see U-M privatize.
He made that statement after giving the keynote address Friday morning at the Zell Lurie Institute’s Private Equity conference at the Michigan Union.
Sam Zell spoke to a crowd of about 150 in a ballroom at the Michigan Union.
Ben Freed | AnnArbor.com
Driving his sentiment : Zell's concerns about the state of Michigan's economy, particularly amid global financial pressures, Detroit corruption, and the upcoming vote on Proposal 2.
“As a major contributor to the university, I worry about the state of Michigan all the time,” he said.
“I mean, from my personal perspective, I’d rather have the university private. The fact that it’s a state institution in a state that’s at a crossroads is very scary particular to anyone who is making long-term contributions.”
Zell did not offer any details on his proposed privatization of the university. Issues negating the probability of such a move by the U-M include the prospect of the losing state allocations which in 2010 accounted for 12 percent of the university's non-health system operating revenue.
In his address, Zell also was bearish on the state of the global economy, saying that the headwinds against investors were the strongest he’d ever seen in his lifetime.
“I can tell you this, no matter who gets elected 2013 is going to suck,” he said to a crowd mostly made up of industry professionals with some U-M business students in the mix.
Zell went on to describe the various forces he sees working against economic growth. Number one on his list of trouble spots was the continent of Europe. When a conference attendee asked whether Zell thought the educated workforce in Europe would aid a potential recovery, he laughed and said that the Europeans had “learned not to work.”
“If I look at all the options in the world, I can’t image a place that would be closer to the bottom than Europe,” he said.
If his outlook on Europe was bad, his views on the city of Detroit were not any better. After his speech, Zell said he would keep his money away from Detroit for the forseeable future.
“Detroit is a corrupt city, OK. It’s as bad as the state of Illinois,” he said.
“All of its CEOs keep ending up in jail. I don’t know how, just like I don’t know how in Illinois, you’re going to get from here to there until you clean up the system.”
Zell said electing Gov. Rick Snyder was a “terrific plus” for Michigan, but that the clean up job here is so large that even the Ann Arbor businessman-turned-governor's attempts have made little progress.
“Governor Snyder has attempted to do that [clean up the system] in Michigan, it hasn’t worked,” he said.
“Or at least it hasn’t worked as fast as everyone would like it to work, but God forbid he wasn’t trying. You had Jennifer Granholm and she didn’t try and the state went straight south.”
His strongest words were saved for Proposal 2 on the November ballot in Michigan. The proposal, known as the “Protect Our Jobs” proposal is the union-backed initiative to put collective bargaining rights into the state constitution.
“[It’s] literally kamikaze. It’s literally like driving a truck into a canyon at 200 miles per hour,” he said.
“If that provision were passed, sell short on Michigan, get everything you can out of this state because it will be owned, lock, stock, and barrel, by people that can vote themselves raises.”
Zell’s official address ended with the playing of a song he sent out at the end of 2008 as part of his yearly holiday present to friends. The song, a parody of “The Ballad of Davy Crockett,” was entitled “Survival of the Fittest.”
Zell said he believes that this is a difficult time for business, but those that are able to innovate and keep up still have opportunities for success.
"I have a nickname, 'the Grave Dancer,' that reflects that I bought all kinds of stuff at the bottom of markets because I had confidence in the future," he said. "I think the headwinds we’re looking at today challenge that confidence," he said. " I think we all have to adapt to the new set of circumstances, because, in the end, only the survival of the fittest will prevail."
Ben Freed covers business for AnnArbor.com. Reach him at 734-623-2528 or email him at benfreed@annarbor.com. Follow him on twitter @BFreedinA2
Comments
15crown00
Sun, Mar 17, 2013 : 7:42 p.m.
imagine the property taxes the U would have to pay and all the new rules it would have to follow.do you like that to Sammy.I wish u had to pay 75% of what you're with in income taxes and i mean right now.
15crown00
Sun, Mar 17, 2013 : 7:38 p.m.
i'd like that to so the State wouldn't have to give them money but but then students would be paying $20,000.00 a year which is way more than the joints worth. you ultra rich think only in ultra rich terms which is fine except most of us aren't even close to that pay grade.
MichU
Thu, Mar 7, 2013 : 2:32 p.m.
Whom does he think he is? This is a public institution that should be responsive to the needs of its state's citizens, not billionaire investors. The looting of our state's resources, including the futures of its young people, is a crime by powerful interests. Zell should address those issues, rather than stake a claim on a beacon of hope for all bright minds, not only the wealthy.
Vivienne Armentrout
Mon, Oct 8, 2012 : 1:28 a.m.
The reporter mentioned that privatization is unlikely because of the property tax bill that would be immediately payable. But more than that, the UM has been free of most local regulations and fees because of a special constitutional provision that essentially makes the UM into a sovereign state within the state. They won't easily give that up. Unless the Gov would try to keep their special status while privatizing them otherwise? I wrote a somewhat tongue-in-cheek post on this years ago that fills out some of what I just said. http://localannarbor.wordpress.com/2009/04/24/privatizing-the-university-of-michigan/
Jay Thomas
Sun, Oct 7, 2012 : 8:46 p.m.
His interest seems to be investing without losing his money. Naturally, liberal democrats don't look at that as being on their top ten list.
say it plain
Sun, Oct 7, 2012 : 3:25 p.m.
Ah, yes, social darwinism, what a brilliant new idea....NOT...lol... A little evolution would be a nice thing for our species. Not likely to happen if we continue to look to men like Zell for 'wisdom', methinks...
Kai Petainen
Sun, Oct 7, 2012 : 1:24 p.m.
This is not a comment with respect to whether or not I agree with Zell.... but a comment on the reporting. Fantastic job. This is a great interview and nicely done. I wish I wrote it.... As for the propositions... Proposition 6 is interesting, in how it is written. In how it is written, ANY bridge (it doesn't have to be international) in Michigan will need to go up for vote. "Create a definition of "new international bridges or tunnels for motor vehicles" that means, "any bridge or tunnel which is not open to the public and serving traffic as of January 1, 2012."
LXIX
Sun, Oct 7, 2012 : 3:40 a.m.
Sam is a funny guy. Yet here is the one fact he has yet to dance with. By law, every human being is rich. Much, Much, wealthier than all of those wise crackin tycoons put together in a small panic room. Don't think so? Who owns the moon and its Earthlit night? Mars' red hot real estate? The other planets and thousands of asteroids laiden with more minerals than ever mined on Earth? And how much is it all worth forever per person Mr. Zell? Privatize that thought for a while.
PeteM
Sat, Oct 6, 2012 : 2:43 p.m.
One of the earlier commenters described this as a rant, and from the article at least I agree. Zell says Michigan's problems make it risky to have U-M remain a state institution. Why? Does he think Michigan's going to sell the law quad to Home Depot to pay for the prison system? What other risks does he foresee. He says "all of Detroit's CEOs" end up in jail (I assume CEO=mayor). The last time I checked Archer and Bing are still free men -- does he think they shouldn't be? Finally, if public unions (or the lack thereof) determine economic why did Wisconsin's economic growth rate trail the national economy by 2 pts this year? Why aren't anti-union states like South Carolina and Mississippi the wealthiest in the country?
Linda Peck
Sat, Oct 6, 2012 : 1:54 p.m.
I see so much anger in the responses to this article and towards people who have made a lot of money, as though they are somehow inherently evil. Where does all this anger come from? Perhaps a desire to have more money which creates a huge resentment and anger towards those who do?
babmay11
Sat, Oct 6, 2012 : 4:04 p.m.
It's got nothing to do with the fact that he's made a lot of money, it's his arrogant attitiude that anyone who hasn't is worthless, and that all public institutions are no good. Warren Buffett has made way more than this guy, yet he values people who haven't been as fortunate as he has. This guy doesn't care about anyone other than himself and the rest of the 1%.
Tom Todd
Sat, Oct 6, 2012 : 2:05 p.m.
some folks would like to see others back in chains so they can have all the money your comment is misguided this so called man has not earned that wealth by himself yet he would be happy to pay YOU nothing and have you doing all the work while living in a dirt floored house while he has gold plated faucets.
Tom Todd
Sat, Oct 6, 2012 : 1:09 p.m.
this is Mitt Romney's hero!
walker101
Sat, Oct 6, 2012 : 12:29 p.m.
If you want to take a look at the future, just look at Europe, I do not understand why the left continues to bury their heads in the sand.
Charley Sullivan
Sat, Oct 6, 2012 : 12:05 p.m.
1. Without Prop 2, the state will be owned by corporations, whose boards already vote to give themselves and each other raises. But we can't vote the bastards out. 2. If you wanna give to U-M, have some faith and give to U-M. If you don't want to, don't. But the privatization of U-M idea ignores the fact that the state has nearly 200 years of investment in U-M, even if today's investment is anemic. How would the situation be any different if the university were privatized? We get 0% of the budget from the state then. 3. So things get challenging, and you want to turn the world into a Lord of the Flies island, where competition is more important than making sure everyone survives and even thrives. Good leadership, Sam. Come row with my team for a month. We have some stuff to teach you. 4. Bring back Jennifer Granholm. Seriously. Now.
johnnya2
Sat, Oct 6, 2012 : 7:12 a.m.
So Mr Zell, you lump all Europe together? Have you seen Norway? The top income tax rate is 47.8 percent, and the corporate tax rate is a flat 28 percent. Other taxes include a value-added tax (VAT), a tax on net wealth, and environmental taxes, with the overall tax burden amounting to 41 percent of total domestic income. Government spending has risen to a level equivalent to 46.4 percent of total domestic output, Seems to me a great place to live. Oh by the way, continually rated a happier place than the US.
sandy schopbach
Sat, Oct 6, 2012 : 4:57 a.m.
Perhaps Mr. Zell would like to know that Europe thinks of the United States economy? What arrogance! And how little he understands. With so little knowledge, he would do better to keep his ideas to himself.
Michigan Man
Sat, Oct 6, 2012 : 2:44 p.m.
No one cares what those in Europe think about the USA. They still owe us billions for bailing them out of WWII.
Laura Jones
Sat, Oct 6, 2012 : 12:56 a.m.
If Mr. Zell wants to make a fair offer to the State of Michigan for the U, then we should listen. The price will include all properties, endowments, gifts, bequests and buildings. The value of the staff, reputation and goodwill should also be substantial. I am not sure Mr. Zell has enough cash to privatize, but he is welcome to try.
Stuart Brown
Sat, Oct 6, 2012 : 3:18 a.m.
Agreed, I think the asking price should start at $20 Billion. This money could be used to convert all of the Community Colleges in the State into four year schools. The State could stop giving over $250 Million per year to UofM and UofM could start paying taxes on its property.
Tom Todd
Fri, Oct 5, 2012 : 11:59 p.m.
I'd bet this kid would have no problem with the USA starting a war that would cost the country a trillion dollars if he made money on it,but the hell with someone making a dollar more an hour.
David Frye
Fri, Oct 5, 2012 : 11:14 p.m.
Better headline: "Mogul donates money, is allowed to deliver pointless rant before university crowd." Save us from rule by billionaires. There seems to be little correlation between making loads of money and having common sense.
glacialerratic
Sat, Oct 6, 2012 : 2:43 p.m.
"Little" correlation.
vivian
Sat, Oct 6, 2012 : 11:24 a.m.
Do you include George Soros when you say that? Just curious.
bluenella
Fri, Oct 5, 2012 : 11:06 p.m.
Privatize, schmivatize. It's a public university. If people like you were paying a higher tax rate, instead of the loophole bonanza & off-shore excitement many of those in your bracket engineer with creative accounting, the country would be in better shape. Privatize = more profits for you, with diminished results for the rest of us.
Tom Todd
Fri, Oct 5, 2012 : 11:16 p.m.
maybe it's true money can't by this clown happiness.
johnnya2
Fri, Oct 5, 2012 : 10:42 p.m.
So basically the two states that have given this idiot EVERYTHING, he says are corrupt and a problem that people should run from. Go ahead Sam, the U does not need your money. Your veiled threat at donating money is typical of his type who make sure EVERYBODY knows that he gave, and then demands a seat at the table to discuss how it should be run.
Jonathan Blutarsky
Fri, Oct 5, 2012 : 10:32 p.m.
"If that provision were passed, sell short on Michigan, get everything you can out of this state because it will be owned, lock, stock, and barrel, by people that can vote themselves raises." He means instead of people like him, who give themselves raises and tells everyone else "Be glad you have a job". PATHETIC!
amlive
Fri, Oct 5, 2012 : 10:04 p.m.
"I can tell you this, no matter who gets elected 2013 is going to suck," Amen! I mean, how is a man like this supposed to feed and care for his family on a few tens of millions coming in from his investments when he's used to getting several times that amount. I feel sorry for you brother. Damn unions, trying to steal this man's hard earned money.
Nick Danger
Fri, Oct 5, 2012 : 8:15 p.m.
Another rich guy advocating to screw the working man or women.I am a U of M alum and will send my donations to WCC
Indymama
Sun, Oct 7, 2012 : 8:31 p.m.
Good Choice Nick!!
Watcher
Fri, Oct 5, 2012 : 7:59 p.m.
Sam was in my undergrad U of M dormitory and my U of M Law School class, but somehow I failed to become a billionaire real estate mogul and investor.
Indymama
Sun, Oct 7, 2012 : 8:30 p.m.
Watcher, You must not have studied hard enough, or listened well enough, or chose another direction! ..or were you just waiting for the government to provide for you like TT?
Tom Todd
Fri, Oct 5, 2012 : 9:06 p.m.
how many has he stepped on to get what he has
Del Dunbar
Fri, Oct 5, 2012 : 7:48 p.m.
Sam, you're right on Snyder, Granholm, Proposal 2, and a Detroit of the past. I continue to love your one liners in your umpteenth speech to the UM business community . I guess your verbal shots through the heart never physically hurt anybody. But why is anybody, never You. Further, you know as well as I that your nickname of Grave Dancer has nothing to do with bottom fishing for cheap prices. A balanced presentation that included your thoughts on your tenure as Chairman and CEO of the Tribune Co., would have been insightful. (http://gawker.com/sam-zell/). Lastly, for better or worse, the University of Michigan belongs to the people of Michigan and will remain a public institution....an asset to be cherished by future generations of Michiganders. I'm sure you'll always be welcome and appreciated on this campus and ....please keep the donations flowing our way.
Linda Peck
Fri, Oct 5, 2012 : 7:40 p.m.
I say Sam is pretty much right and I pretty much agree with him. Privatize everything that is possible to privatize.
timjbd
Sat, Oct 6, 2012 : 3:19 p.m.
So all the public assets that have been built up on the taxes of citizens, and benefitted everyone- including small and large business owners- over the years should just be sold off/handed over now to rich investors?
Linda Peck
Sat, Oct 6, 2012 : 1:49 p.m.
To Tom, I have mostly worked for myself, created my own business, and lived on what I earned. The American Way.
Tom Todd
Fri, Oct 5, 2012 : 9:05 p.m.
lets pay you 50 cents an hour!
America
Fri, Oct 5, 2012 : 7:38 p.m.
If we take nothing else from this talk I hope we at least VOTE NO ON PROP 2.
Indymama
Sun, Oct 7, 2012 : 8:26 p.m.
Tom Todd belongs to a Union! He wants to rule over you!! Vote NO on Proposition 2 and maintain some semblence of your Freedom!!
Tom Todd
Fri, Oct 5, 2012 : 9:04 p.m.
Anti-Middle class propaganda! vote yes.
81wolverine
Fri, Oct 5, 2012 : 7:31 p.m.
Pretty strong and negative words from Mr. Zell. It's one thing to be outspoken, but another to make statements like "If I look at all the options in the world, I can't image a place that would be closer to the bottom than Europe," That's a pretty absurd statement for a supposedly expert investor and business-person. I prefer to take a more optimistic view than Zell about the future of our state and U.S. economies.
Vivienne Armentrout
Fri, Oct 5, 2012 : 7:21 p.m.
Among the graves he has danced on are the Chicago Tribune and the Los Angeles Times. He bought out the Tribune company, which ended up in bankruptcy. http://en.wikipedia.org/wiki/Chicago_Tribune
Rod Johnson
Fri, Oct 5, 2012 : 8:09 p.m.
Exactly. When Sam Zell gives advice, look in the opposite direction. Why would anyone listen to this evil clown?
Audion Man
Fri, Oct 5, 2012 : 7:13 p.m.
Just a hunch, but I don't think Sam Zell has my best interests at heart.
fjord
Fri, Oct 5, 2012 : 6:59 p.m.
"Zell said electing Gov. Rick Snyder was a 'terrific plus' for Michigan" Clue #1 that you shouldn't trust a single thing coming out of this man's mouth.
snark12
Fri, Oct 5, 2012 : 6:34 p.m.
As billionaires go, Sam Zell is the anti-Warren-Buffet.
81wolverine
Fri, Oct 5, 2012 : 10:48 p.m.
That's pretty true. WB would never categorically dismiss an entire geographic area from an investment point of view. He simply looks for great long term value no matter where it is - Europe, the U.S., South America, Africa, whatever. Zell's point of view may simply be real-estate centric, but in the context of the article, you can't really tell that.
snark12
Fri, Oct 5, 2012 : 7:17 p.m.
He's about 1/12th as successful as Buffet, as well.
GoNavy
Fri, Oct 5, 2012 : 6:31 p.m.
No thanks, Sam. Do share your real-estate investing experience; save the rest for those who are interested.
Top Cat
Fri, Oct 5, 2012 : 6:24 p.m.
Yes Sam, some people will always resent you because you are successful....and they are not.
rm1
Fri, Oct 5, 2012 : 6:21 p.m.
"he would like to see U-M privatize." Two points: (1) U-M has already been largely privatized, in that the state legislature's contribution to the university budget has dwindled to $273 million this year. That's about 5% of the total budget of more than $5.5 billion. http://www.annarbor.com/news/by-the-numbers-university-of-michigan/#.UDvEmEJU6I4 (The $1.65 billion "operating budget" or general fund does not include a substantial portion of the University's $5.5 billion-plus expenditures, which are separately paid for. See: http://www.vpcomm.umich.edu/budget/understanding.html ) (2) If you want to privatize, how do you handle the more than $11 billion in property (see first link above) now owned by the constitutional entity, The University of Michigan. Does the state just relinquish all claim on those assets? And what are the politics, as well as the constitutional legalities, of that? An easy throwaway line, Mr. Zell.
timjbd
Sat, Oct 6, 2012 : 3:15 p.m.
That's more a tradition than law. http://www.thefiscaltimes.com/Articles/2011/10/07/The-Rich-University-The-Mother-of-all-Tax-Breaks.aspx#page1 If the U of M went private, they could be taxed by the city, at least. The property taxes alone could be a huge boon. Which the DDA would squander.
Charley Sullivan
Sat, Oct 6, 2012 : 12:12 p.m.
They would remain an untaxed entity, as are all private schools, colleges and universities.
Jonathan Blutarsky
Fri, Oct 5, 2012 : 10:39 p.m.
On the plus side - if U of M did privatize they would hopefully have to pay taxes on that 11 billion - unless of course they rig the game as they seem to always seem to do.
rm1
Fri, Oct 5, 2012 : 9:01 p.m.
And here's an account in Business Insider of Zell's other public rant . . . uhhh . . . statement this week: http://www.businessinsider.com/sam-zell-explains-mitt-romneys-economic-viewpoints-2012-10
Ignatz
Fri, Oct 5, 2012 : 5:28 p.m.
Some folks just don't want to see the working man have half a chance at having a nice life.
bobslowson
Fri, Oct 5, 2012 : 4:55 p.m.
I think his nickname Grave Dancer is for a totally different reason than he thinks!
xmo
Fri, Oct 5, 2012 : 4:51 p.m.
Sam must have made all the Liberals at U of M upset! Didn't President Obama come out of Illinois? ""Detroit is a corrupt city, OK. It's as bad as the state of Illinois," he said." Proposal 2 "If that provision were passed, sell short on Michigan, get everything you can out of this state because it will be owned, lock, stock, and barrel, by people that can vote themselves raises."
ordmad
Fri, Oct 5, 2012 : 4:49 p.m.
"I think that whatever is best for the .0001%ers is what is best for the rest of you." Thanks but no thanks Sam: been there, done that, never has worked.