Howard Hughes: The Autobiography

9

IN THE PERIOD when I was first making movies in Hollywood I made the leap from a millionaire to a multimillionaire. And then in the period from 1937 through 1943 I made the leap from a multimillionaire to a rich multimillionaire. There are plenty of rich multimillionaires now, in 1971, but there weren’t many then.

How do you define a rich multimillionaire? How many millions does it take?

It’s not a matter of numbers. A man with five million may still be just a simple multimillionaire if he focuses on keeping what he’s got and worries about where to invest it. A rich multimillionaire doesn’t concern himself with those things – they seem to take care of themselves. Moreover, in my time there weren’t many men or women who had more millions than they knew what to do with. That was my status.

I became a rich multimillionaire through a peculiar chain of circumstances.

There were more cars on the roads in the United States than ever before, and whether times were good or bad they needed to run on gasoline. In order to make gasoline you had to refine crude oil, and in order to pump crude oil out of the ground you had to use the Hughes tool bit. It was around that time that I made a remark so some reporter which was very widely quoted. It was a smartass thing to say, and I regretted that I said it. But it was still true.

I was asked if Toolco didn’t have an illegal lock on the drill bit industry, and I got a little huffy and said, ‘No one’s forced to use our bit. They can always go out and buy a pick and shovel.’

We had just begun to move back on to the profit side around 1938. But I went over the books, and things didn’t look right to me. We were making money in Houston but not as much as we should have been making. The company didn’t seem to be growing fast enough, and I smelled that something was wrong.

At the time I was pretty much involved in setting up Jack Frye in TWA so I called in Noah Dietrich once again. ‘Get down to Houston, Noah, ingratiate yourself with the good ole boys, and straighten things out for me.’

Noah took the train down and put his finger on the trouble, and it came right out of the brewery.

In 1935 I had bought a brewery called the Gulf Brewing Company. In later years it became sort of a nickel-and-dime affair, but during the Thirties and Forties it was the biggest brewery in Texas. Actually, whenever I’d had enough of an executive in any of my companies in Houston or somewhere else, I would offer him a promotion. I’d send him down there to be brewmaster. The executive found the brewmaster’s tasks nonexistent and he was eased out by Noah, and that was the end of it. So I was spared any face-to-face confrontation with these people.

If you want one of the various faults I have – and which I’ll admit to – that’s one. I couldn’t fire a man. I almost always had to have someone else do it for me. I don’t have the hardness, I suppose, deep down. Any sad story will make me change my mind when an individual’s concerned. Once, early on in Hollywood, I wanted to fire one of the first people who ever worked for me. That was the cameraman on that picture, Swell Hogan, which never got released. When I told him he was through, he said, ‘Gee whiz, Mr. Hughes, I’ve got a wife and three children to support… ‘and I couldn’t fire him, He messed up his part of the picture, as he’d been doing all along. After that, in other similar situations, I always told somebody else to fire a man if he had to be fired.

Down in Houston in 1939 Noah learned that the brewery operation had a by-product. That was cereal mash, which they sold as cattle feed. When Noah went over the books of Gulf Brewing it didn’t show any money coming in from the mash.

Noah quickly found out that Gulf Brewing’s trucks were being used to carry this mash out to a man who had a large cattle ranch. That man was Colonel Rudolph Kuldell. He’d been with the company since around 1920, he’d been a friend of my father’s, and now he was president and general manager of Toolco. He was more a figurehead, because Holliday and Montrose ran the show, but he was a figurehead with his finger in the pie.

Noah called me and explained what he’d discovered. I said, ‘Noah, when you find a few ants running across your lawn, you know there’s a colony of them buried deep. Dig deeper. This guy’s doing more.’

Sure enough, it turned out that not only was he stealing my money to feed the cattle, but his cattle were also supplying the milk for our cafeteria at five cents more than the normal price per quart.

And it went even deeper. They had a very poor accounting system in those days. Checks would come to Toolco for what are called non-recurring items, a rebate for insurance, and the checks were all being stopped by Colonel Kuldell and going into his bank account. They didn’t use Swiss banks in those days to hide money – nobody was that sophisticated. He just put it into the Bank of Texas under his wife’s maiden name. He was also an art collector. We found out he went to New York once or twice a year and used Toolco money to buy expensive French Impressionist paintings that were supposed to go in Toolco offices. Toolco offices had about the same amount of wall decoration as the average men’s room in a railway station. The paintings wound up in this guy’s parlor and attic.

It took a little while to get all this information together. Then I brought Noah back and he was fire-in-the-eye, ready to call out the Texas Rangers. He said, ‘What are we going to do about this?’

Thieves are not necessarily unpleasant people, they can be very personable men, and if we had thrown Kuldell out he would have gone right over to Reed Roller Bit and taken all his accounts with him and all his knowledge. I made a simple calculation. Toolco had just made $7 million profit that past year. This guy had bilked the company to the tune of about two hundred and fifty thousand dollars. If I wanted to save two hundred and fifty, I might be losing my seven million – I might be throwing the baby out with the bathwater.

‘Noah,’ I said, ‘here is your assignment. I want you to make sure that Kuldell is not in a position to steal more then $250,000 a year from me.’

That was my limit. I didn’t like what the man was doing and I wouldn’t encourage others to emulate him, but I was stuck with the situation and I had to make the best of it.

My plan didn’t work. By then all the other good people down at Houston had gotten wind of it and knew that the man was a thief, and they didn’t understand why I didn’t get rid of him. They threatened to quit unless I did.

That shows you, in a sense, that they had very little imagination. You’d think, once they realized that I didn’t mind a guy stealing from me, they would have done a little pilfering themselves.

I finally decided I had to handle this myself. I flew down to Houston in my plane and I took Colonel Kuldell to dinner.

Was he really a colonel or was that just one of those honorary Texas titles?

He was a United States Army colonel, retired, second in his class at West Point. He was assistant to the Chief of Engineers in Washington when my father hired him.

‘Rudy,’ I said, ‘we know what you’ve been doing. I’m sure you’re going to see the error of your ways and, for the sake of Toolco morale, you’re going to resign.’

He dawdled around for a while – I didn’t exactly give him a time limit. Finally Noah called him in and said, ‘Get the hell out, you’re fired.’ Kuldell popped off a little to people, said it was a palace revolution and Big Howard would turn over in his grave.

I told Noah he’d moved too fast. And just to show you that I was right, the year this man left, Toolco business profits dropped considerably more than two hundred and fifty thousand dollars.

There weren’t many good men available, so I put Noah in charge of Toolco for a while, and then I hired Fred Ayres, who had worked for the Cadillac company. Between Noah and Ayres, with me supervising, they modernized the company and the profits went up and up and up. They got up to $60 million a year by 1947.

Which meant $60 million a year in your pocket?

Which meant $60 million a year that I plowed back into the company and my other companies. If there’s any one reason that I can give for the fact that I’ve become a multibillionaire, that’s it. I never had more than $50,000 a year income myself. I submitted an account of my expenses each year to Toolco, and the Board of Directors automatically voted me a dividend equal to the expenses. That ranged from $50,000 to about double that. Anyway, that’s what I paid taxes on. Not having any stockholders to have to satisfy with dividends and reports and those damn fool meetings, I just plowed the rest of the money back in. Toolco was the parent company that owned Hughes Aircraft and the brewery, RKO, TWA; whatever I bought I bought through Toolco, one way or the other, and I didn’t have to pay income tax.

All you hear from investors these days is talk of growth companies, but some very smart guy said a while ago that a growth company is any company your broker wants you to buy stock in. That’s more truth than poetry. Toolco was probably the first truly great growth company in the United States.

There’s another reason too, for my becoming a billionaire, which I admit didn’t hold true all the time, but most of the time. I spent a lot of money freely until after the war. I always owned about one or two dozen cars, which I kept parked in various parking lots and side streets all over the United States. But I didn’t buy new cars, except during the period when I first went to Hollywood. I bought old cars. I didn’t see any sense in buying a new Cadillac when a second-hand Chevrolet would do just as well. If you drive a second-hand Chevrolet, nobody looks twice at you. I had a fleet of them, mechanically perfect, very well maintained. I could have had my own taxi company.

One Christmas I made Noah Dietrich a present of a Mercedes-Benz 300 SL gullwing, with those doors that open straight up. I drove it, and it was a joy, and I was tempted to buy one for myself. Then I thought, no, this is exactly what I’ve been trying to avoid. I didn’t want people watching that flashy car go down the street and yelling, ‘There goes Howard Hughes! Get him!’

The point I’m trying to make is that after my Hollywood years, and after my boats and various personal airplanes, like my Boeing, which was pretty lush, and which I sold to some drunken son of a bitch from Texas who abandoned it at the Houston airport, I stopped spending money on myself. I didn’t have any quirks and fancies, no Taj Mahal in Palm Beach or Palm Springs, and I didn’t maintain two or three mistresses in the fashionable capitals of the world. I had no hobbies except golf, and I had to give that up after my last air crash.

But didn’t you rent a number of houses in California at this time, where you kept women?

I rented several small bungalows. One or two were decent-sized houses. I didn’t have a home of my own. I had to rent. If women stayed there it was because they had no place else to stay and because they were connected with me businesswise in one manner or another. I put up various executives there too. And I had to have some place to stay when I got somewhere. Because by then I had begun to realize that most hotel rooms were filthy, were very poorly cleaned, and I required a special sort of accommodation. It was cheaper in the long run to have a bungalow somewhere than it was to walk in and take the honeymoon suite at the Bel Air Hotel.

What sort of rents did you pay?

Whatever was fair. I didn’t pay them. Toolco paid them. They were charged off as business expenses. I ran the company, so if I stayed in them it was a business expense. And if friends of mine stayed in then, they might have been doing business for TWA too. I can’t remember every single person who stayed in my houses. But that’s the secret – that’s another reason for my getting rich and staying rich. I was a frugal man. I still am.

Frugal? I’ve gotten an estimate that your bill at the Britannia Beach averages $50,000 a month. And you’re not even there most of the time.

Where the hell did you find that out? Wait, don’t tell me. I don’t want to know. I’m positive it wouldn’t come to more than twenty thousand a month, which you’ll admit, is very modest for a man of my means. Naturally if you add up what those guys eat, and various other things, it’s going to run a lot higher. But that’s a drop in the bucket. I know $50,000 sounds like a lot of money to you, but that’s the interest on my capital for an hour or two.

I want to repeat what I said, because I don’t think you’ve gotten the point correctly. And that is, despite what hotel bills I pay, and despite what secondhand cars I maintain around the world, I do not have any expensive fancies and quirks. I don’t piss away my money. I don’t personally own a luxurious jet – the company has several and I use them and others. But I still don’t have a large income, and therefore I’m not a drain on my companies’ resources. I pull my own weight.