Become a Billionaire. Invest in Your Backyard (Silicon Valley).

Most people assume you need to master many trades to become a billionaire. John Arrillaga proved otherwise. He built his fortune. And in the process, Silicon Valley itself. Without being a tech bro. He never claimed he would “change the world.” No constant drive to “disrupt” industries. No pitching to venture capitalists. No disdain for credentials and established norms. His philanthropy wasn’t directed at broad, global problems. It wasn’t detached from his immediate region. He directed it towards his local community around his college.

John Arrillaga was a friend of Charlie Munger. His investment approach was similar to Charlie’s. John focused exclusively on real estate within a mile of Stanford University. It’s a model of sticking to a narrow “circle of competence”.

You can find this week’s TL;DR here.

Key Lessons:

• Do one thing.

Last week on Methods of Prosperity

Larry Gagosian is currently a leading art dealer. He built an empire in the unregulated art market much like his predecessor, Joseph Duveen. Duveen was a pioneer in the art world. He connected European masterpieces with wealthy American industrialists. This was during the late 19th and early 20th centuries.

Strategic market manipulation, aggressive marketing, and a deep understanding of his clients’ desires. That’s the lore of Duveen. His tactics included learning intimate details about potential clients. Andrew Mellon was his biggest client. Duveen orchestrated his introduction to Mellon.

Duveen secured relationships that would lead to significant art transactions. His legacy is evident. Numerous prestigious American collections originated from his dealings. Which includes masterpieces housed in the National Gallery of Art.

Duveen’s impact persists in today’s art market. Gagosian studied Duveen. Provenance, branding, and high-profile private sales. Duveen crafted the blueprint.

Part 100. John Arrillaga (1937-2022)

Inglewood, California, 1937. Gabriel Arrillaga was a professional soccer goalie. He became a laborer in Los Angeles. His wife was a former nurse named Freda.. She gave birth to John Arrillaga and his four siblings. He held his first job at age nine. He delivered newspapers. His first dishwashing job was in a local restaurant. His mother took in neighbors’ laundry to help make ends meet. John attended Morningside High School. He earned the California Interscholastic Federation Award for academic, athletic, and service excellence. He served for multiple years as Morningside High School’s student body president. Money was tight. He couldn’t afford a suit jacket for his high school portrait, so he borrowed one from his chemistry teacher. The sleeves were 6 inches too short for the 6-foot-4 senior.

During his high school years, he was a renowned athlete. Stanford University gave him a basketball scholarship. His scholarship paid his tuition but not living expenses or the cost of his books. To support himself during college, John held up to six part-time jobs. From washing dishes to delivering mail and working as a gardener and cook.

At Stanford, he captained the men’s basketball team. He was a straight-A geography major. He earned All-American honors, and graduated with a degree in geography. Then he made his first philanthropic gift to Stanford. It was a two-figure donation. It was what he could give at the time. A modest gift to the university’s athletics department. Over time, his initial gifts increased in size and extended to other areas of the university.

After graduation, he played basketball for the US National Basketball team. But he desired family life. So he quit basketball. He married Frances Marion Cook a few years after Frances graduated from Stanford. They had two children together. John Arrillaga, Jr., and Laura Arrillaga-Andreessen (Marc Andreessen’s wife).

To support his wife and kids, he got a job selling insurance. He saved enough money to purchase his first run-down commercial building. He completed all of the work on it with his own two hands. That asset earned him enough cash flow to purchase his second building.

In the 1960s, Arrillaga partnered with Richard Peery, his business partner. They bought fruit orchards in the lands surrounding Stanford University. That purchase would transform farmland in what would become Silicon Valley. They converted over 20 million square feet into office campuses for tech giants. The “Valley of Heart’s Delight”. That’s what locals called the Santa Clara Valley before it was Silicon Valley. Its flowering orchards and canneries became small office parks. He turned the Valley of Heart’s Delight into the world’s engine of innovation.

Arrillaga and Peery began developing the land. They bet that if they built the space, the tech firms would soon follow. Anticipating the rise of the tech industry in what would become Silicon Valley. What did they name their company? Peery-Arrillaga. It became one of Silicon Valley’s largest commercial real estate developers. They leased office space to companies like Intel, Apple, Facebook and Google. Peery-Arrillaga developed over 20 million square feet of commercial real estate.

The value of Silicon Valley real estate soared alongside the tech industry. Arrillaga’s holdings appreciated. Which made him one of the largest landowners and commercial landlords in the area. A significant milestone came in 2006. That’s when he sold more than five million square feet of his properties for about $1.1 billion. By 2020, Forbes estimated his net worth at $2.5 billion, ranking him among the 400 richest Americans.

Fortune once described Arrillaga as “perhaps the richest man in Silicon Valley who didn’t make his money starting a tech company.”

He was a major benefactor to Stanford University. He donated more than $300 million over his lifetime. At the time of his passing, he had built and donated over 200 projects and buildings. His gifts funded numerous campus buildings: the Arrillaga Family Sports Center. Frances Arrillaga Alumni Center. Arrillaga Family Dining Commons. Stanford awarded him its highest honor, the Degree of Uncommon Man, in 2009.

He endowed 38 athletic scholarships and 19 academic scholarships at Stanford. He oversaw major campus construction and renovation projects. He led and managed construction of Stanford’s state-of-the-art football stadium. He made decisions on design and landscaping while scrutinizing every detail. He selected every single palm tree. He worked out the best form for every structural element. He created his own designs for the seating. And, in a remarkable achievement, he completed the stadium construction in 42 weeks. It was under budget.

His philanthropy also extended to local schools. He built and donated campuses for the high schools of both his children. At Menlo School and Castilleja School. He built the Rosewood Office Complex on Sand Hill Road in Menlo Park. Which he then donated to Stanford. He built and donated dozens of buildings for police departments throughout Silicon Valley. Libraries, community recreation centers, veteran’s facilities, and a Ronald McDonald house. He donated buildings in his name and dozens of his other donations are anonymous. His preference was for working out of the limelight. He had no need to seek publicity.

He’s one of the most successful and influential real estate developers in the Bay Area. Arrillaga built his fortune on his vision to meet the growing demand. Tech companies needed office space. His acquisitions were strategic. He became a billionaire by excelling in one thing. Buying real estate around Stanford. He was able to transform agricultural land into valuable commercial property. Silicon Valley became the world’s leading technology hub.

John Arrillaga died on January 24, 2022, at the age of 84, surrounded by his family. His legacy isn’t only in terms of wealth, but in the physical transformation of Silicon Valley. From orchards to the tech capital of the world.

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– Sean Allen Fenn

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Methods of Prosperity newsletter is intended to share ideas and build relationships. To become a billionaire, one must first be conditioned to think like a billionaire. To that agenda, this newsletter studies remarkable people in history who demonstrated what to do (and what not to do). Let me know how I can help you out. For more information about the author, please visit seanallenfenn.com/faq.

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