How I Made It

Billionaire Eli Broad reveals the simple philosophy behind his amazing success

Eli Broad is a serial Fortune 500 creator.

He built KB Home and SunAmerica into billion-dollar companies, establishing himself among the ranks of the world's richest people. Forbes estimates the 83-year-old has a net worth of $7.3 billion.

Broad learned early on that unconventional thinking could be profitable.

Broad told CNBC he never accepted conventional wisdom in anything he did, "whether it was in home building [or] whether it was taking a life insurance company and making it a retirement-savings company."

Eli Broad
Al Seib | Los Angeles Times | Getty Images
Eli Broad

Broad was raised in Detroit and started his career as an accountant. In the late 1950s, he decided to branch out on his own and borrowed about $25,000 from his in-laws to start the home-building company Kaufman & Broad with Donald Kaufman. They built it into what's today known as KB Home.

The company went public in 1961 on the American Stock Exchange and then in 1969 became the first in its industry to list on the New York Stock Exchange. By 1970, it had a market capitalization of $1 billion, and it wasn't long before it joined the ranks of the Fortune 500 list.

Since the beginning, Broad wasn't afraid to challenge the status quo. While many homebuilders at the time were focusing on basements, Broad went the other way and started constructing houses without them — and then selling them for 20 percent less than his competitors.

Broad realized that basements were no longer essential because gas heating was becoming more common in homes, eliminating the need for basements to store coal. His company also was one of the first in the industry in 1967 to offer a five-year limited home warranty.

The homebuilder would later expand outside Detroit, mass producing single-family homes from coast to coast in its own developments and building housing for the military. He started expanding into residential homebuilding around the time that baby boomers were looking to settle down, start families and buy their first houses. Nationwide, KB Home has built nearly 600,000 homes.

While homebuilding was a lucrative business, it was also a volatile one. So Broad began looking to acquire a more stable company to diversify the business. He found it in the life insurance industry.

"I said let's look at an acquisition of something that survived the Great Depression," he said. "Banks failed. Savings and loans failed. Mortgage companies failed. Homebuilders failed. But life insurance companies did pretty well."

Broad's next Fortune 500 company was built from Sun Life Insurance Company of America, a Baltimore-based old-line life insurance company that he acquired in 1971 for about $52 million.

Again, Broad steered the company off the beaten path. About a year or two in, he asked: "What's the future? Why don't we find a niche?" They found it in retirement savings.

Broad transformed the business into SunAmerica, a retirement-savings powerhouse acquired in 1999 by insurance giant American International Group for a sale price of nearly $18 billion.

After selling SunAmerica, Broad started devoting more time to philanthropy. Today, the Broad Foundations, including the Eli and Edythe Broad Foundation and the Broad Art Foundation, have assets of $2.1 billion. Their mission is to advance entrepreneurship for the public good in education, science and the arts.

Broad is also a major force in the modern art world, owning personally or through his foundation around 2,000 pieces of art.

He owes his success to having the courage and the foresight to go his own way.

"People who just accept the status quo and conventional wisdom don't make a difference in the world," Broad said. "It's those that challenge [it] and do things differently who advance."