#65 Kirk Kerkorian: Penniless Dropout became the Greatest Deal Maker in Capitalist History

What I learned from reading The Gambler: How Penniless Dropout Kirk Kerkorian Became the Greatest Deal Maker in Capitalist History by William C. Rempel. ---- [0:16] He was a humble man privately proud of his accomplishments, a business genius who ignored his MBA advisers, a daring aviator and movie mogul, a gambler at the casino and on Wall Street who played the odds in both houses with uncanny skill. [4:34] Kirk believed there was no point in placing small bets. [16:48] He was a day laborer at MGA studios. He made $2.60 a day. Thirty years later he owned MGM and his investment was returning $260,000 a day. [21:27] His low tolerance for mistakes and recklessness made him a demanding instructor. He often repeated the mantra: There are old pilots and there are bold pilots—but there are no old, bold pilots. [46:54] He still relished big risks. And he subscribed to the logic of his friend and casino owner Wilbur Clark of the Desert Inn: “The smaller your bet, the more you lose when you win.” Besides, what’s the point—where’s the thrill—winning a small wager? Betting the limit became Kirk’s trademark. [53:26] Kirk was now sitting on stock worth more than $66 million, a vast fortune by any measure. And no one was more surprised than he was. [1:09:03] Kirk blamed Kirk. He had let himself become vulnerable. He hated that. He hated feeling helpless and at the mercy of forces beyond his control. He vowed never to let anything like that happen again. ---- Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work. Get access to Founders Notes here. ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Senra?

  There is an inspiring life story in the 98 years that belonged to Kirk Kerkorian. A boy who ran barefoot in the rich dirt of California's San Joaquin Valley before family financial chaos made him a city boy, fighting for his place on the dirty sidewalks of Los Angeles. He was a tough guy who wept at funerals. A humble man privately proud of his accomplishments. A business genius who ignored his MBA advisors. A daring aviator and a movie mogul. A gambler at the casinos and on Wall Street who played the odds in both houses with uncanny skill. That is an excerpt from the book that I'm going to talk to you about today, which is

• 0:43David Senra?

  "The Gambler: How Penniless Dropout Kirk Kerkorian Became the Greatest Deal Maker in Capitalist History." So let's start with his personality, his early life, and some of his accomplishments. It says, "Kirk was uncomfortable in crowds and dreaded the attention of strangers. His lifelong aversion to the trappings of celebrity would make him what he remains years after his death: one of the least known of America's richest men. He seemed to burst out of nowhere onto the American business scene in the late 1960s. A small businessman with a gambling habit and a junior high school education who struck it rich at the mature age of 50."

• 1:27David Senra?

  He dropped out, and we'll get to that too, but he dropped out in 8th grade. "He was a heroic wartime aviator who ferried factory-fresh bombers and fighter planes for the Royal Air Force over the treacherous North Atlantic in the era before navigational aids. He nursed a small charter air service through cycles of hard times after the war until selling his company for a windfall fortune. But the gambler decided to bet it all on some kind of capitalist trifecta. Suddenly, he was on business news pages across the country, risking huge sums in a puzzling range of eclectic markets."

• 2:07David Senra?

  On the west coast, he moved to control America's oldest commercial airline. In New York and Hollywood, he waged a takeover battle for the faltering befabled MGM Studios. In Las Vegas, he built the world's biggest hotel, despite a secret campaign to stop him by rival Howard Hughes. So let me actually just stop there. So somebody sent me, suggested I cover this book. They sent it to me on Twitter like a few months ago. And I had it on my wishlist, I don't think I had ordered it yet. And then about a month ago, I did a podcast on Howard Hughes. And in the, it's, it was, the author sourcing for the Howard Hughes book, or a lot of the

• 2:49David Senra?

  author sourcing was all these memos that Howard Hughes would write, especially later on his life when he was basically a recluse. He'd write written instructions for like his staff, like they were known as like the Mormons. I mean, it's staff like five or seven people, like basically were his buffer between his little penthouse where he never left and the outside world. So anyways, a lot of those memos in the book, they brought up the fact that Howard Hughes was, even though he would never appear in public, he was insanely jealous when other people would, other entrepreneurs would receive attention. So at the same time that Howard Hughes was living in the desert inn in Las Vegas, Kirk Kerkorian is like developing a lot of the hotels there.

• 3:32David Senra?

  And so because he's developing hotels there, he's written about in the press, and so Howard Hughes actually starts writing these memos on like how to destroy Kirk. Now I bring that up is because Kirk never knew that, first of all. And second of all, he admired Howard Hughes. So if you remember all the different industries that Howard was involved in, Kirk kind of, I'm not saying he copied Howard Hughes, but he certainly admired him. He was an aviator, and a pilot, just like Howard was. He winds up owning a movie studio, just like Howard did. He winds up developing real estate in Las Vegas, just like Howard did. They have a lot of the same.

• 4:10David Senra?

  Like the same ideas and they work in like a lot of the same, uh, the same industries. So Howard Hughes is in this book a lot. I'll probably talk about him a few times, but it's just good to know that Kirk was about 15 years younger than him and we definitely admired Howard's accomplishments. That was not reciprocated. Howard was by that time, you know, high, uh, a drug addict and rather paranoid as I covered in that podcast. Okay. Friends would call him a deal junkie addicted to financial thrills, whether at a craps table or at the negotiating table. In business as in gambling, Kirk believed that there was no point in placing small bets. So that's definitely a theme we're gonna go back to a lot. He just, he did a lot of this stuff, not necessarily for money, but for the excitement and he didn't, he would never bet

• 4:54David Senra?

  small. There were no tycoons in Kirk's family tree. His immigrant father, an illiterate farmer and fruit peddler, was in constant financial trouble. Kirk learned English and how to brawl growing up in Los Angeles. Now, at the beginning of the podcast, um, in the intro, it talked about how he, he went from running around in the dirt in the San Joaquin Valley to, uh, having to learn English in, on the dirty sidewalks of Los Angeles. So what they're talking about here is his immigrant father and illiterate farmer and fruit peddler was in constant financial trouble. He actually had like, uh, his father had over a million dollars worth of assets in like the 1920s, I think. Uh, might, might've been like even the teens, but he was highly

• 5:39David Senra?

  leveraged and he'd, he'd constantly fall behind on payments and then he'd, he would have, uh, all his land foreclosed upon. And so finally, he did this several times and finally he went completely bust. They lost everything and that's when they moved to Los Angeles and he just started to sell like fruit on the side of the road. Um, eviction was a recurring family predicament. He said he studied in the school of hard knocks. It turned out to be an advanced course in survival and the value of trust, loyalty and hard work. So this is Kirk, a little bit more about who Kirk was, uh, Kirk was, a little bit about his personality. Kirk was soft spoken and understated with a paralyzing fear of public speaking.

• 6:16David Senra?

  Kirk never defaulted on a loan and always regarded his handshake as a binding contract. So that's important, too. Later on in his life, he's got an entire staff working for him. He buys and sells tons of different companies. This is much later because like the intro said, he didn't really strike it rich. He was already 50, but he lived to 95. And I think it took him to almost like the age of 75 or 80 to become a billionaire. And then, once he did that, I think his peak net worth was somewhere around 16 to 20 billion. And then, he got caught up in the financial crisis in 2008. And I think he died with a net worth right around 2 or 3 billion. But the reason I bring that up about he always regarded his handshake as a binding contract.

• 7:00David Senra?

  He owned a majority of this company and he puts it on the market to sell. This Japanese conglomerate comes through. They're going to offer him, let's say, $150 million or whatever the number is. They have a handshake agreement with the guy running the company. So Kirk's like second in command. So he agrees to sell the company. The next day, another group wants to buy the company, but offers $15 million more in cash. And so Kirk's second in command calls Kirk and says, "Hey, what should I do? I just got another offer and it's $15 million higher." And Kirk says, "Well, did you make an agreement yesterday? Did you shake and say you're going to sell the company?" He's like, "Yes, I did."

• 7:45David Senra?

  And Kirk's like, "Well, why are we even talking?" And he hung up the phone. So he didn't take the 15 million. He said, "No, your word is your bond. We made an agreement. We're going to honor that agreement." That was something extremely important to him. All right. Says, "He never defaulted on a loan." "Okay, Kirk traveled without an entourage. He carried his own bags and drove his own car, typically a Ford Taurus or a Jeep Cherokee. He refused comps, personally paying for meals and rooms even at his own hotels. He gave away millions to charity and to people in need on the strict condition that his gifts were kept secret. When his donations grew into the tens of millions, he formed a charitable foundation, and it gave away more than $1 billion." So he had a saying that...

• 8:31David Senra?

  He felt like anonymous donations, donations made anonymously to an anonymous person, was like the purest form of giving. And he's saying if you wanted something in return, like you wanted your name on a building, or you wanted a plaque, or an award, or you wanted people to know, like you're publicizing what you're doing, he's like, then it's not charity. Like it's a transaction, you're trying to get something out of it. So this actually wound up backfiring on him because he would pay for, you know, his employees, like they're, somebody in their family would have cancer, he'd pay for the treatment. He did all kinds of very generous things, but his family's from Armenia, and he winded up, he was the most successful Armenian businessman in the United States at the time where there's this giant earthquake in Armenia.

• 9:13David Senra?

  And he was silently and anonymously donating millions and millions and millions and millions of dollars. And he was doing this before anybody asked. And then he started to get a ton of press coverage, where like, look how basically stingy this guy is. Like, you know, your family immigrated from Armenia to America, like you've had all this great success, you've done nothing. So that's when he had to set up the foundation and kind of do it like more publicly, even though he didn't want to. Because, you know, he was, he was getting bad press, undeservedly so. Okay, so then he says, this is some quote, a quote from him, "Life is a big craps game. I've got to tell you, it's all been fun. What follows is an account of the great craps game, The Life of Kirk Corian."

• 9:58David Senra?

  This is one of the books where, I've talked about this in the past, as I flip through the pages to get to my next notes. There's something about when you read a book that's so fantastic, I don't know what the feeling is, but this would probably sound familiar to you. Like, you get to the end of a book you really enjoyed, you know, it's a huge investment. This book is, I have the hardcover version, it's, I don't know, 400 pages, like, you're talking about 10 hours to read. And then you get to the end, and it's like that melancholy, like, bittersweet feeling. I had that feeling when I finished this book, because I enjoyed it so much, and it was just like, wow, like, I'm never gonna get that experience to read this for the first time again. I don't know, I really, I really enjoyed it.

• 10:42David Senra?

  So, so he's discovering, this is, I'm going ahead in the timeframe, he's not a little boy anymore, I think he's around 19. Might be a little older.

• 10:55David Senra?

  But this is what he's discovering his first love, which is flight. And at the time, he's actually working... So let me tell you, it's amazing that in the book, they talk about like how much money... Okay, so he's working at forty-five cents an hour. And at the time, he is installing... Remember, he's in eighth grade education, right? So he's making forty-five cents an hour installing two-hundred-and-seventy-pound wall furnaces. So these things that would heat people's homes. And the person he's working with, they're working close to like an airfield. And the guy he's working with is like, "Hey, we can go pay a dollar,

• 11:37David Senra?

  and we can take a flight on like a little, you know, like a little two-seater prop plane" that they had at the time. And this was his result. And this is him discovering flights and then rapidly switching careers. And so Kirk is in the back, the plane takes off, and he says, "In the back, Kirk's senses were instantly assaulted by the deafening scream and forceful lurch of the Piper's fifty-horsepower engine." Imagine a plane with fifty horsepower. "But if Kirk was unnerved by the noise, the power, the speed, or seconds later, the altitude, he didn't show it. His big grin said it all. Kirk was smitten. It was love at first takeoff. Suddenly, his entire future was banking sharply in a new direction.

• 12:18David Senra?

  Until that takeoff, Kirk had been focused on quite a different career path: professional boxing. Moving-heavy wall heaters serves as an extension of weight training in the gym. His big dream, before he started taking flight, had been getting his name on the marquee of a title belt." He had a nickname, they called him Rifle Wright Cocorian. "Rifle Wright Cocorian, fighting for a world championship in the ultimate international arena: New York City's Madison Square Garden." So that flight causes Kirk to want to learn how to become a pilot, which is like his first passion of his career, and how he makes his first fortune, actually. So now the book is gonna go back in time. We're gonna learn more about his early life, and then a little bit about his dad, and then some of his early jobs,

• 13:02David Senra?

  which I find always fascinating, because you know... You go from making forty-five cents an hour to having a net worth of twenty billion dollars in one lifetime. I find that motivating and interesting. Alright, so the Kerkorian family's financial collapse and forced relocation to Los Angeles would be among the earliest and most unsettling memories of young Kirk's life. It also ushered in prolonged periods of economic uncertainty that would extend more than a decade, deep into the Great Depression. Missed rent payments and evictions, sometimes as often as every three months, repeatedly uprooted the family and made the boy a new kid in the neighborhood over and over again. Hence why he had to learn how to box, because he was constantly getting bullied and getting his ass kicked.

• 13:45David Senra?

  By age nine, Kirk was hawking the Evening Express, which is the newspaper in the area they lived in, on street corners, making about fifty cents a day and turning over pocketfuls of pennies to help support the family. So everybody worked, his brother and his sister as well. More first jobs. Kirk entered the Southern California job market as a middle school dropout at the worst possible time, the depths of the Great Depression. He had to settle for a series of odd jobs. He would caddy at the golf course, he would sell oranges on the side of the highway, anything to bring a few cents a day, anything to bring home a few cents a day. Everyone in the family had to contribute.

• 14:23David Senra?

  So then around the age of, he's about seventeen, he lies, he gets his parents to lie how old he is, because one of FDR's, one of the programs of the New Deal, they created something called like the Civilian Conservation Corps, so they did like infrastructure work and ditch digging and stuff like that,

• 14:44David Senra?

  to like kind of build up funded public works, right? And so he lies to be able to go up to, it's in Sequoia National Park, and they're working, well, let me just read it. "It was especially demanding high-altitude work, digging, chopping, and clearing paths on terrain like the fourteen-thousand-five-hundred-foot face of Mount Whitney." And so they talk about, there's a lot of people like, from day one, there's an obvious difference between the limited stamina of people like Kirk and his friend, and then the farm boys that were able to work much longer. Because at this time, he'd been in Los Angeles for almost 10 years. But a lot of people would just drop their selves and leave because it was such strenuous

• 15:29David Senra?

  work, but Kirk wouldn't give up. So Norman, who is Kirk's friend, goes up there, he's like, "Hey, let's just bail out." Kirk's like, "No, no, no, we're gonna stay, we can do this." And Norman's saying, this is his recollection at the time, he says, "At first, the farm boys pretty near killed us, and we couldn't keep up. But we worked hard and we got tough. The pay was $30 a month, more money than Kirk or Norman had ever made." Okay, so that, but that was a limited engagement. Then he goes back to Los Angeles, and, you know, you have to pick up odd jobs. So here's one of the craziest, interesting facts about his life. One of the odd jobs he picked up was moving boulders at MGM Studios in Culver City.

• 16:12David Senra?

  So they were gonna film like, some kind of underwater scene, and they needed to move these giant rocks. And so the boys spent a night shifting, pushing, and shoving rocks around a big tank used for filming underwater scenes. They made $2.60 each, personal bests for a single day's work. Now I'm gonna jump right to the punchline in the book. Let me just read the other note I wrote, because I was listening to, after I finished the book, I was doing more additional research for you, and I heard the author tell a story that he was giving a speech on, on the life of Kirk Kerkorian. And he said something that was fascinating, and it's, "He was a day laborer at MGM Studios, which I just told you, moving big rocks. He made $2.60 a day.

• 16:57David Senra?

  Thirty years later, he owned MGM, and his investment into MGM was returning $260,000 a day." So from moving rocks in, on the studio for $2.60, 30 years later, he owns the entire place, and it's generating him a quarter million dollars in profit a day.

• 17:20David Senra?

  Okay, so, but before, we're very far from that point in his life. We're still in a sea of uncertainty. And it says, "With regular work still hard to come by, throughout the middle 1930s, Kirk turned entrepreneurial." So this is his first business. "He bought equipment for steam cleaning car engines and rented space at a gas station to use as his operations center. Used car dealers became Kirk's primary customers. He made enough money to start buying and trading old clunkers. So first he cleaned them, then he'd buy and trade old cars. He'd get them running with his auto shop skills, swap out ball tires for other used tires with a few more treads, and then wash, polish, and steam clean. Presto, he could clear a $15 profit."

• 18:05David Senra?

  So again, that's a good amount of money at the time because instead of moving heavy rocks around and making $2.60 a day, he can make what? What is that? Five times, more than five, five, six times that, just fixing up an old car. He also takes his lessons to the future because one of his most successful first businesses is buying and refurbished. He'd buy old junky planes, refurbish them, and sell them. Something that, that, traits that tie together all the entrepreneurs that we talk about on this podcast, right? Is the fact that they're relentlessly resourceful. And Kirk took that flight on that little plane, was smitten, decided, "I have to learn how to fly," but he had no money. Alright, so this is how Kirk learns to fly with no money. "Kirk's new love was flying, and she was a demanding mistress.

• 18:50David Senra?

  He needed more money to pay for $3 an hour flight lessons. So he took an extra job at a bowling alley bar as a bouncer. Kirk enrolled in night school classes to study the same math that once bored him as a schoolboy at the time. You had, you might still need to know, but basically, he was bored in algebra, so he'd always fail out in math classes. But now that the, like, because, you know, the problems he was learning was just fake. But he knew to be a successful pilot, he had to make all kinds of different calculations. So once he had a purpose that, hey, you need to learn this because it's gonna, it's gonna help you reach your goal, he was very adamant. So he said, um, he had to solve the mysteries of a compass and a protractor. He had plenty of motivation now.

• 19:33David Senra?

  Math was essential to all aspects of aviation. From navigating to trafficking, or to tracking fuel consumption, a pilot's computations were serious matters. Life or death matters. And Kirk now had one overriding goal in life: a pilot's license." Sometime around the spring of 1940, a newspaper advertisement caught Kirk's attention. The famous American aviatric, Florence Poncho Barnes, had opened a flight school at her dairy farm in the Mojave Desert.

• 20:02David Senra?

  So, he's like, "Oh crap, I gotta get down there." This is, this is how dedicated he is. He hitchhikes 85 miles to the Mojave and made Poncho a proposition. He was short on education and money for flight lessons, but he was willing to work hard. If that meant getting up at dawn to milk cows, slop hogs, and muck out the barn, Kirk was ready to start immediately. So she actually makes this, um, this trade with him. She said he was impressed with the young man's innovation, or initiative, sorry, and obvious ambition. Um, so then Poncho, he's starting to learn, uh, he's starting to learn how to fly from Poncho, and here's another connection to Howard Hughes.

• 20:45David Senra?

  Poncho regaled her cadets with tales of barnstorming, air derbies, and stunt flying, spiced with accounts of Hollywood parties and her work for filmmaker Howard Hughes. Kirk came out of Poncho's Flight Academy barely six months after plunging into tense pilot training and physically rigorous farm chores. When he left the academy, Kirk had already qualified for a commercial's pilot license, and he already had a job offer.

• 21:10David Senra?

  Um, so this, he's gonna wind up working for a civilian defense contractor. This is right before the start of World War II. So, Kirk was needed immediately by a civilian, civilian defense contractor to teach aviation cadets for the US Army Air Force. So they subcontracted out for the Air Force. And this is a description of him as a teacher. "His low tolerance for mistakes and recklessness made him a demanding instructor. He often repeated the mantra, 'There are old pilots, and there are bold pilots. There are no old, bold pilots.'" So this whole low tolerance for mistakes and, and being extremely demanding, definitely personality traits. Uh, talked about like, uh, later on in life, he was dating...

• 21:53David Senra?

  A series of, he became rather famous, he was dating a series of well-known women, and he was adamant about never being late. He just wouldn't accept it. Like, he was never late for anything, and if anybody worked for him, he would just, like, if a meeting was gonna start and you didn't show up, he would just leave. And this, he was so severe, I wouldn't recommend this as a personality trait, even though I like to be punctual as well, that he was waiting for the, whatever woman he was dating, at the time Kirk owned his own, like, 737. And they're leaving France, he's gotta go back to work in Las Vegas, and she doesn't show up at that point in time, so he just took off without her. And it was her responsibility to figure out how to get back. So he was an extremely, extremely demanding person.

• 22:38David Senra?

  Which you can kind of, you can kind of guess that from, if, just my description of, like, his early life, being extremely poor, evicted everywhere, no education, boxing upbringing, like, he was not, you know, he called it. He, his schooling was not, you know, MBA from Harvard, it was the School of Hard Knocks, so his personality kind of shows that.

• 23:01David Senra?

  Okay, so, and then he's also extremely, there's a reason why the book is called The Gambler, he's friggin' crazy. So he gets a high-paying job, and it's really high-paying, remember? Shortly before this, he was happy if he made fifteen dollar profit on reselling a car, or two dollars and sixty cents and a day's labor. Now he's gonna start making a thousand dollars a month. Well, why the hell would he be paid a thousand dollars a month? Well, he gets a high-paying job because every, almost everybody that does a job, or a lot of people that do the job, die. So it says, "The Royal Air Force Ferry Command needed contract pilots to fly new warplanes from the North Atlantic for the astonishing sum of a thousand dollars a month." So, this is in Canada, I think it's out of Montreal if I'm not mistaken.

• 23:44David Senra?

  They have this, the series of warplanes that, that the Allies are going to need. So it hasn't yet popped off, like, America's not jumped into World War II yet, but Britain needs these to combat, like, the bombing that is, that Germany's doing to, I think, London at the time. And so, this whole, in aviation history though, that, that flight path from, like, top of North America, flying by the Arctic to London, was very treacherous. And they had, like, I forgot what it was called, it was like hurricane-force winds in the jet stream. At the time, one, you had a one in forty chance of crashing.

• 24:23David Senra?

  So they'll pay you a thousand dollars a month, but you're ta- and you're, you're literally just, um, you know, flying a plane over there. And so you're basically like a plane truck driver, if you will. Um, and you're going to make a lot of money and they're going to pay for all your expenses. So you can save a lot of money, but you have a good chance of dying. Basically, this is him. He goes, "Some days he could hardly believe his good fortune. He was part of an elite unit that was steadily changing the balance of power in the war." Why did they say that? Because they're using these planes to, to shoot the, the German rockets out of the sky. He was commanding some of the biggest, hottest, most powerful planes in the air and the, like the, he's on the leading edge of technology for aviation. And day after day, he was flying the un-flyable North Atlantic. They said it was impossible to fly. Kirk Herkorian was having the time of his life. It's also crazy because the book

• 25:07David Senra?

  goes into detail about like, you know, he starts to make friends with some other coworkers who are doing the same thing. And, you know, a bunch of them, um, a bunch of them died. Like their planes would just disappear. And the water is so cold, they talked about like, once you hit the water, you're dead in about 15 minutes up there. Alright, he almost died. He almost died over, um, he lost contact somewhere over Scotland in heavy fog. Um, okay. So it says, I'm going to skip over all that part still because it has nothing really to do with the scope of this podcast. Okay. So this is summary of Kirk's time as a contract pilot. I bring this up because it's extremely important because he uses this as seed money to start his own business. So there is a, a point in, in all these little anecdotes. Kirk's stint as a contract pilot lasted more than two years. Through the end

• 25:49David Senra?

  of the war in Europe, in that time, he qualified to fly seven different planes and accumulated thousands of hours of flight time, thousands of dollars in savings and untold tales of adventure on five different continents. So he loved it. Okay. So this is his second business. Now the war's over. That gig is, is done. So he's going back to Los Angeles. He returned to Los Angeles knowing only that he wanted to fly and that he needed to be his own boss. In a matter of days, he set up a pilot training school. So this is his second business that's going to lead to his third business. The booming aviation business needed large numbers of instrument-rated commercial pilots. So Kirk's flight school roster was quickly filled. Within weeks, the business was turning

• 26:32David Senra?

  a reliable profit. But there was no excitement, no adrenaline rush. The teacher was bored with teaching. Kirk decided to get in on the charter business too. So this is extremely important because the charter business is how he makes his first fortune. One of Kirk's first charter customers was a Los Angeles scrap metal entrepreneur with a gambling habit. Jerry Williams operated a recycling yard about five miles from the airport and wanted regular lifts over the mountains to a budding gaming resort in the desert 250 miles east called Las Vegas. What I love about the life story of Kirk is like he has no wasted energy. So he takes everything he learns and what all the stuff that he's learning is going to turn into a business later down the road.

• 27:15David Senra?

  So he's installing heavy, heavy heaters, right? Takes a flight, realizes, oh, man, I gotta learn how to fly. Learns how to fly in some ingenious way to like get free, like basically barter, farm labor to learn how to fly. Then takes a really harrowing, risky, risky and harrowing job, stacks a bunch of money, uses that money and he says, hey, I'm gonna be, I'm gonna, I'm gonna start teaching other people to fly since I, since I already know how to do that. Makes some money from that, turns it into a charter business. That charter business introduces him to Las Vegas. Later on, he winds up building the largest hotel in Las Vegas three separate times. Okay, so Williams was a regular, was a regular, hiring Kirk and his Cessna for weekly flights to the gaming center.

• 27:59David Senra?

  Kirk was enthralled by the action. Now, this is one of the few direct quotes we have from Kirk because he's extremely private. "I was just overwhelmed by the excitement of the little town. The adrenaline rush was back in his life." So this is him starting and selling more businesses. "The charter business in those days was very good. Gamblers and couples in a hurry for Nevada's quickie weddings dominated customer traffic and Las Vegas was poised for a boom." Kirk's operation was small, was too small. "He sold off his flight school and planes, paid off his Bank of America loans and pocketed a healthy profit that he intended to parlay into something bigger." Kirk wanted his own airline, his own fleet of planes, his own company.

• 28:47David Senra?

  Okay, so he takes the cash that he makes from selling off his flight school, right? And he's like, "I need..." He wants, like, he doesn't want to just fly Cessnas, right? He wants to turn this into a full-fledged charter airline, which he winds up successfully doing, and he's gonna sell it for a lot of money. But, remember how you would sell, he'd buy old clunkers, use his skills to refurbish them and sell them for profit? He's gonna basically do the same thing. So the charter business had two, it was two separate businesses that made a lot of money, that made him wealthy at the age of 50. It was, he had the charter, so, you know, you can hire him, or his planes and other pilots eventually, to fly you to specific places, so like private airfare. And then he had buying old military planes, refurbishing them and selling them. So this is an example of that. One way to build capital fast was in surplus military plane market.

• 29:31David Senra?

  So I guess there's a lot of, like, DC3s, C47s, these huge planes that were used during the war, they were just kind of abandoned all over the world, anywhere from like, there was a bunch of them parked in Hawaii for some weird, I guess it wouldn't be a weird reason, right? They just got done fighting in the Pacific. So you'd have to fly them from like Hawaii to, you know, South America, Alaska, all over the place. So Kirk had a plan. He bought seven of the planes stranded in Hawaii, each worth at least double its purchase price, if he could get it to the US mainland, and doubled again for any plane he ferried all the way down to Rio de Janeiro. He was figuring on profits that in 2018, ranged from $90,000 to $250,000 per plane.

• 30:13David Senra?

  Now, you have to ask yourself, like, why is such a huge profit just sitting there anybody could take? One, you had to, obviously know how to fly, but two, they had limited range. So he would have to, like, take out all, like, basically gut the plane in Hawaii, install extra fuel tanks, and then pilot them over himself. He almost died doing this, on a flight from Hawaii to California. So, again, something where he's putting his life at risk to make money. So this gives him a chance to actually turn his charter business into a charter airline. It says, "When a small charter airline at Los Angeles Municipal Airport went on the market in 1947, Kirk and Rose bought it."

• 30:56David Senra?

  A three, Rose is his little sister. She actually lives, so Kirk lives at 98 years old, Rose lives to 102. Alright, so Kirk and Rose bought it, a three-plane fleet. So they have a DC-3, a twin-engine Cessna, and a single-engine Beechcraft. Kirk, so they're buying this for $60,000, and I'm not even gonna save the punchline here. So Kirk put up most of the $60,000 purchase price after borrowing $15,000 from Bank of America. Rose invested an additional $5,000 and managed the office. So he is going to, oh, let me get there in a minute. Kirk's new bookkeeper, so it's him, Rose, and I hired a bookkeeper. Kirk's new bookkeeper would introduce him to the tax benefits of lease deals and depreciation and capital gain profits.

• 31:40David Senra?

  Both his used plane brokerage and his charter service were making money. He wasn't rich, but the entire Kerkorian clan was sharing in his growing financial security. So he'd hire his family members, because remember, they come from very humble beginnings. Now, I'm not gonna bury this punchline. This small charter airline that he purchases for $60,000 and it starts building up, he sells 21 years later for $104 million. I mean, he's got some transactions in his book. It's just insane. Just 200 million here, 100 million there. Okay. Okay, so this is an example, something he internalizes at 35 years old. He's like, "Listen, to get wealthy, you have to own some kind of equity.

• 32:23David Senra?

  Like, you need, businessmen get wealthy, pilots don't." So he's still buying and selling these old planes. He finds them, some of them are almost scrap. So this is an example of one he bought. He bought for $100,000. So, "His $100,000 cattle scowl went to Northeast Airlines for the remarkable price of $340,000, and that was without the used passenger seats. The scrap dealer sold those separately." So he'd say, like, you'd find somebody that needed like a 747 left wing, and you'd send that to Europe. Somebody needed like the fuselage, or like the chair, the seats, or whatever, and he'd just sell it piece by piece and make a lot more money. And he said, "That transaction produced a milestone for the 35-year-old entrepreneur. For the first time, Kirk's annual income broke $100,000.

• 33:08David Senra?

  He also learned a lesson: Pilots don't make big money."

• 33:13David Senra?

  businessmen do. So he's uh now starting to build up quite that he's he's buying more and more expensive planes. Like these are just giant jets that he's now trying to resell. And he he actually, this is uh when he actually meets Howard Hughes for the first time. Because he's trying to sell a plane. He says, "As good as new plane cost Kirk about $300,000. He uh he hung on it a price tag of $1.6 million." His first sales call was to Howard Hughes. Remember um Hughes Aircraft was giant at the time. So they'd buy all kinds of planes. Um so he's talking to Howard Hughes. They talked planes and flying. They talked price. Hughes was easygoing, friendly, but a hard sell. They agreed to meet in Las Vegas.

• 33:58David Senra?

  Though they had never met, Kirk knew Hughes by reputation, as did most of America. Hughes was a famed aviator, test pilot, and aircraft designer with many speed records and daring flights to his credit. He owned an airline, TWA, and a movie studio, RKO, and was worth millions and millions of dollars. The famous aviator, 12 years older than Kirk, was gracious and down to earth. Again, they talked about planes and flying, then about Las Vegas. This is when they're having dinner. But when conversation turned to business, Hugh Hughes seemed argumentative. He didn't like the price, but he also didn't like a litany of other things. This made me chuckle when I read it. Including the size of the airliner's lavatories.

• 34:41David Senra?

  Kirk was always flexible about price, but he was surprised and put off by the nitpicking, especially over the design of in-flight toilets. And though Hughes was always very polite, his stubborn pettiness make Kirk made Kirk wonder if he might have somehow personally offended the multimillionaire. After three or four more meetings without agreement, Kirk gave up. Okay, so right around this time Kirk actually gets depressed and he's married. His first wife, their marriage is actually coming to an end. So he says their nine and a half year marriage officially ended uh in 1951. Kirk slipped into depression. He stopped working, stopped talking to his family, and holed up alone in a Hollywood apartment. During that same period, he tried to shake to shake his dark mood with electric shock therapy.

• 35:25David Senra?

  He later told friends that it worked, but the effects didn't last long. So I include that in there just because like when I'm telling these stories to you, you know, it's an amazing story from, you know, penniless, eighth grade dropout immigrant to billionaire. But I want you to keep in mind that everyone's life is messed up in some way. Like, there is no such thing as a perfect life. You're gonna have ups and you're gonna have downs. There's, he went through a couple's

• 35:55David Senra?

  serious like

• 35:58David Senra?

  periods of depression in his life, even though from the outside, you know, he's very wealthy, seems to have everything you could possibly want and you just, you know, it's, it's just part of being human. So, uh, I just wanna, you know, I, I wanna make sure I make that clear that I'm not, not just trying to, to put these people on a pedestal or glorify them because they're humans and, you know, there's a lot of ideas that we can learn from these people and, and, and hopefully apply to our own lives and it, it helps to learn from their experience. But they're, you know, we, we're not trying to idolize them. We understand that humans are valuable, like valuable? Yeah, I think that's the right word. So, you know, Kirk definitely had his ups and downs and mistakes as well, just like I do and just like you do. Alright, so this is him gambling on gambling and then learning an important lesson.

• 36:40David Senra?

  And as, now he's in, this is happening in Las Vegas in the mid 1950s. "As a gambler himself, Kirk knew better than most the fundamentals of a casino business model. Customers come in all day and night to throw money at the owners and they love doing it, win or lose. Kirk consistently lost more than he won and yet called his visits to Vegas the best times of his life." And another quote, "I was just overwhelmed by the excitement of the town." And so this is when somebody approaches him about, remember, the, the Vegas at this time is extremely mopped up. Like, it was controlled by gangsters all over the United States. And a lot of like the people running casinos were fronts. So he was approached

• 37:22David Senra?

  and they were trying to raise money and he was authorized to buy, so it says Kirk was authorized to buy his first casino point, which means he'd have a one percentage share ownership in a casino for $50,000. "If timing is everything, the deal had nothing going for it." They were in such bad shape Kirk later conceded. The good news for Kirk was that he lost only $50,000. It was on the dunes and it wound up, uh, basically they went to a rapid series of ownership changes that left his equity share basically worthless. Um, so the good news for Kirk was that he lost only $50,000, but it was a bitter lesson. And this is a, this is the most important lesson and why I'm telling you this part. I learned then not to invest in a business that I didn't run.

• 38:05David Senra?

  So Kirk loved the allure of starting businesses and, and, and doing deals, but he was also obsessed with control, which is obviously very common for, uh, the people that you and I have talked about so far on the podcast. So, um, the, remember that little charter service? He still owns it. It's called, he changes it to TIA. So this is Kirk's plan to grow what's now known as TIA. Um, the importance of, of paying for the long-term and hiring someone and giving them one mandate. Sometimes I leave notes to myself and I can't even read my own handwriting. Okay. The key to Kirk's grand plan was to go all in with TIA as a defense contractor. Since 1959, when the company landed its first government bid, which is ferrying US soldiers

• 38:50David Senra?

  and their families to North Africa, military business had become a steady and reliable source of revenue. Kirk also reasoned that it's, that if his company was the first, was the first supplemental airline with jets, he could sew up all the government business he could possibly handle and take a giant leap ahead of his competitors. A big, this was a big risk for a big payout, but Kirk wasn't taking a wild guess or betting on chance. He knew the business. He saw the expansion of US military bases in and around the Pacific, and he was confident that future demand for troops and cargo would translate into strong returns on investment. So now he's gonna go around, he's like, "Listen, I need jets. I don't have the money for jets. I need to go borrow money."

• 39:32David Senra?

  So since his first stop was Walter Sharp at the Bank of America, they wind up having a lifelong financial relationship. So this is actually important, that he winds up paying back Walter on time and never defaulting on anything. So this is, and this is not the first time they did business. Walter was actually a fan. So it says, "A Kerkorian fan since Kirk's Valefield Flight School." That was the name of his flight school.

• 39:58David Senra?

  Sharp said he would try to get his main office to go for a loan up to $2 million. It was no sure thing. It was an amount well beyond a branch manager's independent authorization.

• 40:09David Senra?

  So even if he got that $2 million from Bank of America, it wouldn't be enough to buy for all the planes he wants to buy. So he goes to the company that he wants to buy the planes from and sees if they'll finance the deal. And they wind up doing it. So the company's called Douglas Aircraft Company. So this is Kirk. He, meaning Kirk, arranged to pitch his idea to Douglas executive Jackson McGowan, a familiar face to Kirk. They knew each other casually, having negotiated a couple of plane deals in the past, when McGowan was a Douglas Vice President of Sales. He was now Vice President and General Manager of the entire Aircraft Division. This is what I meant about the importance of playing for the long game. Kirk had a fabulous reputation, so if he did business with somebody in the past, they would likely to continue that relationship in the future.

• 40:50David Senra?

  And usually in the future, they were in a more advanced station in life, so they could actually provide him more benefit. And in this case, this guy's running the whole thing. So McGowan was skeptical. A supplemental air service paying $5 million for a jet? Was he serious? But he knew Kirk's reputation, and he knew his credit history. He knew his track record. And Kirk's quiet, controlled excitement describing his plans made sense. It got McGowan excited, too. There was even an escape hatch, a Plan B. If government contracts were slow or failed to materialize, Kirk could lease the plane to a commercial carrier. So he sets these deals up. If you remember that three-part series I did on Richard Branson a couple of months ago, or maybe last year.

• 41:33David Senra?

  This, that's what I thought of when I read this section, where when he was setting up, especially for Virgin Atlantic, but in almost any endeavor, Richard Branson just picked up on the simple idea that, "Hey, I just need to protect my downside." And if I protect my downside, and I have enough businesses that have uncapped upside, I have some kind of asymmetric advantage, and it usually will work out over long-term. So when he set up Virgin Atlantic, he'd say, "Hey, I want to buy these 747s from you, but if I go out of business, I need to be, in our lease, I need to be able to, like, you buy the plane back from me." So his downside was cap. Kirk's basically doing the same thing here, but like 50 years earlier. "So the government contracts were slower, failed to materialize. Kirk had leased the plane back to a commercial carrier. The Douglas exec agreed with Kirk. It was a good bet, and he wanted a piece of it. McGowan crafted a special deal." So he's gonna, he's gonna finance some of it.

• 42:18David Senra?

  "Kirk came up with some cash. Bank of America came through with the loan for about $2 million, and Douglas Aircraft Company financed the balance. An unprecedented move at the time of about $3 million. On his signature alone, Kirk had assumed a personal debt load of nearly $5 million. Default would wipe out everything he had built. Failure would bring him a taste of his father's desperation back in those final days at Weed Patch." That's the place in the San Joaquin Valley. But Kirk was, the gambling aviation executive was going all in. "The jet deal closed in June, and Kirk moved quickly. He turned to..." So this is the importance of hiring somebody with just one mandate. He hires this guy named Glenn. Glenn was the sales executive at Lockheed and a leading figure in the post-war charter business.

• 43:02David Senra?

  Kirk lured him over to TIA, making him president of the company. Glenn's mandate was to keep the meter running on the DC-8. That's the jet he just bought. Keeping it, keep it, so he could keep it making money. So basically, your job is just to sell time on this plane that we just spent $5 million for. "The big jet's first steady work was flying high priority military loads from Travis Air Force Base in Northern California to Guam. More contracts followed. And just like Kirk envisioned, TIA was scooping up the cream of the new defense contracts. In its first partial year of operation, the jet, single-handedly propelled TIA from earning $1.25 million in profit to $1.1 million.

• 43:44David Senra?

  The company's net value surged into multi-million dollars, into the multi-millions of dollars." So he gets four times the amount of profit in less than a year. Oh, so this is something surprising, because when I was reading up, I knew that eventually he sells TIA for $104 million, but then in the book, he sells it twice. And the first time, it didn't go well. So I actually want to talk to you about that, because I found this part surprising. So, "Taking outside investment plus giving up control equals an unhappy Kirk."

• 44:16David Senra?

  So he's heavily, he's making money, but now he's, he's highly in debt. So he's looking, he's, he's saying, hey, what if I take outside investment and I have somebody like I can make a little bit of cash and then have some offset like my liability. It says, "Big debt deprived Kirk and TIA have room to maneuver to take advantage of other investment opportunities to expand, or more importantly, to withstand unforeseen economic slowdowns. The plane and TIA were insured against a catastrophic accident, but Kirk was a sitting duck in the event of a business slump. Debt is what broke his father four decades earlier. Kirk pondered ways to minimize his personal exposure to financial ruin." And then, Studebaker came knocking. So Studebaker, you've probably heard that of, of that company.

• 45:01David Senra?

  It's car manufacturing and the guy running the company is this guy named Egbert. Egbert? I'm gonna call him Egbert, because that's funnier. Egbert came prepared to make concessions. Kirk was a classic self-made entrepreneur who ran his own company. He wasn't going to relish having a boss. Egbert assured him that Studebaker wanted Kirk to continue running the air service. Kirk would be corporate vice president and the president of Trans International, a Studebaker subsidiary. Egbert said that Kirk would receive more than 120,000 shares of Studebaker's stock, then valued at about $8.25 per share. The deal would make Kirk a millionaire, at least on paper.

• 45:44David Senra?

  Studebaker would assume responsibility for Dirk, for Kirk's DC-8 debt, that's a $3 million debt for the plane, I guess $5 million. And Kirk had everything he wanted, plus his first $1 million. The total deal was worth about $10 million. However, the honeymoon didn't last long. Accountants and executives in South Bend, South Bend, Indiana, where Studebaker was headquartered, questioned marketing strategies and even the smallest exceptions, or excuse me, smallest expenses. Sometimes Egbert called Kirk directly to complain about costs or whatever. On one occasion, the exchange went something like this. Egbert said, "What the hell do you think you're doing?" Kirk said, "What the hell do you know about running an airline?"

• 46:26David Senra?

  After so many years without a boss, Kirk's midlife encounter with supervision and second guessing turned out to be about as welcome as a patch of moderate to severe turbulence. He winds up getting out of this deal, Studebaker, they buy a bunch of these subsidiaries, they're all making money, but their corporate, their, their main, the main company winds up almost going bankrupt. So Kirk winds up buying back the control. All right, this is a little bit about his philosophy on risk and an example of that risk. Kirk still relished big risks and when he, and he subscribed to the logic of his friend and casino owner, William Clark of the Desert Inn. "The smaller your bet, the more you lose when you win.

• 47:08David Senra?

  Besides, what's the point and where's the thrill, winning a small wager?" Betting the limit became Kirk's trademark. He took a similar approach in real estate investing. After receiving nearly a million dollars in stock from Studebaker at the end of the year in 1962, Kirk turned around and invested most of that fresh income, $960,000, on 80 acres of sand and brush. The property was a potentially prime location near the dunes and across the strip from the Flamingo. So he makes a million dollars, doesn't hold on to it, puts it basically all on a bunch of dirt in Las Vegas. That winds up working out really well for him because he's, unbeknownst to him, he's, uh, there's a guy named Jay Sharano,

• 47:49David Senra?

  who is actually builds like hotels and motels all over the, the country. And he's, wants to build something in Las Vegas and he's like, "I want this land." Looks up who's the owner, wants it being Kirk, so he wants to meet with Kirk. And this is how Kirk winds up with being part owner of Caesar's Palace, one of the most famous hotels in Las Vegas. Jay Sharano, the maestro behind upscale motel developments from Georgia to California, already had financing lined up through personal friendships with Teamster Union President Jimmy Hoffa. Remember, this is the mob era of Las Vegas. Now he needed to win over Kirk Kerkorian, the Strip's newest land over. They met over dinner on a summer night in 1963, so it's about a year after he buys it. Kirk had come to listen. Sarno had come to make a deal.

• 48:34David Senra?

  He proposed a lease agreement that would make Kirk a partner in the casino profits. Sarno launched into his pitch. "This is going to be the greatest hotel casino in the world. Everything is going to be top notch. We'll have the finest restaurant, the best entertainers, the most luxurious rooms. People won't want to stay anywhere else. It can't lose." It was a very big play, and Kirk wanted to hear more. So when he goes into this meeting, he would only, really, at the beginning, he only wanted to accept like regular lease payments. Like, "No, just lease you the land. You just pay me the set amount every month." And Kirk being the gambler, he was like, "Oh, well, actually, it wouldn't be bad owning this." So it says, "It looked like a shaky deal to Cohen."

• 49:16David Senra?

  Oh, I'm skipping over something. So he convinces Kirk. Kirk's like, "Yeah, you know what? I'll give this a shot." Sarno still needs to raise more money. So he goes all over. The book goes into detail. I'm gonna skip over most of it. But he's meeting people all over, everywhere. Nashville, New York City, New Orleans, just everywhere. And I just put this part in there because I thought it was funny, because it winds up being extremely successful. But he goes to meet this guy that specialized in airport hotel developments. His name's Bert Cohen. And this is what Cohen says. "It looked like a shaky deal to Cohen. A lot of debt and hefty lease obligations with sketchy business plan." "After his door shut behind the departing Sarno, Cohen dictated a note to one potential investor."

• 50:00David Senra?

  "This afternoon, I met with Jay Sarno and reviewed his plans for the Las Vegas hotel. I examined the terms of his lease, his loan commitment, and his business plan. If you put one penny into this deal, I promise I'll have you committed to a mental institution." However Kirk didn't, he didn't send that letter to Kirk, I just thought it was funny that he said this is a terrible deal. Kirk saw something different, he's like, "Yeah, I'll do it." Kirk agreed to a final conditions. A relatively modest monthly lease of $15,000, so he's for growing some monthly profit. Uh, in return Kirk would receive 15% of casino profits. So now this is, uh, the story of how Kirk buys TIA back. Then takes it public and he's done this a few times where he sells something to somebody at like peak price.

• 50:45David Senra?

  And then something will happen and he'll be, he's able to buy it back at like one-fourth the cost. It's really fascinating. He did it to MGM Studios a couple of times. Or maybe twice. Um, okay, the car, so this is Studebaker, the carmaker was in freefall. It was on track to lose $16 million in 1963. And that was despite the fact that TIA and several other non-automotive subsidiary, subs- One of these days I'll be able to pronounce that word, subsidiary, were all profitable. The new president, so the guy that made the deal Egbert, he's, he's gone. Now he's replaced by this other guy. The new president had just started selling off everything from idle factory machinery, machinery to corporate subsidiaries. In a desperate campaign to slash Studebaker debt.

• 51:26David Senra?

  Kirk left, uh, meeting with them with a $150,000 option to buy back TIA for 2.5 million dollars in cash. Remember his other deal was worth $10 million. He's buying it back for a quarter of that. He does something similar with a, uh, was like, but the numbers were different. It's like a billion dollars he sells something for and then buys it back for 250 million. Uh, so this is by September 1964, after less than two years under Studebaker's control. Trans International Airlines was back under the direct ownership of Kirk. Um, Kirk was ready to open TIA to Wall Street investors. His nearly two-decade-old charter business would be the first supplemental airline ever taken public.

• 52:05David Senra?

  It was a bet, it was, and this is fascinating, uh, story. Basically these Armenian investors are the ones that saved his ass here. It was at best a modest beginning. TIA stock opened at $10.30 per share, dropped to $10 and didn't move for weeks. But what finally started moving the stock were Kirk's Armenian connections. So the guy, there's this young, hungry guy that cold calls Kirk one day and wants to take like all his, like, his stock business. His name's George Mason. So George Mason goes around and he starts selling, like pitching the stock to fellow Armenians he knew through the newspaper, because it was like an Armenian mafia almost. They weren't gangsters, I mean, like, they had like a connection, cultural connection.

• 52:49David Senra?

  And he does this, like, basically by hand, which is just fascinating to me, and it actually winds up working. So months and months and months, he goes around saying, "Hey, like, any, any possible person can be like an Armenian farmer from Fresno." A couple of these people wind up becoming millionaires because of this, this deal. But he, basically, "Hey, you need to support, like, your Armenian, this is an Armenian-owned business, it's a good investment opportunity for you," is basically the pitch, "like, you should buy this stock." And even if they weren't invested in any other stocks at all. So it winds up working. It says, "In a matter of months, Kirk had paid off the $2 million bank loan from which he had bought TIA back from Studebaker. Kirk was now sitting on stock worth of more than $66 million, a vast fortune by any measure,

• 53:32David Senra?

  and no one was more surprised than he was." And now, there's another quote from Kirk. "I thought after the war, 'God, if only I could get up to having $50,000, that would be great.'" "Then it was $100,000. It just keeps going," Kirk said. "A lot of people ask me, 'Did you have any idea that you would do this?'" The answer is, "Absolutely zero." Alright, so over the course of the career, Kirk invested billions and billions and billions of dollars into Las Vegas. But at this time, he's taking the money from all the money he made from TIA. He sells it off, makes a hundred and something million dollars, I think 150, 104, something

• 54:14David Senra?

  like that, and he just starts buying up more land in, in Vegas. And this is an example of Howard Hughes not enjoying sharing the spotlight. So it says Kirk had paid $5 million cash for about 65 acres. He planned to break ground on the city's tallest high-rise hotel project later in 1967. This is the first time, first of three times that he builds the largest hotel in Las Vegas. I didn't know, he also builds the MGM Grand Hotel, which is the first version, and MGM Hotel, which is the one that's still there to this day. So it says, "The casino would feature the largest gaming floor in Nevada. The hotel would have 1,500 guest rooms, making it the world's biggest at the time." And it's going to be called the International Hotel, which he winds up doing a deal with Hilton, which I'll get to later.

• 54:57David Senra?

  "The news seemed to wake a sleeping recluse. From seclusion in his penthouse suite at the Desert Inn, billionaire Howard Hughes made his own headlines a few weeks later, when he bought the entire hotel for $13.2 million in cash and loans." Funny story, he bought the Desert Inn because he moved in secretly to the penthouse. It was only supposed to be for a few days, stays for two years, they threatened to evict him, so he's like, "All right, well, just buy. Like, just, can't get evicted if I own the hotel." So he buys that hotel. "Then he bought the Sands, the Frontier, and more. A buying spree was on. In the shadows behind those perpetually drawn curtains in his penthouse, Hughes was plotting a one-sided robbery to undermine Kirk's grand plans.

• 55:41David Senra?

  To the hermit billionaire, Las Vegas wasn't big enough for two kings of gambling." And it's funny, in some of his memos that he wrote, he compares him and Kirk to two tigers. He's like, "There can't be two tigers on a rock, only one tiger." It's just, I don't know, Howard Hughes is such a peculiar person after reading two massive books on him, it's just bizarre. So, you know, I'm not trying to glorify the fact that this guy goes all in on everything and that he has a penchant for gambling, because when it works out, it works out really well, but when it doesn't work out, it can wipe him out. And he came close, at one time he came close to, like, he had a, he almost defaulted on a loan, and if he defaulted, and then he had another loan that had, like, a clause in there that

• 56:25David Senra?

  if he defaulted on any other loan, that that loan would come due immediately. So he's like a few, even when he was like over, he was over a billionaire at the time, he was a few weeks from, like, insolvency. So, he definitely pushed it to the limit. This is an example of highly leveraged plus high interest rates. And this actually goes against him. And this is about the International Hotel. Uh, the International Hotel's early financial returns were sensational. International Leisure, that's the company he created. Uh, International Leisure Stock steadily climbed steadily. So he did a public offering to help raise funds for the hotel. Kirk's original 82% ownership had been worth a modest 16 million before the hotel opened. It jumped to $180 million on the strength of steady profits of both the International and the Flamingo.

• 57:10David Senra?

  He buys the Flamingo as well. It was time to take advantage of all the good press and potential investor enthusiasm by preparing for another public offering of International Leisure Stock. So he wanted to do it twice. Beyond raising enough cash to pay off the $50 million he had in high interest rate loans, Kirk expected this public offering to raise his next fortune. Okay, so remember that part, though. He's highly leveraged, he's got $50 million of debt at a high interest rate. He's like, "Oh, everything's fine. The first public stock offering went well. The second one will take care of all this business." But it doesn't. Um, before I get there, though, in the very next chapter is this story that was amazing because he starts buying like...

• 57:53David Senra?

  The span of Kirk's interests were amazing. At one time, he owned like a fairly large stake in like all three automakers. Um, he owns MGM, like he winds up overtaking MGM, which I'm going to talk about right now. Um, he's just got his hands in so many different things. He tries to buy Chrysler later on, um, just all kinds of, uh, like he buys, uh, the hotel from Steve Wynn later on, so... And anyways, the reason I bring that up is because I'm always amazed as I go through these books. I've talked about this idea in the past that books are the original hyperlinks, like they'll lead you from one idea to another, right? So, when I did a podcast on the founder of the creative artist agency, Mike Ovitz,

• 58:37David Senra?

  and his book, Who is Mike Ovitz? In that book, we find out, because Mike brokers, um, so there's this family, Canadian family owns, they started out owning a bunch of distilleries and selling alcohol and stuff. And they eventually buy Seagram's, right? And Seagram's exists still to this day. Um, well, the descendants of the founder, which his name is Sam Bronfman, um...

• 59:04David Senra?

  They take the family's fortune and then Mike Ovitz, I'm introduced to them because Mike Ovitz brokers a deal. I think they buy like MCA or something like that. So the descendants of Samuel Bronfman also at the time owned MGM. Okay, so we're about to be introduced into Sam Bronfman's son Edgar. Now, when I read Mike Ovitz's book about Sam Bronfman, I was like, this guy sounds insane. Like, how does he start with nothing, winds up, you know, building this massive, massively successful, massively profitable company, buys up all these other companies and kind of keeps it like a family affair, because the company lasted like 120 or 130 years. He finally sold. But anyways, we're going to be introduced now to Edgar Bronfman, who at the time, this

• 59:47David Senra?

  is Sam Bronfman's son, he's living and working in New York City, and he's chairman of the MGM board. And Kirk wants to overtake MGM. Okay. So it says Edgar Bronfman, the chairman of MGM Board of Directors, took a call from one of Hollywood's biggest lawyers, this guy named Gregson Botzer. Botzer had been quietly consulting with Kirk Akorian. And the point of the phone call, he now wanted to announce that Kirk would be launching a tender offer in the morning, in the morning, this is a bid for MGM. His bid, $35 each for a million shares. His goal, management control. Did Bronfman want to sell? The 40-year-old head of the Seagram Company in the United States was stunned by the news

• 1:00:31David Senra?

  and outraged to be confronted with an uninvited takeover bid. He declared his opposition immediately. So I'm going to get into, so he winds up getting MGM, but this is when he's got, he's highly leveraged, as I said earlier, and everything falls apart. So what happens is, you know, there's a lot of rumors that there's a skim going on in Vegas, that mobs secretly control these corporations. Kirk was never implicated in any of this, but... Somebody found, eight years earlier, the FBI had tapped this guy that was mobbed up, and he was a bookie. And he was one of the people that Kirk would use to bet on sporting events or horse races and stuff.

• 1:01:15David Senra?

  So that guy calls Kirk one day and is like, "Hey, your bet last night went my direction. You owe me $21,000. How are we gonna get it?" And Kirk always paid his debts and everything else. He's like, "Okay, well, we'll figure out how." You probably don't want a check for $21,000 from me. So Kirk agrees to write it out to some other guy, and then that guy gives that guy cash, right? This comes about eight years later, when he's about to do his second offering for the International Leisure Hotel. And everybody pulls out. So, remember, he's got $50 million at, I think it was like 15% or 18%, like really high interest rates. This is the late 1960s. And now, he's basically forced to find a way out.

• 1:01:57David Senra?

  So he's gotta take on partners, even though, remember, in the past, he didn't like when he took outside investment. But before I get to that point, there's just some personality, some highlights on his personality that I thought was interesting. He talks a little bit about the way he was extremely disciplined. So it says, "Kirk had always been health-conscious and disciplined about regular exercise. He jogged daily and played tennis religiously. He ate small portions, drank in moderation, and despite bouts of insomnia, tried to keep an early-to-bed and early-to-rise schedule." So it says, basically, he'd work from 9:00 to 4:00, so he'd work at 9:00 in the morning to 4:00 in the afternoon. Then he'd do an hour of vigorous exercise, and then he'd have a cocktail and go out to dinner.

• 1:02:40David Senra?

  "He abhorred ostentatious displays of wealth, starting with jewelry. He wore no bracelets, no gold chains, no pinky rings. He kept a simple Timex watch without a band in his pants pocket." And I'm jumping ahead in the story before I go back to how he gets out of the conundrum that he's in. But I found this fascinating, because he winds up taking over MGM, increasing the value a lot, and then selling off pieces of it, because he also bought the United Artists and all these other movie studios. But I thought, I wanna share this part, because there's a pattern of how the entrepreneurs that I've been reading about and talking to you about, they kinda abhor complexity.

• 1:03:24David Senra?

  And so, you know Kirk, one of his most famous quotes is like, you know, don't let, he'd shake your hand on a deal and they'd be like, "Hey, like, don't let the lawyers mess this up, or lawyers and accountants get in the way of like what we're doing here." So this is how Kirk sold MGM to Ted Turner. He sells MGM twice, I think, and this is one of the times. So he just calls him up, and he, because he knows, he met Ted, Ted's a little younger than him, and he just liked him, and he's just like, "Let me see if I can do a no BS deal with this guy." And so, listen, Kirk calls me, Kirk suggested that he wanted something around $1.5 billion, but at whatever price, it had to be all cash, no contingencies, and a no outs commitment.

• 1:04:06David Senra?

  And the deal had to be closed in two weeks, start the clock. So it's a pretty easy deal to understand, like, "We're gonna, we're gonna settle somewhere around $1.5, it's gonna be cash, no contingencies, and you got two weeks." They wound up taking like eight months to close the deal, because he had to like round up money, Kirk went to financing some of the sale himself, similar to what, uh, what the aircraft company did for him, uh, earlier in his career. But I just liked the way he just laid it out in a very like, simple, um, easy, like, easy to understand, and, and, you know, as soon as they hung up, Ted starts working on the deal. Okay, so, this part is, um, about the negative new coverage, and then, you know, it kind of all falling apart.

• 1:04:48David Senra?

  And, well, I've mentioned before, like, one of my favorite books of all time, um, is The Big Short by Michael Lewis, the book being way, way better than the movie. And Steve Eisman is one of the people that, um, saw the, the housing crisis coming, and wound up becoming a billionaire based on his bets against the housing crisis. He was played by Steve Carell in the movie. Anyways, Steve Eisman, I've watched a couple interviews with him, and he's got this great quote about summarizing, uh, all this, uh, financial, like, shenanigans that was taking place at the time. And, you know, how, like, he went, he was famous because he went, I think it was the CEO of Bank of America, and he, like, he went to one of their investor meetings and just called out the guys, like, "You don't know what you're talking about, like, all the, as, things you would think are assets, they're going to zero."

• 1:05:33David Senra?

  And in the book, it talks about, "Oh my God," he had a realization that one of the, the people leading one of the biggest banks in one of the biggest countries in the world is dumb. That's Steve's words. So anyways, he describes it, he says, "They mistook leverage for genius." And I love that quote, because again, leverage can make you seem really smart when the market's going up and make you seem really dumb when it's coming down. So they mistook leverage for genius, and this is a mistake that Kirk makes. The negative news coverage continued. There was no question that any publicity that put Kirk in the same headline with the mob was very bad publicity. By the spring, International Leisure was forced to withdraw its application for the second public offering, and Kirk had to hang four sale signs on everything.

• 1:06:16David Senra?

  So all of his assets now have to be liquidated. Talks began with a very aggressive Baron Hilton of the Hilton Hotel chain. So Baron Hilton is Conrad Hilton's son. Conrad Hilton is the person that founded Hilton. And I have a book on Conrad Hilton that will eventually appear in a Founder's, as a Founder's episode in the future. Baron was eager for a partnership with Kirk as joint owners of the International Hotel. So it says, they're thinking about doing a 50/50 deal, and he's, one of his advisors, one of Kirk's advisors is saying, "Hey, with a 50/50 deal, you'll have no say. You'll be arguing constantly." He pressed Kirk to sell only 49%.

• 1:07:00David Senra?

  "They'll never go for it," Kirk said. The sale ended up coming together in stages. One reason for the protracted transaction was the dreadful condition of the stock market. So now that he had the leverage, not only does he have bad publicity, but now the stock market is crashing. "It was heading to record lows and taking with it a paper, with paper savings of millions of Americans and a big chunk of Kerkorian's net worth. In just a few months, International Leisure's stock," check this out, this is crazy, "the stock had fallen from $65 a share to less than $6.50. Kirk had no choice but to sell at the worst possible time.

• 1:07:39David Senra?

  Hilton paid only $19 million for roughly half of Kerkorian's holdings, nearly 3 million shares that a few months before would have brought in $180 million."

• 1:07:53David Senra?

  Geez, so he lost, what, 90% of his, almost 90% of his investment. "I got a good kick in the ass," Kirk conceded to a close friend. And now, we're gonna see what he thought about this. You'll definitely have an understanding of Kirk after this. "He didn't care if they changed the name of the International Hotel to the Hilton, and he shrugged off questions about the staggering paper loss on the deal. But in a rare public display of temper, Kirk let his feelings show when asked about sharing management control with his friend Baron Hilton and his team. They can talk all they want. They can call it Hilton Hotels. I have no ego problems, but we own equal voting control. We have two directors. They have two. I hate even that. I like to call my own shots.

• 1:08:38David Senra?

  It's my place more than Baron's and Conrad Hilton's, so I'm not gonna dance to their tune, and they can go whistle." Like any sane gambler, Kirk never looked back. He wanted no part of what-if speculations, no second guessing about past decisions, learn a lesson from mistakes, and move on. That was Kirk's way. But Kirk's legal and financial advisors wanted to blame the SEC. They estimated that Kirk lost $100 million as a direct result of the stock offering denial. Kirk blamed Kirk. He had let himself become vulnerable. He hated that. He hated feeling helpless and at the mercy of forces beyond his control.

• 1:09:20David Senra?

  It took much of the fun out of his life and out of his business. He vowed never to let anything like that happen again.

• 1:09:32David Senra?

  And he never does. That is where I'm gonna leave this story. Most of the story, uh, he winds up making a lot more money from the point we are in the story. If you wanna read more about it, I recommend the book. It is absolutely fantastic. It's well worth your time. I'd recommend buying a copy. If you wanna buy a copy and support the podcast at the time, I'll leave a link in the show notes, but you can also go to amazon.com/shop/founderspodcast. I will be back next week with another podcast, going over another biography of an entrepreneur.