“The reasonable man adapts himself to the world. The unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends upon the unreasonable man.”
– George Bernard Shaw
Let me admit outright I had barely heard of Eli Broad before. I hadn’t heard of the two Fortune 500 companies he founded, KB Home and Sun America, either. Nor did I know that he is a very versatile and successful American philanthropist. And it’s his approach to philanthropy that interested me as much as his business success story.
The child of Jewish immigrants from Lithuania who ran a Christmas store, Mr Broad grew up in Detroit. His tryst with business started early when he began trading stamps at good margins, and then moved on to become Michigan’s youngest certified public accountant (CPA).
After a few stints in teaching and accounting, he set up a home construction company focused on affordable homes. He had no real business understanding of home-building, but he applied his principles of cost control, extensive research and plain talk both in the tight-margin, home-building business and insurance, the other business he built.
In his words, he was just unreasonable all the time, always asking, “Why not?” He built businesses swiftly. He also got out at the right time. For instance, he acquired Sun Life Insurance Company in 1971 for $52 million and sold it for $18 billion to AIG. It also helped that he sold the company before Wall Street imploded in 2008, as did AIG.
Mr Broad has fairly cut-and-dried principles about doing business, and he articulates them lucidly. He argues that reasonable people treat conventional wisdom with respect, but those of us who are unreasonable regard it as an expression of the herd instinct. And that, to Mr Broad, is a fine quality for sheep (creatures that usually end up getting sheared), but not for entrepreneurs. So, he says, “Why Not” should be a question posed daily.
Including building homes without basements, a practice that would go against prevailing trends. Mr Broad’s reasoning was that basements were losing their value since you did not have to store coal in them any more. It also speeded up the construction process considerably.
For all the successes, Mr Broad admits that no winning streak lasts forever. His company, Kaufman & Broad, was Wall Street’s darling in 1971. Analysts were convinced that a well-run housing company was immune to the ups and downs of the business cycle. And yet, Mr Broad says, he began having second thoughts. “It’s important to pay attention to the lessons of history and know the realities of your industry. In other words, don’t believe the conventional wisdom you create about yourself.”
In six decades, says Mr Broad, he had four careers: accounting, home-building, retirement savings and philanthropy. And he applied the same principles of selling a cause as he did to selling a product. Mr Broad describes how the $6 billion he earned in business is now being used to reform public education in America, assemble two world-class art collections and make them accessible and provide critical start-up funding for cutting-edge biomedical research, the last with MIT and Harvard. His favourite cause is: selling Los Angeles and its downtown area. And rebuilding Los Angeles’ downtown is, evidently, a passion. The book abounds with examples of how Mr Broad tried to raise funds for one cause or the other — not always with success.
Philanthropy is becoming serious business in India, too. And Mr Broad has several lessons to offer, the most intriguing being that everyone, and not just the rich, can be a philanthropist.
So, try to be a “philanthropic game changer” by starting local and thinking like an entrepreneur, he argues. Not surprisingly, perhaps, Mr Broad and his wife, Edye, were early signatories to the Giving Pledge, conceived by Bill and Melinda Gates and Warren Buffett.
The Art of Being Unreasonable can sound a little instructional at times. For example: “Work doesn’t have to be your life, but your life is your work”. But what Mr Broad means is that he’s not great at work-life balance. He sleeps eight hours a day and yet works all the time. But he does not play golf since it takes too long. He never stays anywhere – parties, museums, meetings – longer than three hours. “In my view, there aren’t many things that need to last more than three hours,” he says. But it’s also interesting to read about an American entrepreneur who is not the CEO of a Fortune 100 company, particularly from the outside.
A small anecdote to close. Mr Broad met Mark Zuckerberg and decided to invest in Facebook, much before the social media giant’s troubled initial public offer (IPO). It took his investment team some serious hounding to find shares, but they did, on Mr Broad’s constant prodding. But given the way things turned out with Facebook’s stock so far, maybe this is one Broad bet that will fall between philanthropy and hard investment.
THE ART OF BEING UNREASONABLE
Lessons in Unconventional Thinking
Eli Broad with Swati Pandey
John Wiley & Sons, Inc; 192 pages; $24.95