Howard Hughes: The Autobiography

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THE NEXT ITEM on the agenda – as they like to say in the board of directors’ meetings that I never attend – is Hughes Aircraft.

In some ways this was my most successful business venture. Toolco was the backbone of my fortune, but that was my father’s doing, not mine. I made it into a multimillion dollar company, but he founded it. On the other hand, Hughes Aircraft was my baby.

I originally started it way back in 1934, but it was just a workshop. I needed some space to develop the planes I used for my assaults on the various records, and then later of course we worked on the Hercules there, and we also did these conversion jobs on the surplus planes which got me into that legal mess I told you about. And during the war we made feeder chutes for ammunition.

What really got us off the ground was the electronics revolution. I saw this coming, and I backed up my hunch with a big stack of chips. I hired the best scientific talent around, built up a team of topflight R & D men, brought in a couple of retired generals into the top management spots – Ira Eaker and Harold George. They weren’t particularly knowledgeable in research and development, but they had knowhow in administration, and they knew the right people, which was even more important.

Ninety-five percent of our business at Hughes Aircraft was done with the Air Force, and both my top men, Eaker and George, were ex-Air Force generals. I could never get along with Eaker personally, but he was a good administrator. What I couldn’t stand about him was that he was a warmonger. You know I’m anything but a hawk, and this guy Ira Eaker was a screaming eagle. He would have torn a poor hawk to shreds, would have made it look like a sick pigeon.

We had a few discussions about politics and the Korean War, and after that I said, ‘Look, let’s just talk business or we’ll have a terrible argument.’

Years later this guy wrote a preface to a book about the bombing of Dresden during the Second World War. More civilians were killed in Dresden than when we dropped the atomic bombs on Hiroshima and Nagasaki – it was a totally defenseless city with no war industry, just civilians – and Eaker said yes, it was terrible and all that, but it wasn’t so terrible, it was justifiable if you remembered that Germans were using the V-1s and they’d started the war in the first place. If he had written this piece when he was working for me at Hughes Aircraft, I would have fired him on the spot.

As for Harold George, the only thing I held against him was that he spread stories about me that I was a pennypincher, that I borrowed dimes from him for telephone calls and never paid him back. Here’s a guy who was making a hundred grand a year and he begrudged me a few dimes. He used to give me an accounting every month or two of the dimes I’d borrowed from him. He loved to twist it around and say I was a cheapskate. Who was the cheapskate, him or me? I borrowed the dimes and he complained that I hadn’t paid them back to him. So who was the cheapskate?

But they were generals, so they knew who to talk to when contract time came round. Our R & D team was headed by Dr. Ramo and Dean Woolridge, top-flight scientists, and they really produced. Hughes Aircraft made fire control systems for the F-86 and F-94 jets, and then around 1950 we came up with a sophisticated system which the Air Force accepted for the F-102 supersonic interceptor. We beat out General Electric for that one. We built a new plant in Tucson to make the Falcon air-to-air guided missile. And we got deeply into solid state physics. We make the finest germanium diodes in the United States. By 1952 we had over half a billion dollars in contracts. We had about 90% of the Air Force business in all those fields.

Ramo and Woolridge got up an expansion plan, felt they needed more laboratory space, more men to handle the flood of stuff that was coming in from the Air Force. We were in the Korean War at the time. I saw the need for this expansion, but I wanted a new plant to be built in the Las Vegas area, where I was starting to spend a lot more time, and where I could be in closer touch with it. I felt Las Vegas was a coming section of the United States, an area wide open for development, whereas Culver City was already pretty well sealed off.

Ramo and Woolridge balked. They said it would be destructive to expand the R & D section into Las Vegas, separated from the main facilities. And they were backed up by the administration, by Eaker and George. They argued with me like they were the Longshoreman’s Union, only they were management.

There were other problems, too, but they were largely Noah’s doing. Hughes Aircraft was more than he could cope with. It was making lots of money, far more than Toolco in its palmy days.

You mean that in 1952 Toolco wasn’t the backbone of your business empire?

This was part of the trouble. Toolco had fallen into second slot. Noah felt he had to take control in California – he felt he was in second place, which was true, and he hated it. And he precipitated the showdown. One year, for example, he wouldn’t pay any bonuses to the executives, and the company at the time was making a small fortune. He called it an economy drive.

I held off making any decisions. There’s a lot of talk about the ability to make snap decisions, but it’s the ability to not make decisions which can be even more important, on my level. I found that often if you just sit quiet, the problems disappear all by themselves. What’s vital today, if you keep postponing it, eventually becomes irrelevant.

At the time – with all that trouble brewing – I decided I’d better find out just how much I owned in Hughes Aircraft: how much it was worth. This was just in case I decided to bail out completely, in case I decided it was another albatross like RKO.

I don’t know if you’re aware of this, but there’s no one you can call in and ask, ‘How much is my company worth?’ You can, but they’ll lie to you, tell you what they think you want to hear. If you want to find out how much something is worth, you’ve got to find out how much someone is willing to pay for it.

For that reason, I had put Toolco on the block back in 1948. I went to Fred Brandi at Dillon Read, the New York brokerage house. Dillon Read was just starting to make inquiries when it leaked from someone and got into the papers. The people at Toolco were very upset – they wanted to know if their jobs were still safe. Apparently they liked working for me, and I was upset and embarrassed. I had to make all sorts of announcements that no one would be pushed aside if and when the new management took over.

We never could agree on a price. The Dillon Read group was offering around a hundred fifty million. It was supposed to be the largest sale of a company since the Dodge widows sold out to Chrysler. But, as I said, I had no intention of selling. I was just trying to find out what the company was worth – I think, in the end, they would have come up with about two hundred and twenty five million.

So again, in 1952, on the pretext that I was thinking of selling Hughes Aircraft, I opened up negotiations with Westinghouse, and General Electric, and Bob Gross at Lockheed.

Poor Bob, I drove him all over the desert around Las Vegas, night after night and day after day. I was used to the heat and he wasn’t. I almost always keep the windows of the car shut tight, and I stuff any cracks with Kleenex. I did that with Bob Gross in the Nevada desert. It didn’t bother me at all but he sweated like a pig, while we talked figures. We started somewhere around $35 million and I goosed him along night after night and got him to, oh, around fifty – and this was just for leasing Hughes Aircraft. I still would own the property.

Bob finally realized that I had no intention of selling, and he said, ‘Thanks for the midnight view of the cactus, Howard, but I’ve got work to do.’

But he couldn’t really be angry at me, because during these bargaining sessions I saved him from a terribly embarrassing incident. The first night, in Las Vegas, we’d stopped at a little drugstore for coffee. Bob had coffee and I had a glass of milk, and when we left, Bob stopped at the counter to pay the bill. I was looking at a magazine rack at the time, and I remember, just as he paid, as the woman took his money and turned away to the cash register, I saw something – well, I couldn’t believe my eyes. I saw Bob Gross – he was president of Lockheed Corporation, one of America’s biggest corporations – reach out and stick a candy bar in his pocket. He stole it.

When we got out outside I couldn’t contain myself. I said, ‘For God’s sake, Bob, what in the world are you doing stealing that candy bar?’

He turned red for a minute. Then he laughed and said, ‘Well, every once in a while, it’s a kick. It’s more fun than paying for it. You ought to try it some time, Howard.’

I was totally flabbergasted. He told me he did this, not every day by any means, but whenever the impulse moved him. Never anything of value, you understand, not diamond watches or sable coats – a candy bar, that’s all.

But this is just background. A few nights later, Bob and I gave up negotiating, and at about nine o’clock in the morning we were driving back to Los Angeles. We passed through one of these little crossroads towns and I spotted a 7-11. And I felt a yen for some Mallomars and a container of milk. You know, Mallomars are those puffy marshmallow chocolate cookie. Unfortunately it’s getting harder and harder to find Mallomars. The damn fools at Nabisco had a winner and they went to sleep on it. I’ve had men go out and scour the stores to find me Mallomars, and they had to go to half a dozen stores before they found them. It’s the Cadillac of cookies – at least for me.

I stopped the car. This was in the midst of a lot of publicity about me and TWA, and I didn’t want to go in, so I asked Bob if he’d do me a favor and go in and buy me a package of Mallomars. ‘If you can’t get Mallomars,’ I said, ‘I’ll take plain butter cookies or graham crackers. And a container of milk.’ Bob said he’d be glad to do it.

So he went in, and I waited, and I waited, and no Bob. I thought, ‘What the hell’s going on?’ Finally, ten minutes later, I got out of the car and went into the 7-11. Inside, one man had Bob by the elbow, and Bob was talking hard, talking for his life, it looked like, to another man.

He’d stuck those damn Mallomars inside his windbreaker and zipped it up. That’s not a candy bar – a package of Mallomars is bulky. And the damn fool had got caught.

Did he try to steal the milk too?

No, he’d paid for the milk. That must have been against his principles, to steal milk.

I stood there. What could I do? Go up there and say, ‘I’m Howard Hughes and you must let this man go. He’s the president of Lockheed Corporation.’ I don’t know whether Bob had identified himself as Robert Gross, president of Lockheed, and I didn’t want to embarrass him, and I didn’t want to be hailed into court as an accessory to a Mallomar theft in a supermarket. That would have made page one everywhere.

How far had he gotten with the Mallomars?

They grabbed him on the outside, near the door. They always wait, I understand, until you’re past the checkout, otherwise you can sue them for false arrest.

I soon realized that Bob didn’t want to identify himself as one of the leading corporate executives in the United States. He wanted to pay these people off get out of there as quickly as possible. That’s what he was trying to do when I walked into the supermarket. But he didn’t have enough cash with him. He had maybe ten or fifteen dollars, and that wasn’t enough to get these hick-town people off his neck.

Didn’t he have a checkbook?

Of course he did, in the car, in his briefcase, but how could he give them a check and sign it Robert Gross? That would have allowed them to blackmail him for the rest of his days. He needed more cash. You don’t buy yourself out of a situation like that with ten dollars.

They had posted a man at the door, some beefy young guy in a T-shirt, to see that Bob didn’t scoot out. Bob sidled up to me and told me what had happened and that he had to have something substantial to pay these people off. ‘Howard, I’ve got to have a hundred dollars.’

I don’t carry that kind of cash on my person, of course, but I did in the lining of my hat. I had my hat on the back seat of the car. They let me go – they had nothing against me except that I was the friend of the thief, and I went out to the car, tore open the lining of my hat, found a hundred-dollar bill and brought it back in.

I thought you said that you only carried thousands and singles in your hat.

I was lucky this time, or Bob was lucky. I had a few hundreds. If I’d only had thousands it would have cost Bob a thousand dollars, because I’m sure they wouldn’t have made change for him. They probably would have had him arrested for passing counterfeit money. I gave Bob the hundred-dollar bill and he gave it to the store manager, and they examined the bill a long time and finally said,’ Okay,’ and let him go.

We went outside together. He was red in the face and sweating. He said, ‘Here’s your damn Mallomars. Next time go in and buy them yourself.’

‘I didn’t tell you to steal them, you goddamn idiot.’ I made him a long speech: ‘You ought to know that crime doesn’t pay. You should be grateful I had the money to bail you out of this. I could just as easily have turned tail and run and let you go to jail. How would it look if I was associated with a shoplifter? It would ruin my reputation.’

And that’s true: I doubt very much if Equitable Life would have loaned me $40 million if I’d been involved in a shoplifting scandal, even for a package of Mallomars. But of course, mostly I was just kidding Bob, and he knew it. On the way to Los Angeles we laughed about it, although it was kind of a strained laugh on his part. I often wondered afterwards if he went on with his candy stealing, or if that was the high point of his criminal career.

Anyway, the following year, 1953, I became involved in another selling attempt, which was chiefly the result of a misunderstanding between me and Spyros Skouras. I’d been talking to him in a Greek gin rummy club that he frequented, and I said I was interested in expanding my medical institute, and I might sell out everything in order to do it. What I meant was that I might transfer all my assets to the medical institute once it got going, but he misunderstood and thought I wanted to sell everything I owned and become a philanthropist. Spyros didn’t speak English perfectly and I couldn’t understand half of what he said when he was talking fast, and maybe I didn’t hear some of it and just nodded – you know how that can happen. You just nod and say, ‘Yeah, yeah, sure.’ Your mind is somewhere else.

Next thing I knew, Spyros called me and said, ‘William Zeckendorf, the urban developer and the owner of the Chrysler Building in New York, and Laurance Rockefeller, the family’s venture capitalist, want to come out and visit you. They’re interested.’

‘Interested in what?’

‘Buying you out. You told me you wanted to sell, didn’t you?’

‘Oh, sure,’ I said. ‘Send them out.’

Now, I thought, I can get a free price on the whole thing – Toolco, the aircraft division, RKO, TWA. I even threw in the brewery. Spyros arranged a meeting. I gave them the full treatment. I didn’t want anyone to know that I was meeting with William Zeckendorf and Laurance Rockefeller, because that would have provoked all sorts of rumors, so I told Zeckendorf he was to meet my people at such-and-such a street corner and then transfer to another car. We talked there for a while. Then I thought they might like a plane ride. I flew them down to Las Vegas in my B-19 bomber, which I’d outfitted with a bed and big easy chairs, a bar, even a partners’ desk.

Sometimes I use this so-called eccentricity of mine to my advantage in business dealings. If you move people around enough, make a cloak-and-dagger operation out of it, that throws them off balance. I was also concerned that we were being spied on in Los Angeles, and therefore Vegas would be safer. So I told them to meet me at Santa Monica Airport at one o’clock in the morning on a runway, and wear dark clothes. White shirts are very conspicuous at night.

Was there a deal in the works by the time you arrived in Las Vegas?

There was an offer. They were serious, except that Zeckendorf wanted to make part of the payment with California real estate, and I already had plenty of that. They started out around a billion and change, and eventually I worked that up to around a billion and a half.

I said, ‘I’ll think about it.’ I wanted to see if they’d jack it up to $1.8 billion which is roughly what I figured it was worth – what I hoped it was worth. But one and a half wasn’t bad, either. It got bogged down somewhere up around there. They went back to New York, and finally I told the switchboard at 7000 Romaine that if Zeckendorf called, I couldn’t be found. I think it was around then that I went to Cuba to see Ernest Hemingway.

Zeckendorf yapped to the newspapers – he was insulting, said it was unpardonable of me, and I was a man without a conscience for having changed my mind that way. That was a baldfaced lie, because I’d never changed my mind – my mind was made up from the beginning that I had no intention whatever of selling. As I said, it all sprang from a misunderstanding on the part of Spyros Skouras, because he was a Greek and couldn’t speak English very well and I got bored listening to him and just nodded and said, ‘Yeah, sure.’ Zeckendorf must have known about the Dillon Read deal falling through in 1948. He wouldn’t meet my price, and I certainly didn’t feel sorry for him. It was me who paid the hotel bills in Las Vegas.

After Zeckendorf and Rockefeller had made their offer, I realized that I owned an exceedingly valuable property, and I certainly wasn’t going to sell it, despite the fact that this would have pleased my managers, who didn’t like the Hughes method of doing business. They wanted a more conventional establishment. They didn’t realize it was the unconventionality of my approach that made Hughes Aircraft possible. I had given these men free rein, they had put together a highly productive team, and now they were going to smash it all up.

Things really came to a head when Noah Dietrich found that the inventory accounts were overcredited with several million dollars worth of parts and we were unintentionally defrauding the government by overcharging them. Profits were supposed to be limited to 11% of our cost, and if our cost figures were way out of line, then we were making more money than we were entitled to – it was a matter of only five million bucks.

Eventually we paid up, and the government got their money. And eventually I managed to piece together the true story – because, as it turned out, that $5 million repayment to the Air Force was only the first installment. That was a repayment on one contract only.

The full amount of the repayments eventually totalled $43 million, and Noah Dietrich called in a team of auditors from Haskins-Sells. They got to the heart of the trouble. A couple of the top people on the managerial end got bonuses based on the profits of the company, so that if Hughes Aircraft could make an additional $43 million they were in line for bonuses of close to two hundred thousand each.

I knew nothing. I was in Cuba at the time. It all split apart when Noah reached over the generals’ heads and fired the comptroller, Then George quit; he was the administrative head. Tex Thornton quit. Woolridge left, and Simon Ramo, and a whole flock of their top men with them, and it looked as though the company was coming apart at the seams.

The Secretary of the Air Force, Harold Talbott, asked for an appointment with me. I had to grant it, and we met in my bungalow at the Beverly Hills Hotel. Talbott had a bad temper and he gave me the rough side of his tongue. Of course each time he said something I didn’t like, I pretended I didn’t hear him. He threatened to put me out of business. The Air Force would cancel all our contracts, every goddamn one of them.

I kept saying,’ What? What? I can’t hear you,’ because I figured that after a while he’d cool down.

But he didn’t. The best I could get from him was ninety days to straighten out the mess. Talbott insisted that at the end of that time I’d either have to sell to Lockheed or I’d have to accept a new management appointed by the Air Force. I finally accepted the new manager. They put in William Jordan, who had been president of Curtis-Wright. They had to make sure these fire-control and other devices kept coming off the assembly line – we were in the Korean War. It was tapering off, but they knew they would have to find another war to take its place, and they were already casting their eyes on Vietnam. Without a war every now and then, those goons are out of business.

They had me so scared they were going to take the business away from me that Tom Slack, one of my lawyers, came to me one day with an idea. He said, ‘Howard, you want to make a safe haven for the aircraft company where the government can’t get its hands on it.’ It was his idea that we create the Howard Hughes Medical Institute and turn Hughes Aircraft over to it. I thought at the outset to start this up in Texas, in Houston, where that big medical complex existed already, and for a while that was under discussion. But it leaked to the papers, and everybody was talking about how Howard Hughes was going to give $125 million to the Texas Medical Complex. They were drooling at the mouth in Houston. But by that time I was fed up with Texas, and I felt that the last place I would put my money would be with those people who threw me out of the state.

I may be exaggerating. They didn’t throw me out of the state. But they didn’t want me back. They wanted the jobs I could provide. But they didn’t want me personally. I was too funny a duck to paddle around in Texas among those beautiful Texas swans. I was the ugly duckling, even though I laid the golden eggs. And so my lawyers and I organized the Hughes Medical Institute in Florida and put the Hughes Aircraft company under its wing.

This had one drawback, which didn’t turn up until later. Noah explained that if I needed money at some time in the future, I couldn’t use the aircraft company assets for collateral or put them up for sale, because it was now a public trust. But I didn’t think a situation like that would come along, and besides, I had plenty of money stashed away by then in Switzerland and similar places, for a rainy day. But from that point on I stayed out of the aircraft company’s affairs. All my ideas get funneled into the company through Toolco and various people. We’ve got an order backlog of close to a billion dollars and this year, as I understand it, we’ll sell another billion dollars worth of equipment. It’s the finest company of its kind in the United States. We just developed something called the Lasermatic. That’s a laser beam, controlled by a computer – it cuts cloth. Sold them to Genesco, and that’s going to revolutionize the garment industry.

What about the Medical Institute? The Patman report accused it of being a tax dodge.

Don’t parrot back that garbage to me. The Institute’s done some fine things. They’ve sent research scientists to Harvard, Yale, Johns Hopkins, everywhere, and I’ve never gotten any personal benefit out of it in the way of treatment. I’ve never even been there. Never laid eyes on the place. They never even gave me an aspirin.

Then as far as you’re concerned it’s not a tax dodge.

It’s every man’s privilege to avoid paying taxes. That’s the European attitude and that’s the one I subscribe to. I don’t want to discuss it anymore.

Early on, when you were talking about Zeckendorf, you mentioned that you had real estate in California. Does it amount to anything?

It amounts to quite a lot – in value, at least. And it also at that time amounted to a headache. In the middle fifties, Los Angeles wanted to build the Playa del Rey Marina, and they needed land. I had twelve hundred acres adjoining the site – the last big chunk of land in the Los Angeles metropolitan area. I had bought it many years before. I own hundreds of thousands of acres of land, in all parts of the United States, that I bought at various times. I don’t know where half of it is.

I’d bought this land in California for about $1,500 an acre. That’s cheap. And by 1955 it had gone up in value considerably, but I thought it was going to go up still further and I didn’t want to sell it.

I told Noah, ‘Don’t sell any of it to those marina people. I’m not interested.’

‘But suppose they offer a good price? How much would you consider selling for?’

‘Not for less than fifty thousand an acre,’ I said.

I hadn’t kept in close contact with land values. I only named that price because I didn’t want to sell the land. It was a ridiculous price. But they pulled a fast one on me. The city filed condemnation proceedings against me in order to force me to sell them the land they needed for the marina. It’s the same as if you have a house in the middle of a proposed highway route; they file condemnation proceedings and that’s it. You take what they give you, and you get out. I was in the same position.

Meanwhile I’d gone out of sight, and my lawyers were holding up the proceedings by employing the usual delaying tactics. It would have taken a good long time before anything would have happened with the condemnation procedure, but in the meantime Noah continued some quiet negotiations.

Finally he came to me and said, ‘Howard, I had to sell them an acre and a half, just to keep them off your back a while.’

‘For Christ’s sake,’ I squawked, ‘I told you I didn’t want to sell any of that land for less than $50,000 an acre. How much did you get?’

‘I got $62,000 an acre,’ Noah said.

That took the wind right out of my sails. ‘All right, an acre and a half. But don’t sell them any more. Got to pay taxes on all that profit.’

However, once the thing got going, it was like a snowball rolling downhill, and I sold them about 120 more acres. I realized after a while I must have taken a screwing when they bought the first lot for sixty-two thousand. I operate under the principle that if a man accepts my offer I must have offered him too much, and if a man agrees to pay what I ask him for something, then I’ve set the price too low. So I wound up asking $77,000 an acre. ‘Take it or leave it,’ I said.

They took it. That’s not bad, is it?