Threshold Resistance (13 page)

The Pulitzer Publishing Company was a terrific media conglomerate operating daily newspapers in St. Louis and Tucson, weeklies in suburban Chicago, seven television stations, and two radio stations. It was well run and very profitable (it still is). Four members of the Pulitzer family, feeling that Joseph Pulitzer Jr., the patriarch of the venerable family, was being stingy with their money, were looking for someone to purchase their stakes in the company. Lazard was representing them.

I was very interested in making an investment in Pulitzer on a friendly basis. Regardless of Joseph's tight-fisted family relationships, senior management was extremely capable. Hostile actions, which rarely benefit anybody, are a lousy reaction to threshold resistance. In an April 1986 edition of the
New York Times,
business reporter Albert Scardino described an important component of my investment philosophy:

We didn't end up owning an interest in the company, but we did help the disenchanted family members achieve a fairer value for their holdings and earned a $6 million payout from Lazard. We could have pressed our position (we had the absolute right to purchase the shares), but I did not want to be involved on a negative basis.

The Taubman Company by the mid-1980s was a well-oiled, highly sophisticated machine. We had developed a great deal of sophistication and were always doing many projects at once. In 1985, we completed a transaction with the pension funds of General Motors and AT&T, one of the largest real estate deals of its time, which valued our centers at $2 billion. This provided me with the confidence and resources to spend time on other projects: Sotheby's, A&W, the Michigan Panthers, and increasingly, philanthropy.

Through our more than fifty years of friendship, I learned many important lessons from Max Fisher. One of the most important was his personal take on philanthropy. Max was a brilliant, pragmatic guy. Most business leaders promote giving and civic involvement as a responsibility or obligation—something you have to do in response to your success. Many refer to it as “giving back.”

Not Max. He saw philanthropy as an opportunity—a privilege you earn as you succeed in life. It's not something you have to do; it's something that you should want to do. There are great rewards and joys in helping others and making a difference in your community.

In 1982, Max Fisher and I were involved in the development of the
Riverfront Apartments, which at the time represented the first market-rate housing built in Detroit in twenty-five years. The eight hundred units (built in two phases) of the Riverfront Apartments weren't a big moneymaker. In fact, despite twelve years of generous tax abatements granted by the city—which were challenged by community leaders in an aggressive campaign captured on bumper stickers all over town reading “Tax Max and His Pal Al”—we lost more than $50 million. The costs associated with the former industrial site (including the need to drive pilings for the foundations) coupled with the inherent complexity of vertical construction made the residential space we were building twice as expensive as buildings in the suburbs, where the people we were marketing to lived. Unfortunately, to be competitive with the abundant suburban alternatives, we could only charge around $1 per square foot per month in rent. In real estate parlance, that's what you call a development that just won't “pencil.”

But Detroit mayor Coleman Young—who counted Max and me among the few suburbanites he trusted—was a persuasive man and a tireless advocate for revitalized housing for his city. He believed, and Max and I agreed, that the apartments would serve as a catalyst for more residential development along the Detroit River. We were right. The project leased up well, demonstrating the market viability (if not profitability) of riverfront housing. Several other projects with river views followed. And as expensive as it turned out to be, Max and I were proud of our contribution to downtown Detroit's rebound, which has continued, in starts and stops, to this day.

Max understood that getting involved in things you think will make a difference also makes good business sense. Education has been a major focus of my civic involvement for as long as I can remember. For example, in 1980, I—along with Michigan governor Jim Blanchard, business leaders, and the presidents of our state's public universities—founded the Michigan Partnership for New Education. I served as the organization's chairman. We raised $48 million
from the state, the private sector, and the universities (their contributions were in-kind) for this innovative public-private initiative to experiment with creative approaches to education and improve the way our K–12 public school teachers were trained.

Dr. Judith Lanier, who at the time was the dean of Michigan State University's College of Education, was our guiding light. MSU's education school was annually ranked as one of the finest in the nation, and Judy was highly respected as an innovator. She understood the need to allow new levels of competition and nontraditional thinking into the struggling world of public education.

Consider the fact that our nation's public and private universities are the envy of the world, yet a shocking percentage of our elementary, middle, and high schools are failing. Central to this disconnect is that higher education in this country is a fiercely competitive enterprise. If you've recently experienced the stress of having a young member of your family prepare to enter college, you know what I mean. Dozens of seductive college recruitment brochures arrive at your home in the mail each week. Consumers (students and parents) have a mind-boggling array of choices to consider. Recognizing the advantages of market competition, we encouraged, with the support of then–Michigan governor John Engler, the state's first charter school initiatives. In fact, in 1996, after the Michigan Partnership had completed its work, I cofounded and provided $35 million in financing for a charter school company called The Leona Group. Leona was named after the mother of cofounder William Coats. Bill was an experienced public school administrator and education professor, who had come to head the Michigan Partnership from a senior position with the Kellogg Foundation.This successful for-profit corporation today operates more than 50 charter schools in Michigan, Arizona, Indiana, and Ohio. Believe me, I understand the controversial nature of charter schools. But I remain convinced that without a healthy injection of market forces, our entrenched public school sys
tems—especially in inner cities—will never embrace the necessary reforms.

The Michigan Partnership also pushed to allow the certification of nontraditional teachers, especially retired engineers from our state's world-class automotive companies. These mature, talented folks could excite studentsoth girls and boys—about math and science, subjects in which there was and still is a shortage of teachers.

Of course, “teaching the teachers” to make sure they were equipped with the latest and most effective techniques and understanding was another of our primary goals. While they are not compensated accordingly, teachers are among the most important professionals in our society. And they are very willing to invest their time in upgrading skills and employing tested new approaches to instruction. During a visit to Northern Michigan University in our state's beautiful Upper Peninsula (the university was kind enough to grant me an honorary degree), a public school teacher from a very rural district came up to me in tears, explaining that the training and support she had received from the Michigan Partnership for New Education had been the only professional enrichment she had experienced in her more than twenty-five years of teaching. Her sincere, emotional thanks was all the proof I needed that our efforts over the six years of the program's existence had been successful.

Beyond the personal rewards, why get involved? When companies have to spend billions of dollars providing remedial instruction in reading, simple math, and problem solving, that's a double tax. They've paid once for the failed school systems, and now they have to essentially create schools of their own to stay competitive with educated workforces around the world. The future success of every business, including the Taubman Company, depends on the quality of the workforce coming along.

In a 1990 address to the Greater Detroit Chamber of Commerce, I suggested that our great state of Michigan had been blessed in the late nineteenth and early twentieth centuries with a steady flow of immi
grants to staff our assembly lines, build our roads, and bring new ideas to our businesses. But where was all this energy and capability going to come from as we looked ahead to the twenty-first century?

In the area of higher education I have also focused on the things that will influence the environment in which my businesses can operate successfully and my community can thrive. At the University of Michigan I provided leadership support for the medical library, the health care center, and the College of Architecture and Urban Planning, all of which bear my name. At Brown University and Michigan I helped develop interdisciplinary programs in American institutions and public policy to expose students to the workings of our great nation. And at Harvard's Kennedy School of Government, through the encouragement of my good friend and fishing buddy Dean Graham Allison, I established the Taubman Center for State and Local Government in 1990 to focus needed attention on the way our public and political institutions affect the way we live and work in America. Each year we send a number of Taubman Fellows from the Detroit area to attend the center's terrific summer programs for state and local officials from all over the nation. All we require of our Detroit fellows is that they share their experiences with us over lunch when they return from Cambridge.

Friends often inspire our philanthropy. New York senator Jacob Javits was a brilliant man and one of my favorite tennis partners.
Unfortunately, his life was cut short by the terrible degenerative condition known as amyotrophic lateral sclerosis (ALS), or Lou Gehrig's disease. I will never forget the last time I visited him in his Manhattan apartment in late 1985, a few months before he passed away. His mind was still razor sharp, but his body had shrunk nearly to the size of a doll. I vowed as I left him that day to do whatever I could to tackle this monstrous killer. Years later, I met Dr. Eva Feldman, a world-class neurologist and professor at the University of Michigan. In addition to being one of my physicians—a medical challenge in itself—Eva has done groundbreaking work in the area of ALS. It is an honor for me to be able to provide financial assistance for her work in memory of Jacob and all he did for New York and our country.

In 1979, the Michigan Cancer Foundation (one of the founding members of what today is the nationally recognized Barbara Ann Karmanos Cancer Institute) approached me with an urgent need. It seems they were close to losing a star researcher named Jerome Horwitz. Dr. Horwitz was being wooed by every cancer center in the country, and the foundation was concerned that if his research facilities were not upgraded immediately, he would move on. I agreed to pay for a fully equipped laboratory floor in a new medical building being developed on the campus of the Detroit Medical Center. They call it the A. Alfred Taubman Facility for Environmental Carcinogenesis Research. Dr. Horwitz stayed. And while he never came up with a cure for cancer, in that space with the long name he completed his groundbreaking, lifesaving research resulting in the development of azidothymidine, better known as AZT, the first drug approved by the Federal Drug Administration for the treatment of HIV infection and AIDS. Not bad.

Through my philanthropic efforts, and through the range of business ventures I became involved with, I became more of a public figure in the 1980s. But my most significant step in being more of a public figure—and in having more of my business be a matter of
public interest—came in 1992. At the Taubman Company, our projects were getting larger, and there was concern about how to finance them. In addition, with the company having grown so large, the executives wanted to use publicly traded stock as a part of compensation. I had generally resisted taking the company public. Over the years, we had shown a great capability to finance projects. And I always preferred to own more of my projects, rather than less. What's more, aside from ceding a portion of control and making more of the business public knowledge, selling shares to the public would mean putting our fate in the hands of Wall Street analysts and money managers, who I felt never really understood the business of real estate. I didn't see a public offering as the culmination of a lifework. Nonetheless, in November 1992, we sold shares to the public. Here, again, the Taubman Company was an innovator. Before going public, we transformed the company into an umbrella partnership real estate investment trust (REIT, or UPREIT). This structure, in which the REIT doesn't directly own the properties, but rather a stake in an umbrella partnership that in turn owns interests in properties, allows for a more favorable tax treatment to founders like myself. We were the first UPREIT, and within a few years many other companies followed suit.