Chapter 7
Bright and Young Is a Winning Combination
Back in 1986, my then assistant, Bruce Karsh, gave me some bad news: he was leaving Kaufman and Broad.
Bruce was just 31 years old, but he had been my right-hand man for two years, and it hadn’t been easy to recruit him. When I found Bruce, he was a rising lawyer at O’Melveny and Myers, Los Angeles’s oldest and biggest law firm. He had also been a star student at Duke University and a clerk to now Supreme Court Justice Anthony Kennedy.
I had wanted Bruce to stay on with me at Sun Life for a long time. It had been a big year for us. We had just acquired the company that would get us going in the annuity business and would help make us a multibillion-dollar company. But Bruce left me for the same reason he first came—he was a bright guy with a lot of ambition. I said he could go on one condition: He had to find me an even more talented replacement. Bruce hemmed and hawed at first. He already had a candidate in mind but, he said, the senior partners at O’Melveny would kill him if he told me.
I was eager to have another O’Melveny alum. I had learned that bright young corporate lawyers often sit across the table from investment bankers and do the same work but for a lot less money and with less room to grow. It was a great talent pool in which to fish. Thankfully, Bruce finally gave me the name of Jay Wintrob.
Jay was 29 years old. He had graduated summa cum laude from the University of California, Berkeley, and gone to the Berkeley School of Law. Bruce gave Jay the nudge, and he applied for the assistant’s position. Compared to Bruce, Jay was a little sedate. But he showed up on time for his interview at my house, asked good questions, knew Kaufman and Broad well, and showed that he was ready to leave a comfortable job for something more challenging at a company on the verge of major growth. I hired him on the spot. I always bet on youth over experience for experience’s sake, and I was willing to do it again with Jay.
Sometimes You Are What You Wear
The technology sector famously relies on fresh ideas from young people. It has built a system of handing out venture capital for their innovations. When you walk into a meeting of entrepreneurs and venture capitalists, you can tell who’s who pretty easily. The ones with the ideas are wearing sweatshirts. The ones with the money are in the suits, like me.
Actually, I’ve spent much of my career in industries where youth is not particularly valued—accounting, homebuilding, and insurance. I’ve been the youngest guy on construction sites and in boardrooms more times than I can count. I got my fair share of “Where’s your father?” when I launched Kaufman and Broad. I started wearing a suit to work every day because I wanted to look older. Weighing 130 pounds and sporting a big grin most of the time didn’t exactly encourage people to take me seriously. In those days, most homebuilders were family operations run by older men who had inherited the business. They liked doing the same old thing in the same old place because that’s what their fathers had done. Many of my competitors placed too high a premium on experience—that’s part of why Kaufman and Broad and, later, SunAmerica were able to become such successful companies. We captured bright young talent, listened to new ideas, and—when they made sense—ran with them.
Until 1961, when Kaufman and Broad had just been listed on the American Stock Exchange, I had hired only a few employees, all trustworthy people, many of whom I knew before they came on board. I hired my first boss, Leroy Golman, away from his own accounting firm. I partnered with a couple of homebuilders I met in Detroit to launch in our second market, Phoenix, Arizona, in 1960. And I left another executive I recruited from a rival homebuilder in charge of our Detroit business when I moved my family to Arizona so that I could oversee our Sunbelt operations. When we went public, we suddenly had a lot of capital to become what we wanted to be—a national homebuilder. To do that, we needed fresh talent, and to find it, I went straight to Harvard Business School.
Interviews Don’t Have to Be Tricky
At the time Harvard Business School was the top-ranked place to get a business education. I flipped through stacks of résumés, looking for sound educational backgrounds and other notable qualifications.
When I first started recruiting for our company, I conducted interviews myself in Cambridge, Massachusetts, flying in and attempting to woo starry-eyed grads away from New York investment banks and toward a West Coast homebuilder they hadn’t heard of. Over time I developed a set of expectations for a good interview. I’ve never proposed the sort of riddles that would-be Microsoft or Google employees now have to suffer through. Although I’m sure it helps those companies reduce their sizable applicant pools, I believe there are less tricky ways to learn how well a candidate handles stress and how quickly and clearly his or her mind works out a problem.
I put the most emphasis, instead, on what an interviewee can show me. I want to see a lot of confidence, ambition, and drive. I want him or her to ask me a lot of questions and to convey knowledge about the industry and my company. Even in the days before Internet search engines, I expected anyone applying for a job with me to get to the library and read some trade publications and company filings. With today’s easy online searches, there’s simply no excuse for not doing your homework.
Sometimes I missed hiring the best man or woman. On one of my trips to Harvard Business School, I interviewed a young man named Gary Wendt and decided not to bring him on board. Decades later I ran into him again. I was considering pursuing a merger for SunAmerica with General Electric, and Gary was CEO of General Electric Capital Services. He reminded me that I had once shown him the door. “Biggest mistake of my life,” I told him. Gary was a good sport and put in a word for SunAmerica with GE’s CEO Jack Welch, who, unfortunately, had by then soured on big financial services acquisitions. Jack probably wouldn’t have paid the premium I believed SunAmerica deserved anyway.
Qualifications Are Almost Everything
Particularly for younger employees, the résumé doesn’t always tell the whole story. That was certainly the case for Jana Greer, who came to me wanting to join Kaufman and Broad’s communications department.
Jana had a solid educational background. She had studied speech communications and graduated Phi Beta Kappa. What she lacked was a compelling employment history. The only job she had held since graduation was as a guest relations manager at Disneyland. That didn’t faze me. She gave an impressive interview, and I hired her. I had a feeling she had the potential to go on to great things.
I knew I had made the right decision when, years later, I was in Montreal on my way to France and I received her panicked phone call. Jana—the former communications student and now corporate communications vice president—was on a press check for our annual report and had spotted a major accounting error in our set-to-print financials. She had fact-checked the work of Price Waterhouse. She had grown a lot from when she was hired, as many young employees do. Their talent and energy spills into every part of a company. Jana moved from our homebuilding business to SunAmerica. She would go on to run our annuities division and ably shepherd the company through the financial troubles of its current parent and the 2008 economic crisis. Today, she is president and CEO of SunAmerica Retirement Markets.
How to Keep ’Em Once You Hire ’Em
Hiring the best young employees is a lot easier than keeping them. When I first started recruiting for Kaufman and Broad, I was up against the biggest names in American business: Goldman Sachs, General Electric, McKinsey & Company, Merrill Lynch, J.P. Morgan. I had to convince top-flight B-school graduates why they should work with me and not join a bigger company that might offer larger salaries.
The first thing I promised was stock options. Many young Kaufman and Broad employees became millionaires because of them. Commonplace today, that form of compensation was far rarer decades ago. The plus side of stock options remains the same: They give employees a reason to stick around and help the company grow. Tying an employee’s compensation to the company’s performance is a powerful incentive for everyone to work together toward the same goal. Employee stock ownership works at all levels of a company hierarchy, not just for top executives. We widened our plan to include more managers and gave almost all employees the ability to purchase our stock at a discount—at the suggestion of a 26-year-old employee.
The second promise I make young employees is even more important: I promise them growth. I recruited Bruce Karsh and Jay Wintrob away from a top-drawer law firm with a very simple question: “Do you want to walk through the same door for the rest of your life, or do you want to do more?” It’s exactly what an ambitious young person wants to hear. The only people who won’t be swayed by that challenge are people you don’t really want to hire. As Jay later told me, he switched because he wasn’t sure what other opportunities he would have to try something outside his comfort zone at a law firm.
Our company delivered for both Bruce and Jay. We had a meritocracy through which they could rise quickly. Within eight years of leaving Kaufman and Broad, Bruce had cofounded an investment management firm, Oaktree Capital Management, that would make him a billionaire. As for Jay, within eight months, he was elected a corporate vice president of SunAmerica. In a few years he was executive vice president. In roughly the amount of time it would have taken him to become a partner at O’Melveny, he was managing SunAmerica’s $25 billion investment portfolio.
Jay’s path shows the third and most important thing I give young employees: I promise them hard work and high expectations all the time. Some employers think the young are allergic to hard work or that they’ll slavishly put in 16-hour days because they don’t have families yet. Neither is quite correct. Younger employees simply have fewer preconceived ideas of what they can and can’t do. I always try to widen their perspective, deepen their sense of accomplishment, and build their capacity.
As Jay noticed quickly, I was not about to spend time asking him, or anyone, about the weekend or the outcome of Monday Night Football. But I did give him difficult work that he accomplished even when he thought he couldn’t. His projects spanned every part of the company. He had no predestined career path. He worked on acquisitions, structured new business, disposed of old businesses, invested in private equity firms and hedge funds, and even advised me on hiring new employees—it sure worked when Bruce did it. Most important, he was my second-in-command when I negotiated SunAmerica’s $18 billion merger with AIG.
After Jay had spent 13 years with the company—and only after I had searched exhaustively for the best candidate, inside and outside our company—I named him CEO of SunAmerica.
Youth Can Be a Risky Bet
Many employers might have seen Jay as a risk. He had a legal background, not a business one, and had never indicated he wanted to pursue a career in finance. I couldn’t have known whether he would one day return to a law firm, start his own practice, or, for all I knew, write the great American novel. Jay stayed, I believe, because of the opportunities SunAmerica offered and because he enjoyed meeting the relentless expectations I had of him. Challenge and reward build loyalty.
Another top executive at my company, Bruce Karatz, started out as a risk too. He was untested when I hired him in Los Angeles and later put him in charge of building houses in the south of France. We had expanded to Europe only a few years earlier, but we had quickly made a name for our company against the other dominant American homebuilder operating there, Levitt and Sons. Soon after, the top position in our Paris operation opened when the manager and I disagreed over how much time he should spend on business versus polo ponies, parties, and mistresses, which I’ve seen can be a problem for executives at any age.
I was in Paris with Bruce searching for new candidates when, over lunch, he applied for the job. Oh great, I thought. This isn’t going to go well. He was brand-new, but I knew he had ambition, big ideas, and a good work ethic. He reminded me of the men I had hired more than a decade earlier, when Kaufman and Broad was just getting off the ground—men I thought of as romantic dreamers but who still worked hard and definitely livened up the place. I didn’t tell Bruce all that. Instead, at that Paris lunch, I goaded him with a little challenge, “You may fail, but go for it.” Bruce thanked me and off he went.
In 1977, after a bruising few years for our business, he pulled off an incredible marketing feat. I was always looking for smart ways to sell our company’s product, but I focused mostly on creating consumer value and on fairly straightforward, smart advertising. Bruce was keen on the newer way of the world, of much more attention-grabbing events and associations that created a personality for a company—what’s now commonly called branding. I wasn’t about to stifle that impulse, even though when Bruce told me what he wanted to do I thought he was nuts.
Bruce decided to build a model home on top of one of Paris’s grand old department stores, Au Printemps. He had subcontractors pitch in labor and materials pretty much for free. He got the department store to furnish and landscape the models beautifully, and at no charge to us. He supervised workers as they hauled 1,000 concrete blocks, 7,000 roof tiles, 800 cubic meters of soil, several trees, and even a car up eight stories of Parisian splendor. Half a million people walked through the model home, including me. I was impressed. It was probably the most successful promotion in the history of homebuilding—until Bruce beat himself in 1997 by building an actual version of the cartoon house from The Simpsons. Our company became well regarded and a widely known name in France, and 11 years after Bruce proved himself in Paris, I named him chief executive of Kaufman and Broad.
Older People Can Be Young Too
I have been fortunate to have had four careers. Each one has kept me from getting too satisfied with myself. Each one has enabled me to keep learning, asking questions, thinking on my feet, and meeting bright people who are very different from me. Surrounding myself in my late 70s with talented young people keeps my viewpoint youthful. The problem with age isn’t age—it’s that every accomplishment can become an invitation to self-satisfaction and complacency. People often ask me how I’ve celebrated some of my achievements, from making my first million to breaking ground on The Broad, our contemporary art museum, in downtown Los Angeles in 2011. The answer is I don’t. I move forward because I know I can do more.
The brightest young people instinctively know that the best is yet to come and that they have to work to get there. People of any age can cultivate those qualities, and it keeps them flexible and innovative. When I interview more experienced employees for a position, I always ask them: “What did you learn in the past year that you didn’t know before?” Too often they have a hard time answering. That makes my decision an easy one.