Sam Zell: The Emperor Has No Clothes

I had the incredible pleasure of sitting down for an interview with my mentor and friend Sam Zell, a self-made billionaire, the grandfather of the modern real estate industry, and one of Forbes’ 100 Greatest Living Business Minds.  During our insightful conversation, I had the chance to ask Sam about his thoughts on the latest investment trends, including cryptocurrencies and NFTs.

Our conversation took place 15 months before the spectacular downfall of FTX and its disgraced founder Sam Bankman-Fried.

Our discussion about investment trends inevitably brought me to mention Sam’s iconic annual gifts.  Every year, Sam sends 650 of his associates and friends uniquely numbered and custom-made bronze statues and music boxes that reflect his public thinking and predictions for the upcoming year.

Sam graciously sent me one in 1999, and it was a statue of a naked man standing on a stack of Wall Street Journals predicting a catastrophic collapse of technology companies.  The title was “The Emperor Has No Clothes.”  The man was wrapped in a ribbon with ticker symbols of the high-flying tech companies at the time:  Webvan, eToys, Dr. Koop, and more (Akamai was not included, which I thanked Sam for!)  At the back of the statue was a button – when I pressed it, Sam’s voice emerged: “New technology will change our lives, but it will not change the basic laws of economics.”  Music then came on, and it was a parody of Paul Simon’s song “50 Ways to Leave Your Lover” called “50 Ways to Make a Billion.”

The gift came 2 years before the dot-com crash, and Sam’s prediction could not have been more spot on.

Today, the investment landscape is inundated with more new trends than ever – Bitcoin, cryptocurrency, meme stocks, and NFTs.  On March 11, 2021, a piece of digital art titled EVERYDAYS: THE FIRST 5000 DAYS made by the artist Mike Winkelmann – also known as Beeple – sold on Christie’s online auction for over $69.3 million, making Beeple one of the top three most valuable living artists.  In 2021, venture capital firms deployed more than $30 billion globally into crypto startups, and Shark Tank investor Mark Cuban (make sure to listen to my interview with Mark here!) called crypto “the next big thing.”

When I asked Sam about his thoughts on these new investment trends, he simply said that he didn’t understand them.  “I’m too old – I’m old enough to remember pet rocks!” he joked.  More importantly, Sam believes that the newest waves of popular crypto startups are simply extreme examples of human nature:  we as human beings have always been prone to ride exciting trends like these throughout history – and although there might be a role for crypto to play in the future, people are, generally speaking, merely responding to fads as opposed to making intelligent decisions.

My interview with Sam was in August 2021 – and sure enough, Sam was right again.  In the several years, Bitcoin has lost 34% of its value since its all-time high in November 2021, while Ether is down 50%+.  The Terra LUNA (LUNA) coin crashed from a high of $117 in early April to nearly $1, and after freezing more than $11.8 billion in customer assets, the leading cryptocurrency lender Celsius filed for bankruptcy on July 13, 2022.  And then there’s FTX – a company that raised more than $2 billion from some of the firms most prominent investors, and that lost more than $8 billion in assets for its clients.

The message that came with Sam’s gift 23 years ago still rings true today:  crypto might change our lives, but it will not change the basic laws of economics.  Will crypto companies will be able to weather this crash the way some technology companies were able to survive the Dot-com burst?  Only time – and Sam Zell – will tell.

This article is based on my interview with Sam Zell, a self-made billionaire with a net worth of more than $5 billion who has been on the Forbes 400 since its first issue in 1982.  Sam is considered one of the grandfathers of the modern real estate investing industry and currently serves as Chairman of seven NYSE-listed companies and of his private investment firm, Equity Group Investments.  Among his many accomplishments, Sam sold Equity Office to Blackstone for $39 billion in 2008, and Forbes has recognized him as one of the 100 Greatest Living Business Minds.  Sam is also the best-selling author of Am I Being Too Subtle? and an active philanthropist with a focus on entrepreneurial education.  Listen to the full episode here.

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Randall Kaplan is a serial entrepreneur, venture capitalist, philanthropist, and podcaster. He is the founder and CEO of JUMP Investors, a venture capital firm that has invested in more than 80 early-to-late-stage technology companies, including Google, Seagate, and Lyft. Randall is a Co-Founder of Akamai Technologies, a publicly-traded technology company that has 8,000 employees around the world and earned $3.8 billion in 2022 revenues. He is also the Founder and CEO of Sandee, the largest provider of information about beaches in the world with over 100 categories of information for more than 100,000 beaches in 212 countries.

Randall is the host of In Search of Excellence, a podcast designed to motivate and inspire others to reach their potential and achieve excellence in all aspects of life. Randall’s guests have included Mike Tyson, Mark Cuban, Kevin O'Leary, David Solomon, Bob Pittman, Sharon Stone, David Rubenstein, Steve Case, Orlando Bravo, Sammy Hagar, Sam Zell, Rachel Zoe, Tim Draper, Kliff Kingsbury, and Eric Garcetti, among many others. Randall is also a dedicated philanthropist – he is the founder of The Justice Ball which has raised more than $8 million for a non-profit legal clinic that aids more than 12,000 poor, sick, elderly, and homeless residents of Los Angeles each year, and is the Co-Founder of The Imagine Ball which has raised millions of dollars and is dedicated to ending the cycle of poverty and homelessness in Los Angeles.

Read Randall's full bio at www.randallkaplan.com.