Threshold Resistance

by A. Alfred Taubman

  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 systems—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 immigrants 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?

  Unlike the 1890s, our hope for the future will not be found on the deck of a ship crossing the Atlantic…but at a student’s desk or computer terminal in a classroom in Detroit. For these “new immigrants” right here at home, their symbol of liberty is not a statue in New York Harbor…but a teacher beckoning young minds to learn. My friends, this state’s and this nation’s chances of surviving as a first-class industrial power will be determined by our ability to educate our young people. More than ever before, educated people will be our most important resource.

  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.

  By the early 1990s, then, my private businesses and private life had been transformed. I served as chairman of two large publicly held companies (Sotheby’s and Taubman Centers) was involved in many civic organizations, and had grown accustomed to seeing my name in print a great deal, although I was never totally comfortable with that. My net worth and the contents of my art collection were a matter of continual public speculation. Sure, I enjoyed the accolades and attention and the opportunities it presented. But I was to learn with Sotheby’s that being a public figure involved with a highly public company could be a double-edged sword.

  FOURTEEN

  The Best and Worst of Times

  On Tuesday, March 10, 1994, we celebrated the 250th anniversary of the founding of Sotheby’s. The company’s New Bond Street galleries never looked more festive as members of London society arrived to honor the venerable auction house on its birthday.

  As chairman and majority owner of Sotheby’s, I was called upon to deliver the toast to Sotheby’s. The pomp and circumstance surrounding the dinner, described in a detailed agenda, let me know I was a long way from A&W. We greeted guests for a champagne reception in a receiving line. After a fanfare of trumpets, a single bagpiper led us up the stairs and through the building for an elegant dinner. At the end of dinner, a line of bagpipers marched slowly among the tables and assembled behind me. As the toastmaster cried out, “The Queen,” an orchestra played the British national anthem. After the pipers marched out, it was my turn to speak.

  Of the 250 years Sotheby’s had been in business, I had been involved for just a bit more than a decade. But it had been a period of significant change, growth, and success. While the company’s financial and market position had never been stronger, there were still some doubters who feared that American control would forever alter the character of this very British institution. This was my opportunity to put those fears to rest.

  While I knew most of the people in the room, I had some reason to be concerned. I had not always done well with audiences beyond the borders of the United States. In 1987, while on the board of directors of the Chase Manhattan Bank, I was invited to address the leaders of the business community in Brazil. At the time, Brazil was attempting to get out from under billions of dollars of international debt (they were no longer paying principal or interest). The nation owed about $8 billion to a bank consortium that included Chase. I’m not sure why, but the officers of the bank thought I was just the guy to go down to Brasilia to encourage this struggling nation—rich in resources but short on political and economic stability—to make good on their obligations.

  I was as diplomatic as I could be. But I did suggest that the nation’s leaders consider “resuming productive relations with the international community, including negotiating an arrangement with the IMF and reconsidering the interest moratorium.” I don’t speak Portuguese. But I do know when I’m being chewed out in any language. Following what I thought was enthusiastic applause from the attendees, my host, Brazil’s minister of finance, delivered an animated, heated rebuttal. The newspapers came to my defense the next day, but I never got the key to the city.

  Thankfully, my duties and message before the assembled lords and ladies at Sotheby’s were quite different than my fool’s errand to Brazil. The program was entirely in English, we were paying our bills, and I was among friends. Promptly at 10:05 p.m. following an introduction by the toastmaster, I began my toast with the proper salutation: “Your Royal Highnesses, Excellencies, my Lords, Ladies, and Gentlemen.” When there are several royals in the audience—and there were many this evening—one is permitted to address them in the generic plural. “On behalf of the board of directors, I would like to thank you for honoring us with your presence on this special evening.”

  I continued: “Two hundred and fifty years ago tomorrow, March 11, 1744, in London, Sotheby’s held its first auction. Contrary to published reports, I was not present.” (Polite laughter from the assembled lords and ladies.) “But historians tell us that a library of 475 books was sold that day by our founder, Samuel Baker. His nephew, John Sotheby, inherited the firm soon after.”

  I was nervous but holding my own. “Tonight we celebrate our first 250 years of business. And it is appropriate that we do so here in London, this great city that represents so much of our past accomplishments and so much of our future promise. As an American, I am indeed humbled by the fact that well before there was a United States of America, there was a Sotheby’s. In fact, when I learned that my responsibility tonight would be the toast to Sotheby’s, a story came to mind that is told about Sir Winston Churchill.”

  I don’t think there is a historic figure I admire more than Winston Churchill, and I incorporate his quotes in my public speaking whenever it makes sense. I hoped this anecdote would effectively communicate the positive aspects of Sotheby’s Angl
o-American personality.

  “In 1942, while reviewing a joint command of British and American troops in North Africa, Sir Winston was warned that the two cultures often clashed most dramatically in, of all places, the officers’ mess. The Americans, who religiously drank their whiskey highballs before dinner, forbade alcohol during the meal. The British, on the other hand, allowed no drinking before dinner, but always served claret and burgundy at the table.”

  I continued: “Faced with the task of toasting the officers that evening, Churchill arrived early and announced, ‘Before dinner we Brits will have to defer to the American rules. But at the table, you Yanks must abide by the British regulations.’” (Enthusiastic laughter and applause from the assembled lords and ladies.) “Churchill raised his glass and added, ‘I hope this arrangement for the fraternity of Anglo-American relationships will be accepted in good spirits by all!’”

  The mood in the room changed from rigid formality to genuine celebration. I paid tribute to the memory our former chairman, David Westmorland, and acknowledged the contributions of senior executives: Michael Ainslie, who was just about to step down as chief executive officer; Henry Wyndham, chairman in the U.K.; and Diana Brooks, who was to replace Michael as CEO of Sotheby’s in a matter of weeks.

  I lifted my glass and concluded with the toast: “We look forward with optimism to our next 250 years. The opportunities are great, as is our commitment. In support of our efforts, I ask you to join me in a toast to Sotheby’s. Happy birthday, Sotheby’s!”

  The room erupted with the words, “Happy birthday, Sotheby’s!” What a great evening. Our horizons couldn’t have been brighter. At least it seemed that way as the trumpets sounded, the Scots Guards marched into place, and the handsome guests celebrated with champagne in the Colonnade Gallery.