Adam: Thanks again for taking the time to share your story and your advice. First things first, though, I am sure readers would love to learn more about you. How did you get here? What failures, setbacks or challenges have been most instrumental to your growth?
Richard: My career began in real estate, where I worked for Sam Zell for 17 years. During this time, Equity Office Properties Trust grew from a small collection of office assets into a $39 billion company. It was an amazing period of growth for me, in which I learned to not be afraid of failure. In a traditional sense, I was actually underqualified for virtually every position I had during that time – but that was part of the magic of working there. Sam ran a meritocracy. If you were willing to take on big challenges and get things done, he would give you a chance, regardless of your background or formal education.
For a young professional starting a career in real estate, you were only limited by your ambitions. I was promoted from a Vice President in property finance to CFO, COO and ultimately served as CEO of one of the largest real estate companies in the world at that time.
One of the biggest challenges in that type of environment was trying to maintain some kind of work-life balance, which is a challenge for most people, particularly entrepreneurs. In order to be successful, you have to put your heart and soul into your work. My best advice is to be conscious of what you are doing and make as much space as you can for your important relationships. There are tradeoffs, but you have to be just as focused on your relationships as your career.
I was 45 when we sold Equity Office, which led me to really think about what I wanted to do next. The change was abrupt. One minute I was negotiating a large leveraged buyout that turned into a bidding war, and the next, I am thinking about what I want to do for the rest of my life. Ultimately, I decided to start investing my own capital into early stage companies. I can honestly say that I underestimated how hard it would be. It has become a cliché to talk about the trials and tribulations of starting a business—in many ways, the media had glamorized it in unrealistic way. There is nothing fun about failure, or having to let staff go, or shutting down a business. Raising capital is extremely difficult for most early stage companies, and there are so many things out of your control that will impact your business. You really have to be able to deal with a great deal of stress and uncertainty.
That said, it is an incredible experience to take an idea and turn it into an impactful business that you are very proud of, which is exactly how I feel about Sagegreenlife. We have the most advanced living wall products on the market, and what drives me each and every day is knowing that we sell products of integrity that make the world a better place.
Adam: What were the best lessons you learned from your experience as CEO of Sam Zell’s organization, Equity Office Properties Trust? What did you learn from Sam in particular about real estate investing and about leadership?
Richard: Being CEO of Equity Office was humbling. I began my new role right as the office markets in the U.S. were in a steep decline. We went from 95% leased to 83% leased, and it put considerable pressure on the entire organization. I had to lay off 18% of the workforce, cut the dividend and start to shrink the company when our entire focus had previously been on growth. The key was to be quick, decisive and honest with employees and stakeholders about what you were doing and why. We were committed to treating everyone with care and compassion. In times like that, what you say matters less, but what you do and how you do it matters a great deal. Constant communication and being willing to answer tough questions from employees was critical. We got through that period and ultimately had a 37% compounded annual return during my tenure as CEO. It was trial by fire from the very beginning!
I learned so much from Sam; it’s impossible to capture it all. When comes to investing, he taught me a tremendous amount about understanding your risk. Sam used to always say that the upside took care of itself, but can you survive the downside? I also learned about intrinsic value versus “spreadsheet value.” We always did long-term modeling, but if you couldn’t understand it at a high level based on a few key facts, you were probably missing the essence of the deal. The answer was rarely in the spreadsheet. If there was a problem with the deal, it was probably apparent at a high level.
Adam: What are your thoughts on the real estate market today? At the risk of making a wrong prediction, where do you think we are headed?
Richard: Most real estate downturns are caused by oversupply, and that has largely not been an issue since the financial crisis. Having said that, low interest rates globally have turned this asset class into a fixed income proxy, and virtually every sector of commercial real estate is trading near its historical highs. With investors accepting historically low returns for this asset class, the risk is likely to be disappointing total returns, but I don’t see a disaster, because supply has largely been in line with demand.
Adam: What is your best advice for emerging real estate entrepreneurs and leaders? How can those interested in getting into the space learn?
Richard: My best advice for emerging entrepreneurs is to really understand your strengths and weaknesses and hire people that compliment your skills. Furthermore, don’t simply fall in love with the CEO title; rather, be prepared to step down when the company needs a leader who might be better at that job than you are. I see too many young leaders feel like they have to be the CEO, when they really don’t like what that job actually entails or have the management skills necessary to help their company thrive.
Adam: In your experience, what are the defining qualities of an effective leader? How can leaders and aspiring leaders take their leadership skills to the next level?
Richard: I think one of the hardest leadership skills to learn is how to effectively delegate; you do not always need to be the person with all of the answers. Your team will never grow as leaders and professionals if you dominate every conversation and make every decision. Stepping back and altering your management style is very difficult, but it is essential if you want to build a high-performing team.
Adam: What are your three best tips applicable to entrepreneurs, executives and civic leaders?
Richard: 1. You can create a strong work environment and culture on paper through mission statements and guidelines, but it is your actions that will truly define your culture. How you and your managers lead every day is what makes the biggest impact on your team.
2. Don’t tolerate toxic people in your work environment. Tolerance can destroy your culture and your team is counting on you to address the situation. I have never regretted moving fast in these situations, but I have absolutely regretted waiting too long. Even the person who may get let go can benefit and learn from your honest feedback. It is even more important to address these issues if the person is perceived to be a friend, relative or a star performer in some ways. You will lose credibility fast if your employees think there are two sets of rules and expectations. If you want to create a great work environment, you really can’t tolerate people who are disruptive or abusive to other employees.
3. For civic leaders, understand risk and return. If you want to create innovation in your city or state, risk-takers must feel welcome and the environment should help increase their odds of success.
Adam: What is the single best piece of advice you have ever received?
Richard: Don’t be afraid to fail. My father always told me that and it has served me well over the years.
Adam: How do you see the workplace changing and how do you think the workplace will look in five to ten years?
Richard: According to the Conference Board, there will be an acute demographic labor shortfall for at least the next 15 years, and Millennials will be 75% of the labor force by 2025. The war for talent is real and it is just beginning. Businesses have to stop thinking about work environments as expenses when they have the potential to be incredible assets that will help attract and retain key employees.
Work environments will become healthier and offer employees much more flexibility around how and where they want to work. The days of cube farms and windowless spaces are over. There is an entire generation who simply won’t work in that environment. It’s time to change, and change fast, or your business will lose its best employees.
Adam: What are your hobbies and how have they shaped you?
Richard: I love spending time outdoors skiing, hiking, biking and traveling through national parks. My favorite place is Glacier National Park in Montana. I never get tired of camping or hiking there. My love of nature is initially what drove my interest in Sagegreenlife. We don’t have to live in concrete jungles and sterile interior spaces. Our entire product line is devoted to bringing nature into every environment, inside and outside, and I love that about our company.