Book summary “The art of being unreasonable”: summary

Introduction

You often feel stuck because you follow the rules, accept industry norms, and settle for moderate success. This conventional approach prevents you from building great enterprises or making a lasting impact. Eli Broad argues that true progress and major achievements require rejecting conventional wisdom and being intentionally unreasonable.

The book explains how to apply unreasonable thinking across business, risk management, and philanthropy. You will learn to challenge standard practices, leverage your time, and lead with uncompromising logic.

Consider how to transform your approach by asking these questions:

• How do you spot opportunities where others see dead ends?
• What separates ordinary managers from visionary builders?
• When should you ignore expert consensus to achieve breakthroughs?

1. Challenging Conventional Wisdom

While reasonable people adapt to the world, unreasonable individuals refuse to accept standard limitations. You must push past outsized ambitions with strict discipline and relentless focus to shape the world to your vision.

True progress and major achievements require rejecting conventional wisdom and being intentionally unreasonable.

Eli Broad built two Fortune 500 companies in completely different industries—housing and retirement savings—by consistently defying the conventional expectations of seasoned experts. He earned $6 billion in business while reaching nearly 79 years of age.

The Operational Compass

A guiding principle embraced early in life can serve as a lifelong operational compass for business and personal decision-making. Broad kept a paperweight inscribed with a quote by George Bernard Shaw on his desk across all his offices. It reminded him that all progress depends on the unreasonable person who tries to adapt the world to himself.

The paperweight traveled from Broad's initial shared office as a young CPA in Detroit to his office at SunAmerica overlooking the Pacific Ocean. It finally rested on his philanthropic foundation desk. He maintained nearly 40 years of friendship with Dick Riordan and married in 1954.

Asking Why Not

Asking "Why not?" serves as a powerful mental trigger to bypass the status quo and unlock innovative solutions. Adults frequently lose the childlike habit of asking "Why not?" due to an ingrained fear of mistakes and acceptance of conventional consensus. You must reintroduce this question to break down prejudices and open doors to discovery.

As a 13-year-old stamp collector, Broad asked "Why not?" and bypassed standard retail channels to buy bulk clip envelopes directly from Chrysler Corporation's mailroom for two dollars, reselling them at a profit.

The transaction relied on simple execution:

• 2 pounds of stamp boxes cost a few dollars;
• 10 dollars profit emerged on a 2 dollar investment;
• a 1941 Chevy was bought for 200 dollars at age 16.

Overcoming Industry Dogma

Innovation requires treating conventional wisdom as a herd instinct rather than a reliable guide for action. Conventional wisdom abhors change and promotes stagnation under the guise of safe business practices. You must view it as an opportunity to find hidden gaps and create unconventional insights.

When starting his homebuilding company during a recession, industry experts claimed no one would buy a home without a basement or at such low prices. Broad ignored them and succeeded after losing a 67.40 dollars a week accounting job in 1956. The first 15 houses sold initially yielded over 200,000 dollars.

2. Business Strategy and Execution

Re-conceptualizing the fundamental nature of an industry creates an immediate competitive advantage.

The Manufacturing Mindset

Instead of viewing homebuilding as a traditional real estate venture that hoards land inventory, you should treat houses as manufactured goods and land as raw inventory. This approach lets you optimize supply chains and eliminate nonessentials like basements and excessive hallways.

Kaufman and Broad bypassed costly construction loans by completing homes within a strict 45-day schedule, allowing cash flow from closing sales to cover contractor bills. The resulting no-frills house cost 13,740 dollars, which was 2,000 dollars cheaper than the closest competition. Buyers paid a monthly payment of 65 dollars, and the company built 120 houses in the first year, generating 1.7 million dollars in first-year revenue.

You can apply these operational principles by following specific steps:

• Identify core operating assumptions in your industry that are accepted as gospel.
• Redefine what business you are actually in, shifting from a generic category to a specific operational model like manufacturing or banking.
• Scrutinize every material cost and eliminate nonessentials to lower final consumer pricing.
• Control production timelines tightly to ensure cash flow covers operational expenses without high-interest loans.

Shifting Fiscal Calendars

Small operational adjustments in timing and scheduling can alleviate resource bottlenecks and secure superior professional services. By staggering standard operational timelines away from peak industry congestion, you can secure top-tier talent and resources at lower costs while avoiding systemic burnout.

Kaufman and Broad moved the end of their fiscal year from December 31 to November 30, allowing them to hire the best accounting firms at optimal rates without end-of-year rush burnouts.

You should handle your scheduling through clear practices:

• Examine when your competitors close their books, launch products, or operate their cycles.
• Shift your fiscal or operational calendar to a non-congested period to gain priority access to top professionals.

Corporate Growth via Banking Models

Pivoting a mature, slow-growth company toward a new demographic and adopting a banking mentality generates outsized returns. By recognizing demographic shifts like the aging baby boomer generation, an insurance business can transition into retirement savings, focusing on variable and fixed annuities where profit is generated via the spread between investment returns and payouts.

Broad acquired Sun Life Insurance Company of America in 1890 in 1971 and later rebranded it to SunAmerica in 1993, transforming it into the best-performing stock on the New York Stock Exchange through aggressive growth targets and banking-style operations. SunAmerica achieved 2 to 3 percent higher annual investment return than competitors before it merged with American International Group in 1998.

3. Research, Risk, and Talent

Thorough homework and deep research into industry history provide the clues needed to navigate future economic downturns and identify untapped opportunities.

Doing Your Homework

Conventional wisdom often pushes companies toward narrow core competencies and related industries during crises. Broad studied the Great Depression and discovered life insurers survived well because policyholders held on to policies for security, leading him to buy Sun Life Insurance Company of America.

Kaufman and Broad bought Sun Life Insurance Company of America in 1971 for $52 million and sold it as SunAmerica for $18 billion in 1998.

• Spend some of your day, every day, learning about the present and the past
• Learn from others successes and mistakes
• Ask questions about what other companies and peers are doing

The Second Mover Advantage

First movers bear the cost of breaking new ground and establishing markets, but they often fail to evolve when tastes change. Second movers can enter with lower research costs, offer better prices, target neglected niches, and improve execution.

Kaufman and Broad expanded to Paris in 1967 following Levitt and Sons, who had entered three years earlier. After Levitt faced corporate issues and withdrew, Kaufman and Broad became Paris's biggest single-family homebuilder.

• Look for needs your competitors do not satisfy
• Look for disgruntled customers who deal with a competitor only because there is no other option
• Negotiate better contracts with suppliers and labor to hold down costs

Time Management and Delegation

Broad insists on getting eight hours of sleep and strictly controls his schedule by setting strict time limits on meetings and social events. Leaders must identify their single most critical duty and never delegate it, while delegating all secondary operational tasks.

Broad kept final sign-off authority on every land purchase during his tenure, ensuring no one else made the critical decisions that could make or break the business.

• Identify the crucial tasks that you couldn't live or work without
• Prioritize constantly as circumstances change throughout the day
• Delegate everything else after making expectations and priorities clear to employees

Betting on Youth

Young professionals from demanding fields like corporate law possess high intelligence and drive but often face rigid career ceilings. By recruiting them and offering growth, stock options, and high expectations, companies secure dynamic leaders.

Broad hired 31-year-old lawyer Bruce Karsh and later 29-year-old Jay Wintrob as assistants. Wintrob rose to manage a $25 billion portfolio and eventually became CEO of SunAmerica.

• Look for solid educational backgrounds, confidence, ambition, and drive during interviews
• Expect candidates to do their homework and ask good questions
• Promise young employees stock options, growth, and hard work with high expectations

Disciplined Risk Management

Taking calculated risks is essential for growth, but you must strictly limit exposure on speculative bets to avoid the illusion of invincibility.

Broad defines risk as trying something new that may or may not work. He instituted a personal rule to keep speculative or high-risk investments, such as junk bonds, to a small fraction of the total portfolio.

During the high-risk financial boom of the 1980s, Broad kept unusual and risky investments limited to under 10 percent of SunAmerica's portfolio, allowing the company to survive while competitors making heavier bets collapsed.

• Ask yourself two questions before taking a risk: What do I have to lose? And what's the worst that can happen?
• Never bet more than 10 percent of your assets on highly speculative ventures unless you are young with a great Plan B

4. Leverage, Marketing, and Investing

Leveraging your time, effort, and network can achieve massive philanthropic or business results beyond what money alone can buy.

When asking for help or pitching a major idea, always visit people at their homes or offices. Going to the other person's turf shows respect and puts them in their comfort zone. Eli Broad visited the legendary L.A. cultural philanthropist Dorothy Chandler at her stately Hancock Park mansion to notify her of the MOCA campaign.

Pledge large financial commitments over time rather than all at once to keep the sum invested and hedge risk. Paying a pledge incrementally allows the donor to earn investment returns on the total sum. Eli Broad pledged the first $1 million to MOCA, payable over five years, to an institution that did not yet exist.

Turf and Pledges

A manageable mortgage is one of the best forms of leverage to build equity and purchase what you cannot afford outright. By leveraging a mortgage and paying as little down as possible when interest rates are low, you can invest the remaining cash into assets that appreciate faster. Eli Broad notes that mortgages were essential to the growth of American wealth in the twentieth century.

• Pay as little down as possible when interest rates are low.
• Invest the money that would have gone into a down payment into a solid mutual fund that appreciates at a higher rate than the mortgage interest.

Instead of trying to reach millions of individual end-users, target key leaders or institutional heads who possess the scale and authority to multiply your impact. The Broad Foundation focused on training 100 school district superintendents rather than trying to train 100,000 individual teachers.

Leveraging Mortgages and People

The key to marketing is value, and successful companies price their products so that customers can comfortably afford them. Kaufman and Broad priced their starter homes so that monthly mortgage payments would be less than the average monthly rent on an apartment.

• Determine what your customers want and need.
• Focus entirely on providing value rather than unnecessary frills.
• Align your pricing with what your target customer can comfortably afford.

A new or smaller company can look as big as major industry players by executing creative, high-impact, cost-effective marketing. SunAmerica branded an NBC Sports Desk to appear during Olympic and Wimbledon coverage, and bought Super Bowl ads immediately before kickoff and after the game for $250,000 instead of $1.3 million.

Marketing and Asymmetric Opportunities

Look for asymmetric investment opportunities where the likelihood of earning a high return is significantly higher than the risk of loss. Eli Broad participated in buying First Republic Bank from Bank of America for about $1 billion, down from Merrill Lynch's $1.8 billion purchase price, doubling his money in about a year.

Unless you are willing to put in 24/7 diligence, do not pick your own stocks; instead, hire a qualified professional financial advisor. Eli Broad employed a talented two-person investment team for more than a decade to research, advise, and execute trades.

• Ask friends and relatives for recommendations or consult reputable firms like Charles Schwab.
• Identify one or two advisors and ask for several references you can call.
• Consider taxes and fees when selecting investment vehicles.

Professional Advisors and Negotiation

Successful negotiation relies on three core rules: making a fair offer, keeping emotions under control, and accounting for the other party's interests. Eli Broad successfully negotiated with a college landlord over a broken piano leg by offering a fair resolution instead of panicking about expulsion.

• Calculate necessary supplies, labor hours, worker wages, overhead, and a fair profit to form your offer.
• Keep control of your emotions and set a firm limit before entering the room.
• Take the other party's interests and unstated motives into account.

In negotiations, avoid starting wildly low; instead, make a first offer that is very close to your final fair price. Eli Broad acquired Count Giuseppe Panza di Biumo's multi-million dollar contemporary art collection for MOCA by starting his offer at $11 million, precisely matching his target price.

• Make a first offer that is pretty close to your final offer, leaving just a little wiggle room.
• Ask the final closing question when deadlocked: "Is that the best you can do?"
• Never enter a negotiation room unless you have the full authority to make a decision.

5. Logic, Competition, and Leadership

Unreasonable logic means sticking strictly to facts and sensible conclusions when others succumb to emotion or distraction.

You can apply a venture capital approach to medical research and civic projects. Look for promising ideas and provide leveraged seed money. When proposing major institutional changes, relying on shared self-interest and objective logic can overcome stubborn resistance from traditional competitors.

Edye and the author put up $100 million in seed money over 10 years, matched by Harvard and MIT, to create The Broad Institute by breaking down the silos to decode and apply the human genome. Eric Lander initially stated he needed $800 million to start the institute in the year 2001. Two years after the institute got off the ground, they put up a second amount of $100 million. Three years later, they put up $400 million for an endowment.

The Hound Dog Mentality

Entrepreneurs and ambitious individuals must actively hunt for opportunities instead of waiting for them to arrive like kennel dogs waiting for scraps. By reading multiple newspapers daily and analyzing public events, you can develop a sixth sense for embedded opportunities. Falling short of an ambitious chase often brings an unintended upside, such as enhanced public image and positioning the company alongside industry titans.

The author aggressively pursued the bankrupt Baldwin United insurance annuities against industry giant Metropolitan Life. Baldwin United filed a bankruptcy amount of $9 billion, affecting 165,000 policyholders with $4 billion in annuities sold by its six insurance companies. While Metropolitan won, the intense public battle elevated the author's company profile.

Knowing When to Quit

When an endeavor hits an insurmountable wall or limits are reached, you must cut losses immediately rather than drift into desperation. It is vital to establish predefined limits on time, money, and pain. Continuing past those limits when external forces or market realities are impermeable to logic is a waste of resources that should be redirected to new projects.

The author teamed up with Edroski Jr. in 1999 to bring pro football back to L.A., following the year 1995 when the Raiders left Los Angeles. His $500 million bid for the NFL franchise fell short against Houston's winning offer of $700 million, which included $260 million of public money. Other bids to acquire the Los Angeles Dodgers and purchase the parent company of the Los Angeles Times also fell short due to higher competing bids, structural debt traps, or league politics, prompting him to throw in the towel.

Motivating Through Challenges

The most effective way to motivate high performance is by setting unreasonably high goals, offering true challenges, and allowing safe failure.

Mentorship should avoid fear, anger, or micromanagement. By handing people major projects and allowing them to fail without punishment, you earn intense loyalty, foster risk-taking, and draw out your team's finest work.

When the author gave his new investment officer Marc Schwartz the challenging mandate to buy a stake in Facebook, Schwartz utilized his resourcefulness to secure the investment just before a major valuation spike. During a period when 100 companies had executives accused of backdating stock options, leaders still needed to foster innovation. You must measure progress against a batting average of 600 representing an acceptable failure rate in trying new things.

• Ask if it is the person's absolute best work repeatedly until they push past their perceived limits.
• Assign major projects without giving step-by-step instructions to foster resourcefulness.
• Praise specifically, genuinely, and briefly, following up with a more demanding goal.
• Tie performance directly to material rewards like bonuses and stock options.

Pure Competition

Competition acts as an essential catalyst that pushes individuals, institutions, and systems to higher levels of achievement and customer benefit. Whether applied to business markets, higher education, or monopolistic K-12 public schooling through charter options, rivalry stimulates better quality and efficiency. Furthermore, competitions can elevate the standards and visions of the judges and patrons observing them.

The author utilized architectural competitions for projects like The Broad Art Museum at Michigan State University and the Caltrans headquarters to force architects, developers, and university presidents to elevate their design ambitions. This system supported the annual Broad Prize for Urban Education at $1 million and the Broad Prize for Public Charter Schools at $250,000. For the MSU museum, 30 initial architectural firms were reduced to semifinalists. The author and his wife also pledged $50 million toward the construction of BCAM, and the author added an additional amount of $10 million for art acquisition at LACMA.

Architectural competitions represent the purest form of competitive challenge, frequently requiring a willingness to sacrifice conventional costs for unique concepts. When strong clients establish strict functional parameters and pair them with visionary architects, competitions yield iconic public spaces. However, realizing truly novel designs often requires navigating unexpected fabrication challenges and escalating budgets.

The design selected for The Broad museum by Diller Scofidio + Renfro featured a unique vault-and-veil concept that required sourcing specialized concrete fabrication from Germany to preserve the architectural integrity. This design involved an estimated extra cost of $10 million compared to other proposals ahead of the year 2014 when the museum was expected to open.

6. Philanthropy and Reflections

Being respected is much more important and easier to obtain than being loved when you are driving toward a major goal.

Leadership and Philanthropy

Unreasonable focus often ruffles feathers and neglects small talk. Respect is gained by holding high standards, treating people fairly, and achieving results, which ultimately heals bruised egos. Eli Broad faced heavy pushback from faculty and board members when he joined the board of Pitzer College to instill financial discipline, but he was eventually named chairman of the board for his success.

Encourage respectful debate over the methods to reach a goal, but once a logical decision is made, dissent must end. Larry Summers helped Broad define three core questions to test whether a philanthropic investment is worth making.

• Will it make a difference in 20 years?
• Would it happen anyway without our support?
• Do we have the right people to make it happen?

The Broad Institute in Cambridge was funded after passing these tests regarding genomics and stem cell research. Crises should be utilized as opportunities to rethink broken systems, question assumptions, and implement large-scale changes. The Broad Foundation applied this rule to tackle systemic urban public education reform.

To fix stagnant urban school districts, philanthropy must focus on importing high-level management talent and training effective superintendents. Monetary spending alone does not improve schools if entrenched bureaucracies and antiquated policies remain broken. The Broad Superintendents Academy and The Broad Residency were launched to infuse management talent and train school district leaders for a 600 billion dollars industry for education that includes 14000 plus school districts in the country and a 7 billion dollars budget for the Los Angeles Unified School District.

Urban Education and Art

Collecting art by living contemporary artists offers deep intellectual engagement and supports creators who challenge conventional wisdom. Buying art from living creators allows collectors to participate in defining an era while applying research and homework to build significant collections. Eli and Edye Broad commissioned Richard Serra's massive steel sculpture No Problem with panels 15 feet high and 21 feet long, 2 inches thick, and 15 tons in weight, and funded Jeff Koons's Balloon Dog during a recession. They paid 11.7 million dollars for Warhol's Small Torn Campbell's Soup Can (Pepper Pot) and offered a 30 million dollars challenge grant to MOCA.

Art collections should be shared broadly with the public through lending libraries and museums rather than kept hidden in private storage. The Broad Art Foundation has made more than 8000 loans to nearly 500 museums since 1984.

Personal Reflections

A solitary childhood without siblings or close friends can build early independence, self-reliance, and a thick skin. Growing up in the Bronx between the ages of 7 and 14 with no siblings and no close friends forced the author to think and make decisions independently. An unreasonable career focus often comes at the heavy cost of missing precious moments with family. Taking his sons Jeffrey, born in 1956, and Gary, born in 1959, along to tour subdivisions on weekends replaced typical childhood leisure.

Individuals must analyze and define their own career missteps rather than letting external critics dictate what constitutes failure. Kaufman and Broad formed Nation Wide Cablevision in 1966 and sold it in 1972 to TCI for a 15 percent share, cashing it out immediately for $23.5 million instead of keeping it as Comcast later reached $73 billion. True entrepreneurs find their primary satisfaction in building and creating rather than accumulating money or seeking applause. Broad became the youngest certified public accountant in Michigan at age 20 in 1954, took Kaufman and Broad public in 1961, made it the first homebuilder on the New York Stock Exchange in 1969, and reached the 100,000th house milestone in 1977.

Modern philanthropy is driven by a sense of civic obligation and the application of business skills to major societal problems. The Broad Institute was created through partnerships with Harvard and MIT and now includes 1,900 gifted young scientists. Who you spend your life with is the single most important decision you can make, far outweighing how you choose to spend your career. Sharing a modest first meal of a boxed Pillsbury chocolate cake split down the middle in a tiny rented home marked 58 years of marriage to Edye.

10 Key Ideas

1. Eli Broad argues that true progress and major achievements require rejecting conventional wisdom and being intentionally unreasonable.
2. Re-conceptualizing homebuilding as a manufactured good rather than a traditional real estate venture creates an immediate competitive advantage.
3. Thorough homework and deep research into industry history provide the clues needed to navigate future economic downturns and identify untapped opportunities.
4. Leaders must identify their single most critical duty and never delegate it, while delegating all secondary operational tasks.
5. Taking calculated risks is essential for growth, but you must strictly limit exposure on speculative bets to avoid the illusion of invincibility.
6. Look for asymmetric investment opportunities where the likelihood of earning a high return is significantly higher than the risk of loss.
7. Successful negotiation relies on three core rules: making a fair offer, keeping emotions under control, and accounting for the other party's interests.
8. Entrepreneurs and ambitious individuals must actively hunt for opportunities instead of waiting for them to arrive like kennel dogs waiting for scraps.
9. Larry Summers helped Broad define three core questions to test whether a philanthropic investment is worth making, including whether it will make a difference in 20 years.
10. Who you spend your life with is the single most important decision you can make, far outweighing how you choose to spend your career.