Feb 29, 2008 1:17 PM

Sam Zell up close

Sam Zell, the real estate magnate and new owner/CEO of the Tribune Company that publishes the Los Angeles Times, has a softer side that is not usually part of his public persona. Let's just say it's not what the iconoclastic, hard-driving, blunt-talking, gravel-voiced Zell is best known for.

Coming in at No. 52 with $6 billion on Forbes' 2007 list of the 400 richest Americans, Zell proudly calls himself "the grave dancer" for his fortune-making coup during the 1970s recession when he snapped up more distressed properties in the country than anyone else. As a world-class grave dancer, Zell said, "You gotta dance around the edge. But you don’t fall in."

Zell, who runs a vast global distributed real estate enterprise that is building low- and medium-income housing on a massive scale in emerging countries like Mexico, Brazil and China, has rarely fallen in.

His hard-boiled exterior, however, showed a minute crack when he chatted with Dean Judy Olian of the UCLA Anderson School recently in front of an audience at the Hammer Museum. On a nearby tabletop were a few of his expensive holiday "toys," original artworks that have become collector's items. He commissions these each year to give to some 675 people on his year-end gift list.

Zell told those attending the Hammer Conversation in the Billy Wilder Theater that he decided long ago that he wouldn't be handing out corporate gifts of chocolates and pen-and-pencil sets. Instead, he wanted to give his friends and business acquaintances a picture of "where my head is at" every year. In 1999, for example, at the height of the dot com boom, Zell came up with a witty, and prophetic, expose of the Internet bubble, packaged in an elaborately produced video that combines animation and his message put to music.

His most recent holiday video, which the audience was also treated to, was a clever "take" on the chaos, confusion and constipation generated by the current economy.

All of this — the message, the medium and the gift — comes annually to Zell during a weeklong motorcycle trip he takes by himself somewhere in the world in May or June. "That's when I start thinking about what I'm going to do for the year-end gift," he said.

Zell has built his reputation on trusting his instincts, no matter how far from the mainstream they point. His real talent, he explained, lies in his ability to observe a situation in person — he spends 1,200 hours a year on his plane traveling the globe – filter out the “noise” and figure out the risk-versus-reward ratio.

"People who have excelled economically ... have all been people who have turned right when everybody else turned left. I don't believe in the conventional wisdom, and therefore I challenge conventional wisdom."

That was true for the over-valued Internet in the 90s. "The fact that nobody agreed with me has never bothered me in the past and is not likely to bother me in the future," he said.

And it'’s true today, with hysteria over the economy. "For every horror story you hear on Wall Street," he said calmly, "You can go to the farm belt. The farmers have never made more money in their lives. You can go to Texas in the energy area, and there's full employment."

With his takeover of the Tribune Company, engineered in conjunction with an employee stock ownership plan, Zell is again betting against conventional wisdom to see if he can turn a profit in the struggling newspaper industry. When Olian asked what he was thinking when he bought the Tribune, Zell cited his bottom line. "Everything is a function of price. From my perspective, I looked at the Tribune. I looked at what I perceived the opportunity would be. I looked at the price ... and I structured the transaction in a way that gave us a materially better opportunity of succeeding."

His original assumption was that revenue from his newspapers would continue to erode every year, that broadcasting would get better and that interactive enterprises would grow significantly. In fact, in the first 60 days under his aegis, newspaper revenue "dropped more than we would have expected. To some extent, that may be all this recession mongering; to some extent, it may be the fact that we are slowing. ... But I doubt very much if the last 60 days are indicative. Is it a growing media? No. Does it have lots of opportunities that I think will both make money and make a difference? Yes."

Zell pointed to two examples of recent successes. The Chicago Tribune created the "Red Eye," a free community newspaper geared toward 25 to 40-year-olds. "In Chicago, if you go on one of the commuter trains, you will see everybody reading it," he noted. His Fort Lauderdale, Fla. newspaper is producing a free weekly teen newspaper, half of which is written by students. "It's totally financed by advertisers. ... The result is we're making money."

Zell, who reads four newspapers every day and keeps Bloomberg.com on his desktop computer, said he doesn't believe newspapers will die. But after being arrogant and monopolistic for so long, he explained, they need to give up their historical perspectives and understand who their customers are — their readers and their advertisers. "In most businesses, the customer is always right; in the newspaper business, the customer is often not consulted," he said.

When during the open Q&A a woman in the audience bemoaned the cuts and changes being made in the newsroom of the L.A. Times. Zell told her that the cuts have been smaller than the decline in revenue.

The bottom line, he said, is that a newspaper "must earn its way, and reporters must report in a manner that attracts readers. I don’t know how to put it more simply than that."

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