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

In the episode, the host delves into the extraordinary life of Kirk Kerkorian, a self-made billionaire with a penchant for high stakes. Kerkorian, an 8th-grade dropout and son of an immigrant farmer, rose from humble beginnings in California to become a formidable business tycoon. He was a daring aviator who ferried planes during WWII, a shrewd investor who turned a small charter service into a multimillion-dollar airline (TIA), and a visionary who shaped Las Vegas by building the world's largest hotels and engaging in high-profile deals, including the acquisition of MGM studios. Despite his wealth, Kerkorian was known for his frugality, humility, and the desire to maintain a low profile, avoiding the trappings of celebrity. His story is a testament to the power of risk-taking, resilience, and an unwavering commitment to one's own instincts in the face of adversity.

• Kirk Kerkorian experienced financial instability in his childhood, moving from rural California to Los Angeles due to his family's financial chaos.
• He was known for being uncomfortable in crowds, avoiding attention, and maintaining a low profile despite his wealth.
• Kerkorian was a private individual who shunned the trappings of celebrity status.
• Despite his aversion to publicity, he became known in the American business scene in the late 1960s as a successful businessman with a junior high school education.
• Kerkorian was a wartime aviator and later sold his charter air service for a significant profit.

"Kirk was uncomfortable in crowds and dreaded the attention of strangers. His lifelong aversions 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."

This quote highlights Kerkorian's discomfort with fame and how despite this, he rose to prominence in the business world unexpectedly.

• Kerkorian was a daring individual who took significant risks in business, often against the advice of his NBA advisors.
• He was involved in various industries, including aviation, movies, and real estate, and was known for making large bets rather than small ones.
• Kerkorian's business approach was influenced by his admiration for Howard Hughes, despite Hughes' attempts to undermine him.
• He was seen as a "deal junkie," finding excitement in the process of making deals and taking risks.

"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."

This quote encapsulates Kerkorian's approach to business and risk-taking, equating his love for big deals to the thrill of gambling.

• Kerkorian's father was an immigrant farmer who struggled financially, leading to repeated foreclosures and eventual bankruptcy.
• The family faced constant evictions and financial instability, which contributed to Kerkorian's resilience and understanding of trust, loyalty, and hard work.
• Kerkorian was a fighter, both literally and metaphorically, learning to box and stand up for himself due to frequent relocations and bullying.
• Despite his wealth later in life, Kerkorian was known for his humility and adherence to principles, such as considering a handshake as a binding contract.

"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."

This quote provides insight into Kerkorian's tough upbringing and the values he developed as a result, which would later influence his business dealings and personal character.

• Kerkorian lived a modest lifestyle, driving his own car and refusing special treatment, even in his own hotels.
• He was a generous philanthropist, often giving anonymously and insisting on secrecy regarding his charitable donations.
• Kerkorian believed in the purity of anonymous giving, but was forced to create a foundation to manage his donations publicly due to negative press.
• His philosophy on life was likened to a "big craps game," emphasizing the fun and excitement he derived from his endeavors.

"Kirk traveled without an entourage. He carried his own bags and drove his own car, typically a Ford Taurus or a Jeep Cherokee."

This quote illustrates Kerkorian's humble and self-sufficient nature, even as one of America's richest men.

• Kerkorian dropped out of school in 8th grade and worked various odd jobs during the Great Depression.
• He discovered a passion for aviation, which led to a significant career shift from boxing to becoming a pilot.
• Kerkorian's first business venture was steam cleaning car engines, which evolved into buying, fixing, and trading used cars.
• He demonstrated resilience and entrepreneurial spirit from an early age, laying the groundwork for his future success in business.

"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."

This quote reflects on Kerkorian's early work ethic and determination, which played a crucial role in his later achievements.

• Kirk Kerkorian started with manual labor, moving heavy rocks for $2 a day.
• He transitioned to buying, refurbishing, and selling old cars for profit.
• Kirk's first successful business involved buying and refurbishing old planes.
• Relentless resourcefulness is a common trait among entrepreneurs discussed in the podcast.

"He could clear a $15 profit. So again, that's a good amount of money at the time, because instead of moving heavy rocks around and making two and day, he can make what is that? More than five, six times that just fixing up an old car."

This quote highlights Kirk's early realization that refurbishing and selling cars was more profitable than manual labor, marking his first step towards entrepreneurship.

• Kirk was captivated by flying and decided to learn how to fly despite having no money.
• He took a job as a bouncer and enrolled in night school to learn essential math for aviation.
• Kirk understood the life-or-death importance of a pilot's calculations.
• His goal was to obtain a pilot's license.

"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."

This quote describes Kirk's determination to fund his flight lessons, showing his commitment to his goal of becoming a pilot.

• Kirk was motivated to train as a pilot at Florence "Pancho" Barnes' flight school.
• He worked on farm chores in exchange for flight lessons.
• Pancho was impressed by Kirk's initiative and ambition.
• Kirk obtained a commercial pilot license and a job offer before WWII.

"So she actually makes this trade with him. She said he was impressed with the young man's innovation or initiative."

The quote emphasizes Kirk's willingness to work hard and his creative approach to overcoming financial barriers to achieve his goals.

• Kirk became an instructor for aviation cadets with a civilian defense contractor.
• His mantra highlighted the importance of caution in flying: "There are old pilots and there are bold pilots. There are no old, bold pilots."
• He was known for his punctuality and high standards, which extended into his personal life.

"His low tolerance for mistakes and recklessness made him a demanding instructor."

This quote reflects Kirk's strict approach as an instructor, emphasizing safety and precision, which are critical in aviation.

• Kirk took a high-paying but dangerous job flying warplanes across the North Atlantic.
• The job was risky due to treacherous flight paths and weather conditions.
• He felt exhilarated by the challenge and the role he played in the war effort.
• The job provided substantial savings, which he later used as seed money for his businesses.

"He was part of an elite unit that was steadily changing the balance of power in the war."

This quote captures Kirk's sense of purpose and pride in his contribution to the war effort through his high-risk flying job.

• After WWII, Kirk established a pilot training school, which quickly turned a profit.
• He sold his flight school and planes to fund his goal of owning an airline.
• Kirk's charter business introduced him to Las Vegas and the opportunities there.
• He realized that owning equity and being a businessman was key to wealth.

"Kirk wanted his own airline, his own fleet of planes, his own company."

The quote underscores Kirk's ambition to scale his business ventures and his desire for independence and control over his enterprises.

• Kirk capitalized on the surplus military plane market post-WWII.
• He refurbished and sold old military planes for substantial profits.
• His ventures in this market allowed him to build capital quickly and take on greater business risks.

"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."

This quote illustrates Kirk's strategic approach to the surplus plane market and his willingness to personally undertake risky flights to increase his profits.

• Kirk purchased a small charter airline with his sister Rose.
• He learned about the tax benefits of lease deals and depreciation from his bookkeeper.
• The airline was sold 21 years later for $104 million, showcasing his long-term growth strategy.
• Kirk internalized the importance of owning a business over just being a pilot.

"He sold 21 years later for $104,000,000."

This quote exemplifies the immense success of Kirk's investment in the charter airline, highlighting the financial acumen that contributed to his wealth.

• Kirk met with Howard Hughes to sell a plane, discussing aviation and business.
• Hughes was known for his achievements in aviation and wealth.
• The negotiations with Hughes were challenging due to Hughes' attention to detail and negotiating style.
• Kirk's interactions with Hughes were a learning experience in high-stakes business dealings.

"His first sales call was to Howard Hughes. Remember, Hughes aircraft was giant at the time, so they'd buy all kinds of planes."

This quote places Kirk in the context of dealing with another major figure in the aviation industry, demonstrating his reach and ambition in the business world.

• Kirk experienced depression and sought electric shock therapy, which he found beneficial.
• He continued to expand his business ventures, focusing on the importance of equity and ownership for wealth accumulation.

"For the first time, Kirk's annual income broke $100,000."

This quote marks a significant financial milestone in Kirk's career, reflecting his successful transition from pilot to businessman.

• Kirk Kerkorian's life journey from an immigrant eighth-grade dropout to a billionaire is filled with both successes and struggles, including periods of depression.
• The narrative serves as a reminder that no life is perfect and that everyone, regardless of wealth or status, experiences ups and downs.
• The aim is not to idolize individuals like Kerkorian but to learn from their experiences, recognize their humanity, and understand that everyone is fallible.

"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 going to have ups and you're going to have downs."

This quote emphasizes the inherent imperfection of life and the universality of personal struggles, regardless of external success.

• Kirk Kerkorian understood the casino business model well, having been a gambler who often lost more than he won.
• Despite his losses, he considered his time in Las Vegas as some of the best in his life, captivated by the city's excitement.
• His early investment in a casino was a failure but taught him the crucial lesson of not investing in businesses he didn't control.

"I learned then not to invest in a business that I didn't run."

The quote highlights the pivotal lesson Kerkorian learned from his failed casino investment, shaping his future approach to business by emphasizing the importance of control.

• Kirk Kerkorian's grand plan for TIA (Trans International Airlines) involved becoming a defense contractor and securing government contracts for troop and cargo transportation.
• He took calculated risks based on his knowledge of the business and the expansion of U.S. military bases, confident in the future demand.
• To finance his ambitious plans, he established a lifelong financial relationship with Walter Sharp of Bank of America and negotiated aircraft financing with Douglas Aircraft Company.

"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 was faring US soldiers and their families in North Africa, military business had become a steady and reliable source of revenue."

The quote outlines Kerkorian's strategic decision to pivot TIA towards government contracts, leveraging military needs as a stable revenue source.

• Kirk Kerkorian built lasting business relationships, which played a significant role in his ability to secure financing and grow his ventures.
• His reputation and credit history enabled him to convince executives like Jackson McGowan of Douglas Aircraft Company to finance his ambitious plans.
• Kerkorian's strategy included safeguarding against potential losses, similar to Richard Branson's approach to business, ensuring that his downside was protected while aiming for asymmetric advantages.

"Kirk had a fabulous reputation. So if he did business with somebody in the past, they were likely to continue that relationship in the future."

This quote signifies the value Kerkorian placed on maintaining a strong reputation, which facilitated future business opportunities and partnerships.

• Kerkorian hired Glenn, a sales executive from Lockheed, to be the president of TIA with a singular focus: to keep the newly acquired jet profitable.
• Under Glenn's leadership, TIA secured lucrative military contracts, significantly increasing the company's profits and net value.
• Kerkorian's decision to invest in TIA's growth through a single, high-priority goal demonstrated his business acumen and ability to capitalize on market opportunities.

"Glenn's mandate was to keep the meter running on the DC-8."

The quote succinctly captures the core responsibility assigned to Glenn, emphasizing the strategic focus on maximizing the new jet's profitability.

• Kerkorian considered outside investment to offset his liabilities but was wary of losing control and autonomy in his business decisions.
• The partnership with Studabaker initially seemed beneficial, but the loss of control and disagreements with executives led to dissatisfaction.
• Kerkorian's experience with Studabaker reaffirmed his preference for maintaining control over his ventures.

"Debt is what broke his father four decades earlier. Kirk pondered ways to minimize his personal exposure to financial ruin."

This quote reflects Kerkorian's awareness of the risks associated with debt and his desire to protect himself from similar pitfalls that affected his father.

• Kirk Kerkorian embraced high-stakes risks, aligning with the philosophy that larger bets lead to more significant rewards.
• His real estate investment in Las Vegas, which initially seemed risky, paid off when he became part owner of Caesar's Palace.
• Kerkorian's ability to see potential where others saw risk exemplified his entrepreneurial spirit and willingness to bet big on long-term gains.

"The smaller your bet, the more you lose when you win."

The quote encapsulates Kerkorian's risk-taking philosophy, suggesting that the thrill and potential rewards of large bets are worth the risk.

• Kerkorian bought back TIA from Studabaker at a fraction of the initial selling price, exemplifying his savvy in capitalizing on market fluctuations.
• He then took TIA public, making it the first supplemental airline to do so, with the help of Armenian investors.
• The public offering marked a significant milestone for TIA, despite a modest start, and showcased Kerkorian's strategic financial maneuvers.

"By September 1964, after less than two years under Studebaker's control, Trans International Airlines was back under the direct ownership of Kirk."

This quote highlights the successful reacquisition of TIA by Kerkorian, setting the stage for the company's public offering and further growth.

• Kirk leveraged his Armenian connections through George Mason to sell stock.
• Mason pitched the stock to Armenians, emphasizing the cultural connection and the investment opportunity.
• This grassroots selling approach was successful and led to significant wealth for some investors.
• Kirk's stock value increased substantially, allowing him to pay off a $2 million bank loan.

"But what finally started moving the stock were Kirk's Armenian connections... a couple of these people wind up becoming millionaires because of this deal."

The quote highlights the importance of community and cultural connections in business, as Kirk's Armenian ties played a crucial role in moving his stock and creating wealth for investors.

• Kirk invested billions into Las Vegas after his success with the stock.
• He bought land and planned to build the city's tallest high-rise hotel.
• The International Hotel would have the largest gaming floor and be the world's biggest hotel at the time.
• Kirk's investment caught the attention of Howard Hughes, sparking a rivalry.

"So it says, Kirk had paid $5 million cash for about 65 acres... This is the first time, first of three times, that he builds the largest hotel in Las Vegas."

The quote outlines Kirk's ambition and strategic investment in Las Vegas, marking the beginning of his legacy in building some of the largest hotels in the city.

• Howard Hughes also had significant investments in Las Vegas hotels.
• Hughes viewed Las Vegas as a territory for only one gambling king and sought to undermine Kirk's plans.
• Hughes' reclusive nature and competitive drive led to a one-sided rivalry against Kirk.

"Billionaire Howard Hughes made his own headlines a few weeks later when he brought the entire hotel for $13.2 million in cash and loans."

The quote demonstrates Hughes' aggressive approach to maintaining dominance in Las Vegas, directly challenging Kirk's growing influence in the hotel and gambling industry.

• Kirk's financial strategy involved high leverage and high interest rates.
• The International Hotel's success initially led to a significant increase in Kirk's wealth.
• Kirk planned another public stock offering to raise funds and pay off debts.

"This is an example of highly leveraged plus high interest rates. And this actually goes against him."

The quote underscores the risks associated with high leverage in business, foreshadowing potential financial challenges for Kirk due to market fluctuations and external pressures.

• Kirk had stakes in various industries, including automakers and hotels.
• He attempted to overtake MGM and had plans to buy Chrysler.
• Kirk's story exemplifies the interconnectedness of businesses and the value of reading books as "original hyperlinks."

"At one time, he owned a fairly large stake in all three automakers. He winds up overtaking MGM."

This quote illustrates Kirk's diverse portfolio and his aggressive approach to business acquisitions, highlighting his significant impact across different sectors.

• Kirk was disciplined about his health, exercising regularly and maintaining a balanced lifestyle.
• He avoided ostentatious displays of wealth and preferred simplicity.
• Kirk's disciplined approach extended to his work schedule and personal habits.

"Kirk had always been health conscious and disciplined about regular exercise."

The quote reveals Kirk's dedication to personal health and discipline, which likely contributed to his success by fostering a strong work ethic and focused mindset.

• Kirk believed in simplicity and clarity in business deals.
• He sold MGM to Ted Turner in a straightforward, no-nonsense transaction.
• Kirk's philosophy was to avoid complexity and let business deals be guided by mutual agreement rather than legal complications.

"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."

The quote exemplifies Kirk's straightforward approach to business, valuing clear terms and swift execution in his dealings.

• Negative publicity and stock market conditions forced Kirk to liquidate assets.
• Kirk had to sell shares at a significant loss due to external factors.
• Despite setbacks, Kirk maintained control and learned from his mistakes, vowing never to become that vulnerable again.

"I got a good kick in the ass, Kirk conceded to a close friend."

This quote conveys Kirk's acknowledgment of the setbacks he faced and his resilience in overcoming them, emphasizing the importance of learning from one's mistakes and moving forward.