Threshold Resistance (12 page)

Some journalists came to my defense. For every commentator who found the phrase offensive, several others considered it profound. No one, unfortunately, was interested in the actual quote. This became abundantly clear when a business magazine staffer called to fact-check the “art is root beer” version. Our public relations office pointed out the error and sent the text of the lecture, highlighting the sentence “You may find there's more similarity in the challenge of marketing a frosted mug of root beer and a precious painting by Degas than you ever thought possible.” The fact-checker called back to let us know that the shorter version of the quote would go into the publication, explaining, “Yours just doesn't sing.”

With this attitude toward “fact-checking,” heroic pronouncements such as “Give me liberty or give me death” could actually have been something like, “Let me take the liberty to ask you folks to reconsider the rather harsh sentence you have imposed.” Who knows?

Well, at least the students and professors at Harvard knew what I meant. The best business opportunities in a mature consumer society deliver goods, services, and experiences that go beyond satisfying needs. Acquiring a precious Degas painting for your collection is a privilege and a joy. Enjoying a frosted mug of root beer at an A&W drive-in restaurant on a hot summer evening is a delight. Finding just the right dress for a special occasion makes you feel good about yourself. And watching Anthony Carter catch a game-winning touchdown pass is a memory that lasts a lifetime among friends.
Nobody needs to do any of these things. But companies profit by creating and delivering such opportunities. Businessmen and business-women who deliver such enjoyable experiences to their customers will win in today's mature, competitive markets. And you can quote me on that.

I
n the 1980s, the trajectory of my career shifted somewhat. I was in my sixties, approaching the age at which many people retire. Because I was well-off, because my company had grown to be very large, and because I had become involved with highly publicized ventures, such as the Irvine Ranch and the Michigan Panthers, I had become something of a public figure, which was not what I had sought. As a result, a lot of opportunities were presented to me, and I pursued many of them. In retrospect, I probably would have been better off just building centers. But I was always fascinated with doing interesting things.

Taubman Centers was the heart of my business and my identity. I wasn't bored with developing centers. In the 1980s, we were still building, though not at the feverish pace of the late 1960s and early 1970s. In the mid-1970s, the dynamics of development had changed. Land costs had increased in the suburbs, and we believed the great wave of population growth in the outlying regions was beginning to slow. And so we began to look for opportunities in the more densely developed areas in between the first-generation shopping centers (downtowns) and second-generation shopping centers (regional malls). While the land was generally difficult to assemble, these
locations offered great advantages: a 360-degree market, excellent road access, and large populations. We still held true to our old maxim that people shop where they live. But by building in more densely populated areas, we could also tap into people who were interested in shopping where they worked, too. And as we focused more on higher-end stores—and higher-end consumers—these locations made a great deal of sense. Applying many of the same principles and practices we had perfected with our large malls, we began to adapt them to somewhat different and smaller configurations. Of the nine properties we opened in the 1980s, four were done in urban locations.

Built in the late 1950s, the Mall at Short Hills, in northern New Jersey, was a poorly designed mess. The Prudential Insurance Company, which owned the property, in the late 1970s asked us to look into redeveloping it, which we did. After we reopened it in 1980, it quickly turned into what one writer called a center “for all-stars.”

In 1982, in partnership with my great friend Sheldon Gordon, we opened the eight-floor Beverly Center in Los Angeles, which was our first real attempt at vertical retailing. The site was only nine acres, much smaller than our typical development. But with two hundred specialty stores, a Hard Rock Cafe, and movie theaters, it quickly emerged as a destination for many of the 2 million people who lived within a fifteen-minute drive. The same year, we opened Stamford Town Center in Stamford, Connecticut. Again, it was smaller than most of our superregional centers: 900,000 square feet built on eleven acres. In 1984, its third year of operation, the Stamford Town Center reported sales of $300 per square foot, which, I noted at the time, was like a rookie baseball player batting average. Thanks to the growing wealth and job creation in these near-in suburban areas, these centers today are among our most successful, with some of the highest sales-per-square-foot figures in the industry. Today, the Mall at Short Hills has five specialty department stores: Bloomingdale's, Saks, Ma
cy's, Nordstrom, and Neiman Marcus. And the stores do a tremendous volume—over $1,000 per square foot in sales. Last year, the 8,000-square-foot Tiffany store did almost as much in sales as a department store.

In Charleston, South Carolina, we created Charleston Place, a hotel, conference, and shopping complex in the heart of one of America's most historic downtowns. Gifted architect John Carl Warnecke assisted us with the design. Located at the intersection of King Street and Market Street—the city's primary retail thoroughfares—Charleston Place's shops were carefully designed to enliven (actually, rescue) the struggling street-level retail that existed at the time. Mayor Joseph P. Riley Jr., who brought us to town, is still in office and justifiably brags about the new businesses and economic vitality spawned by Charleston Place. Mayor Riley provided the leadership to convince local entrepreneurs to invest downtown, and today Charleston is a bustling, beautiful place to live or visit. Farther up the Atlantic coast in Manhattan, we were partners with Solomon Equities in 712 Fifth Avenue.

Through all this growth, the Taubman Company remained very much a family company. Not everybody thinks it's a good idea to do business with family and friends. While I understand the reluctance, some of my most successful and rewarding business initiatives have involved my closest friends and family members. My first hire when I founded the Taubman Company was my father who worked with me until his death. Two of the company's three most senior officers today are my sons, Robert and William. My friends Max Fisher and Henry Ford II were partners in the Irvine Ranch and Sotheby's acquisitions. In fact, I can't remember a major business step I ever took without some involvement of family and friends.

Clearly, not all family businesses succeed. After all, not all families succeed. But there is plenty of evidence to suggest that there is something special about organizations imbued with a healthy dose
of familial DNA. The cover story in the November 10, 2003, issue of
Business Week,
headlined “Family, Inc.,” began with this introduction: “Surprise! One-third of the S&P 500 companies have founding families involved in management. And those are usually the best performers.” Here's what the magazine reported:

That's not surprising to me. Although they may not be mandated by any Sarbanes-Oxley regulation, devotion, dedication, loyalty, and deep personal involvement are critical requirements of good corporate governance. It just makes sense that if the fate of my family name and fortune are directly linked with the business I'm running, my effort and commitment—in most cases—will exceed those of a “hired hand.” Call it passion. Call it love. Call it survival. Family employees and leaders just have more skin in the game.

I like the fact that there's a Ford driving the future of Ford Motor Company (I personally witnessed and admired the intense pride and dedication of Henry Ford II during our decades of friendship). Founding families give their companies distinctive flavor and soul. That's not a bad thing. I had the pleasure and honor to sit on the board of directors of the Getty Oil Company in the 1970s and 1980s. The Getty family owned 40 percent of the stock, and the Sara B. Getty Foundation (the entity that created and supports the wonderful Getty Museum) owned 11 percent. Fellow board member Gordon Getty, the
son of J. Paul Getty, would occasionally serenade us at board dinners with a full-blown aria. I'm not a great fan of opera, but I enjoyed these extemporaneous performances. They served to remind us that we were in a very real sense members of an extended family—a family that had a tremendous stake in the future of Getty Oil.

Sure, family feuds and bad seeds have taken their toll on family businesses. But more often than not, these organizations stay focused and grow.
Business Week
observed on 11/16/2003:

I've had good luck and more than my share of fun with family businesses—starting with my own. Part of the reason I was able to get involved with a range of activities in the 1980s was the strength of the team running the Taubman Company. Bob Larson, who is now at Lazard, was president and a gifted leader. And my two sons, Bob and Bill, were both there. I had hoped they would come work for the company, but I didn't presume they would. They were both intelligent young men and were always interested in what I was doing. And while my schedule was always hectic, we did manage to spend quality time together.

In 1981, to celebrate William's graduation from Cambridge University, where he had earned an advanced degree in philosophy and religion, fourteen of us were among the first westerners to gain entry to Tibet after cold-war tensions had cooled. It was an interesting group. Joining me and a young woman I was dating at the time, were
Max and Marjorie Fisher; New York attorney Peter Tufo and his mother; Italian businessman Emilio Gioia and his wife, Iris; my attorney and friend Jeffrey Miro and his wife, Marsha; my daughter, Gayle, and her husband, Michael; Dr. Ralph Brandt; and William. I had sponsored a mission to China for a number of United States mayors. In return, the government of China had invited us to tour their fascinating country.

A highlight of the trip was a visit to an industry exposition in Guangzhou, or Canton, at the time the most important trading center in south China. On display were the newest products of China's emerging economy. I was particularly impressed with a manufactured terrazzo tile as good as any sold in Italy and less than a quarter of the cost. The Taubman Company bought floor tile by the thousands of square feet. This stuff was first-rate and cheap. My son-in-law, Michael, who is a microsurgeon, was equally excited about a medical microscope priced at around $7,500. The German equivalent sold for more than $45,000. We had every intention of placing orders. But when we met with the senior trade officials we were informed that the piece of terrazzo I held in my hand and the microscope Michael had admired were the only ones in existence. They had no intention of selling their “display” samples.

When my sons began working in the company, they never reported to me. Bobby started in our Washington office working under Bob Larson, doing land work. He then moved to San Francisco and ultimately ran the leasing department on the West Coast, and then I brought him to Detroit. He was named president in 1990 and is today also chairman and chief executive officer. William worked in investment banking for Oppenheimer a few years and came to work for the company in 1984. Today, he's chief operating officer.

I've also enjoyed my involvement in the Athena Group, a private nonretail real estate development firm I started in 1995 with my stepdaughter Tiffany's husband. We've completed successful residential and office projects as close as Washington, D.C., and Manhattan, and
as far away as Moscow and the city of Baku in the oil-rich republic of Azerbaijan (formerly part of the Soviet Union). In Baku we transformed a six-story structure built by the Germans in 1906 as a mill and wheat storage facility into a modern office building. The handsome exterior of the building (the brick walls were four feet thick to survive earthquakes) was designed to blend into the urban fabric of Baku, masking its original function. Much of the interior was essentially a massive, open silo, so we had to add the floors. Because the soil was inadequate to handle the weight, we designed a truss system at the roofline from which we actually hung the floors. In order to convince the city's planning board to allow windows on the sixth floor—which was the original attic space—one of our associates, Metin Negrin, flew to Paris to photograph top-story dormer window treatments throughout the city. We were convincing enough, and the sixth-floor tenants today pay top dollar for fabulous views of the Caspian Sea.

Our building, which was the first “class A” office building in Baku, leased up immediately to major international oil companies. On street level, HSBC Bank and British Airways occupied the retail space. While record keeping and accounting procedures are far from perfect in Azerbaijan, we got our money back on the project in just eighteen months and are still partners in the very successful building.

Longstanding friends continued to be a great source of new ideas and businesses. I met Dixon Boardman in the 1970s when he was an investment adviser with Kidder, Peabody in New York. He did a great job for me, and we became good friends and golf partners. After Kidder went through a series of acquisitions by General Electric and Paine Webber, I suggested that Dixon start a hedge fund, actually, a fund of funds. He was excited about the idea, and with an initial investment of $22 million (of which $10 million was mine) created the Optima Fund in 1988. Today, Dixon's fund manages about $6 billion, and we're still the best of friends.

With the assistance of my friend Mort Zuckerman, an accom
plished real estate developer and publisher of
U.S. News & World Report,
the Athena Group invested in Russia's first independent tabloid newspaper. The editor was a talented journalist named Artyom Borovik, who also hosted the nation's most popular television news program, a
60 Minutes
-style show. Encouraging and facilitating the development of a free press in Russia was heady stuff. But our involvement ended abruptly when Artyom was killed in a very suspicious private airplane accident.

This was not my first exposure to a family-owned media business. I owned a small media company headquartered in Phoenix, Arizona, in the 1970s. And in 1986, I pursued an investment in the Pulitzer Publishing Company, a very successful family-owned and-operated business. The deal was brought to me by Felix Rohatyn, a partner in the investment firm Lazard Frères. Flush with cash from the divestment of the Irvine Ranch and a major investment in the Taubman Company portfolio by the General Motors Pension Trust, I asked Felix to keep his eyes open for promising opportunities.