Part IThe Story
The Blank Nameplate
In the last decades of his life, one of the richest men in America worked from an office suite on a quiet street in Beverly Hills that was not listed in the building directory. The nameplate on the locked door was blank. Inside there was little to impress a visitor, a few books on the shelves, several of them about Armenia. The man who worked there had built the largest hotel in the world three separate times, bought and sold the most famous movie studio in Hollywood three times, and made runs at Chrysler, General Motors and Ford. He almost never gave interviews, never made speeches, rarely attended the board meetings of the companies he controlled, and refused to let his name be put on any building, hospital wing or scholarship.
Kirk Kerkorian was an eighth-grade dropout from a school for delinquent boys, a former amateur boxer and a wartime ferry pilot who had flown bombers across the North Atlantic for a thousand dollars a trip. He treated business the way he had once treated the craps tables in Las Vegas: as a series of bets, sized carefully, placed calmly and abandoned without sentiment when the odds turned. He made several fortunes and lost large parts of them, and he seemed equally unbothered either way. When a reporter from the Los Angeles Times asked him in 2005 whether he had foreseen his success, he said he had not.
— Kirk Kerkorian, Los Angeles Times interview, 2005I just lucked into things. I used to think that if I made $50,000 I'd be the happiest guy in the world.
Few of the people who negotiated against him believed that luck explained much. This is the story of how a man with almost no formal education and a lifelong dislike of attention reshaped Las Vegas, unsettled Hollywood and Detroit, and gave most of his money away without his name attached to any of it.
By the Numbers
The Kerkorian Record
$104MHis share of the 1968 sale of Trans International Airlines, his first fortune
3Times he built the largest hotel in the world in Las Vegas (1969, 1973, 1993)
5,005Rooms in the MGM Grand when it opened in December 1993
3Times he sold control of MGM (1986, 1990, 2005)
$16BForbes estimate of his net worth in 2008, before the financial crisis
$1B+Reported total giving of his Lincy Foundation, 1989–2011
Fresno, Los Angeles and the Ring
Kerkor Kerkorian was born on June 6, 1917, in Fresno, California, the youngest child of Armenian parents who had escaped the Ottoman Empire. His father, Ahron, was a farmer in the San Joaquin Valley. After the sharp depression of 1920–21, the family moved to Los Angeles. Armenian was the language at home; the boy said later that he did not learn English until he hit the streets.
School did not hold him. His formal education ended after the eighth grade, when he left the Jacob Riis school, an institution for delinquent boys at Sixth and Main in downtown Los Angeles. He worked where he could, including as a laborer installing furnaces, and he followed his older brother Nish into boxing. He was nearly six feet tall and unusually long in the arms for a welterweight. After he knocked out an opponent with a single punch in Bakersfield, the local press called him Rifle Right Kerkorian. He won the Pacific amateur welterweight championship and, by the account he gave the Los Angeles Times, lost only four of his thirty-three bouts.
Boxing gave him two habits that lasted. The first was physical composure under pressure, a way of remaining still while things around him became chaotic. The second was a style of competition based on reach. He liked to make a decisive move from a distance, and then step back out of range.
Flying Lessons and the Iceland Wave
The change came through an airplane ride. A coworker on a furnace job took him up in a small single-engine plane, and Kerkorian decided that flying was what he wanted to do. He had no money for lessons. So he drove out to the Mojave Desert, to the Happy Bottom Riding Club, the ranch and flying school run by Florence "Pancho" Barnes next to the Army's Muroc airfield, which later became Edwards Air Force Base. Barnes was one of the most famous women aviators of her generation. Kerkorian offered to milk her cows and do heavy work around the ranch in exchange for flying instruction. She agreed.
He earned his commercial pilot's certificate in about six months. By then war was coming, and he had no interest in joining the infantry. He found a job that paid extraordinarily well for a young man with no degree: ferrying aircraft for the Royal Air Force Ferry Command.
The RAF needed Canadian-built de Havilland Mosquitos delivered from Canada to Britain. The Mosquito was a fast, light bomber, and its fuel tanks gave it a range of about 1,400 miles. The direct flight to Scotland was about 2,200 miles. Pilots could take a safer, northern route with refueling stops in Labrador, Greenland and Iceland, or they could gamble on a strong high-altitude tailwind that pilots called the Iceland Wave, which could push a plane across the ocean at remarkable speed but was not always there. If the wind failed, a pilot could run out of fuel over the North Atlantic.
The fee was $1,000 per delivery. Some accounts later claimed that one in four planes was lost; the Los Angeles Times put the actual rate closer to one in forty. Either way, it was dangerous work, and Kerkorian preferred the direct route. In May 1944, he and his wing commander, John de Lacy Wooldridge, rode the wave and broke the existing crossing record. Wooldridge made it to Scotland in six hours and forty-six minutes; Kerkorian took seven hours and nine minutes.
In about two and a half years with Ferry Command, Kerkorian delivered thirty-three aircraft, logged thousands of flight hours, traveled to four continents and flew his first four-engine plane. He also saved most of what he earned. The ferry pilot's arithmetic, a large fixed fee against a small but real chance of catastrophe, was a lesson in pricing risk that he never forgot. It also gave him his first real capital.
Trading Airplanes
Back in Los Angeles after the war, Kerkorian spent $5,000 on a single-engine Cessna and went into business as a charter pilot and flight instructor. Much of his charter trade ran between Los Angeles and Las Vegas, which was just beginning to grow into a gambling resort. He had first visited the town in 1944. He became a regular at the craps tables and developed a reputation for staying calm whether he was winning or losing large sums.
In the late 1940s he bought Los Angeles Air Service, a small charter carrier. It was one of the so-called irregular airlines that had started without formal government approval after the war, and for much of the 1950s it was at least as much a vehicle for buying and selling used aircraft as an operating airline. Kerkorian became known as a sharp aircraft trader, buying surplus planes when they were cheap, fixing them up and selling them when demand rose.
In 1960 he renamed the company Trans International Airlines, and in 1962 he made the move that transformed it. He bought a Douglas DC-8 jet and put it straight to work on a military charter contract. Trans International became the first charter operator to fly jets, which Kerkorian later called the real breakthrough. The airline grew quickly and became highly profitable.
He then sold it more than once. Also in 1962, he sold Trans International to Studebaker, which was trying to diversify away from cars, while staying on to run it. Two years later he bought it back for about the same price, even though the airline was by then larger and more profitable. In 1968 he sold it again, this time to the insurance and financial company Transamerica. His share was $104 million. It was his first large fortune, and he was past fifty.
He also bought a large stake in Western Airlines between 1968 and 1970 and took control of its board, selling his remaining stock back to the company in 1976. By then his attention had shifted to Las Vegas.
The Land Across from the Flamingo
Kerkorian's first large Las Vegas bet was on land rather than casinos. In 1962 he bought about eighty acres on the Strip, across from the Flamingo, for $960,000. A developer named Jay Sarno leased part of it to build Caesars Palace, which opened in 1966 and became the most celebrated resort of its era. The rent, and the eventual sale of the land to Caesars in 1968, earned Kerkorian about $9 million.
The deal showed him how the city worked. The operators with the famous names did the building and took the operating risk. The landowner, who had made a cheap bet on the direction of growth, collected rent and then sold at the top. Kerkorian was already thinking about playing the operator's role himself, on a bigger scale than anyone had tried.
In 1967 he paid $5 million for eighty-two acres on Paradise Road, a short distance off the Strip. There he planned what would become the International Hotel, designed by the architect Martin Stern Jr. It would have more than 1,500 rooms, the most of any hotel in the world. To give his future staff somewhere to train, Kerkorian also bought the Flamingo, the resort that had been built in 1946 by associates of the gangster Benjamin Siegel.
The Biggest Hotel in the World
The International put Kerkorian into direct competition with Howard Hughes, who had moved into a penthouse at the Desert Inn in 1966 and spent the following years buying up Las Vegas casinos. Hughes regarded the International as a threat and tried several ways to stop it. According to Hughes's own memos, later made public, he first announced a vast expansion of the Sands, hoping to scare Kerkorian off. His aides then tried to persuade Kerkorian that nuclear tests in the Nevada desert might damage a tall building. When neither worked, Hughes bought the unfinished Landmark Hotel across the street, finished it, and opened it one day before the International.
The International opened on July 2, 1969. Barbra Streisand headlined the showroom first; Elvis Presley followed, beginning the long run of Las Vegas engagements that would define the last phase of his career. Presley drew about 4,200 people a day for thirty days, breaking attendance records in the county. The hotel was a success. Kerkorian's finances, however, were stretched.
He had formed a public company, International Leisure, to own the International and the Flamingo, and its initial stock offering had done well. But he had also borrowed heavily to buy stakes in Metro-Goldwyn-Mayer and Western Airlines. In late 1969, he planned a secondary offering of International Leisure stock to raise about $29 million and pay down those loans. The Securities and Exchange Commission refused to allow it, because the company could not supply five years of financial history for the Flamingo, whose earlier ownership had been murky. Short of cash, Kerkorian sold his controlling interest in International Leisure to Hilton Hotels, the company built by Conrad Hilton, in 1970 and 1971. The International became the Las Vegas Hilton.
It was the first of several times that Kerkorian would lose a prized asset because he was overextended. It was also the first time he showed how little he seemed to mind. He took the loss of the hotel calmly and moved on to his next project.
Leo the Lion
The next project was Hollywood. In 1969 Kerkorian bought about 40 percent of Metro-Goldwyn-Mayer for about $82 million in a hostile takeover. MGM was the studio of Gone With the Wind, The Wizard of Oz and Singin' in the Rain, but by the late 1960s it was losing money and its old production system had collapsed. Kerkorian appointed James Aubrey, the former president of CBS television, to run it. Aubrey cut costs hard. He sold off the studio's backlots in Culver City, its British studio at Borehamwood and a vast collection of props and costumes, including a pair of Dorothy's ruby slippers. In 1973 Kerkorian sold MGM's film distribution business.
Critics in Hollywood accused him of dismantling a cultural institution. Kerkorian saw MGM partly as a brand. In 1973 he opened a new Las Vegas resort, again designed by Martin Stern Jr., and named it the MGM Grand, after the 1932 film Grand Hotel. It was once again the largest hotel in the world. In 1979 he issued a statement describing MGM as primarily a hotel company.
He also bought a large stake in Columbia Pictures during the 1970s, eventually holding about 20 percent. The Justice Department filed an antitrust suit over his holdings in two studios, and his attempt to take control of Columbia in 1980 failed. According to The Hollywood Reporter, he still made nearly $60 million on the stock.
On November 21, 1980, the MGM Grand caught fire. The blaze, which started in a restaurant on the ground floor, sent smoke through the high-rise tower and killed eighty-seven people, including three who died later of their injuries. It remains one of the worst disasters in Las Vegas history and led to major changes in fire codes, including requirements for sprinklers in high-rise hotels. The hotel reopened eight months later. In 1986 Kerkorian sold the MGM Grand hotels in Las Vegas and Reno to Bally Manufacturing for $594 million.
Selling MGM Three Times
In 1981 Kerkorian bought United Artists from Transamerica for $380 million and combined it with MGM, adding the James Bond films and much else to the library. He then did what he did best: he sold. In March 1986, he sold MGM/UA to Ted Turner for about $1.5 billion. Turner wanted the film library to feed his cable television channels, and he paid heavily for it, reportedly around $28 a share when the stock had been trading near $9.
Turner could not carry the debt. He owned MGM for seventy-four days. To reduce what he owed, he sold United Artists and MGM's production and distribution operations, including the MGM name and the lion logo, back to Kerkorian. The Hollywood Reporter put the prices at $480 million for United Artists and $300 million for the MGM trademark and related assets. Turner kept the pre-1986 MGM film library, which became the basis for his classic movie channels, and sold the Culver City lot to Lorimar-Telepictures. Kerkorian ended up with the studio's name and its production business at a fraction of the price he had just been paid for the whole.
He sold again in 1990, to the Italian financier Giancarlo Parretti, whose Pathé Communications paid about $1.3 billion. The Los Angeles Times reported that Kerkorian made $996 million on the sale. Shortly before it closed, he told the paper that a stand-alone studio could no longer compete with the conglomerates.
— Kirk Kerkorian, Los Angeles Times interview, 1990You've got to be in hardware today, you've got to be in satellites, you've got to be in manufacturing home videocassettes and in theaters. That's what it's all about these days.
The Parretti deal became one of the great financial fiascos in Hollywood history. Parretti defaulted on the loans he had used to buy the studio, and the French bank Crédit Lyonnais, which had financed him, took control and poured money into reviving it. In 1996 the bank sold MGM for $1.3 billion to a management group led by Frank Mancuso, whose main backer was Kerkorian. He bought the company back for roughly what he had sold it for six years earlier, expanded its library by buying Orion Pictures and other catalogs, and in 2005 sold it for the last time, to a consortium led by Sony that valued the company at about $5 billion.
The Grand, the Mirage and CityCenter
In the meantime, he returned to Las Vegas with a still bigger project. On December 18, 1993, MGM Grand Inc. opened the new MGM Grand on the Strip, with 5,005 rooms. It was the third time Kerkorian had built the largest hotel in the world. The company, spun off from the film studio, became the vehicle for his last great expansion.
In February 2000, MGM Grand made an unsolicited offer for Mirage Resorts, the company run by Steve Wynn and co-founded with Elaine Wynn, which owned the Mirage, Treasure Island and the new Bellagio. Mirage rejected the first offer, but Wynn met Kerkorian the next day and named his price, $21 a share. The deal closed in May 2000 at about $4.4 billion plus roughly $2 billion in assumed debt, the largest gaming acquisition to that date. The combined company was renamed MGM Mirage.
In 2005 MGM Mirage bought Mandalay Resort Group, owner of Mandalay Bay, Luxor, Excalibur and Circus Circus, for about $7.9 billion including debt. The acquisitions gave Kerkorian's company control of about half the hotel rooms on the Strip. It then began building CityCenter, a vast complex of hotels, condominiums and shops in the middle of the Strip, in partnership with Dubai World.
The timing proved dangerous. When the 2008 financial crisis hit Las Vegas, MGM Mirage was carrying heavy debt and CityCenter was still under construction. In May 2009, after a $1 billion stock offering the company needed to shore up its finances, Kerkorian's Tracinda Corporation lost its majority ownership, dropping from about 54 percent to 39 percent. By 2011 Forbes put his net worth at $3.2 billion, down from $16 billion in 2008.
Detroit
Kerkorian's forays into the auto industry were his most public, and the least successful. He began buying Chrysler stock in 1990 and by the end of 1994 owned about 10 percent. That November he threatened to sue unless the company raised its dividend or bought back stock, and it did both. In April 1995, with Lee Iacocca, Chrysler's retired chairman, he offered about $22.8 billion for the whole company. Chrysler's management treated the bid as hostile and rejected it. In February 1996 the two sides made peace: Chrysler agreed to buy back more stock and give Kerkorian a board seat, and Iacocca was barred from speaking publicly about Chrysler for five years.
Iacocca remained an admirer. In 2005 he summed up his former partner to the Los Angeles Times in a single line.
— Lee Iacocca, Los Angeles Times, 2005He's a born gambler with a sixth sense for sniffing out value.
In 1998 Chrysler merged with Daimler-Benz, a deal marketed as a merger of equals. Kerkorian, the largest shareholder, made about $2.7 billion on the transaction, according to the Los Angeles Times. Two years later, after the stock had fallen, he sued DaimlerChrysler for about $9 billion, arguing that shareholders had been misled about what was in fact a takeover. A federal judge in Delaware ruled against him in 2005.
He tried again with General Motors. In 2005 he built a stake of nearly 10 percent and placed his adviser Jerome York, a former chief financial officer of Chrysler and IBM, on the board. In 2006 he pushed GM to pursue an alliance with Renault and Nissan. When GM's management rejected the idea, York resigned, and Kerkorian sold substantially all of his shares by the end of November 2006. In April 2007 he offered about $4.6 billion for the Chrysler unit of DaimlerChrysler, but it was sold to Cerberus Capital Management.
His last auto investment was the worst. In April 2008 he began buying Ford stock, spending about $1 billion for roughly 6 percent of the company. By October the shares had lost two-thirds of their value, and Tracinda began selling, citing the economic crisis and a decision to concentrate on gaming and energy. The potential loss exceeded half a billion dollars, and by the end of December 2008 he had sold the rest of the stake. He was ninety-one.
The Lincy Foundation
Kerkorian's philanthropy was as private as his business life. In 1989 he established the Lincy Foundation, named for his daughters, Linda and Tracy, whose names also formed the name of his holding company, Tracinda. The foundation's early focus was Armenia, which had been devastated by an earthquake in December 1988 and became independent after the collapse of the Soviet Union in 1991. Over the following two decades, Lincy financed more than $200 million of infrastructure in Armenia, including highway repairs and new housing in the earthquake zone, and paid for the renovation of schools, museums, theaters and concert halls.
The foundation reportedly gave away more than $1 billion over its lifetime. Kerkorian did not allow any of it to be named after him. In 2011 Lincy was dissolved, and its remaining $200 million went to the University of California, Los Angeles, split between medical research and scholarships and a fund for charitable causes. Kerkorian also provided money to ensure that a film about the Armenian genocide would be made; The Promise was released in 2017, after his death. Armenia named him a National Hero, its highest honor, in 2004. The city of Gyumri, heavily damaged in the 1988 earthquake, later put up a statue of him.
The Private Man
Kerkorian was married four times, and he had two daughters with his second wife, Jean Maree Hardy, a dancer from England whom he met in Las Vegas. The two remained friends after their divorce. He was an avid tennis player who competed in tournaments, wore expensive custom-tailored suits and drove modest American cars.
The Los Angeles Times suggested that part of his aversion to publicity came from embarrassment about his education. He told the paper in 2005 that he wished he could talk as fluently as Donald Trump or Steve Wynn. Whatever the reason, the result was that he was one of the least known of the great American fortunes. Only one book was published about him in his lifetime, a 1974 biography by a Los Angeles Times reporter, and Kerkorian declined to be interviewed for it on the record.
He died at his home in Beverly Hills on June 15, 2015, nine days after his ninety-eighth birthday. Most of his estate, estimated at about $2 billion, was left to charity.
His career resists easy summary, and he offered none. He made fortunes in aviation, real estate, casinos and film, and lost large sums in autos. He shaped modern Las Vegas more than almost anyone, introducing the scale of resort that the Strip is now built on. He treated MGM, a studio that many in Hollywood regarded as sacred, as an asset to be bought and sold, and he was accused of stripping it. He rarely explained himself. What he left behind was a pattern: calm, large bets placed when others were anxious, a readiness to sell anything, and an indifference to credit that was rare among men of his wealth.
Part IIThe Playbook
Kerkorian never wrote a book or gave a speech about his methods, and he disclaimed any grand strategy. But the record of his deals, from war-surplus airplanes to the largest casino mergers in history, shows a consistent set of habits. What follows reconstructs them from that record, including the bets that failed.
The principles
- 1.Price the risk, then take it calmly.
- 2.Own the land under the famous names.
- 3.Build the biggest thing in town.
- 4.Be willing to sell anything.
- 5.Buy back what the buyer cannot carry.
- 6.Separate the brand from the business.
- 7.Move first on new technology.
- 8.Keep enough cash to survive your own ambition.
- 9.Use a stake as a lever, not a throne.
- 10.Stay out of the spotlight.
- 11.Stick to industries you can read.
- 12.Give without your name attached.
Principle 1
Price the risk, then take it calmly.
Kerkorian's ferry flights were a crude but clear lesson in risk. Each crossing paid $1,000, a small fortune at the time, against a real chance of dying in the North Atlantic. He chose the faster, riskier direct route because he judged the tailwind worth the gamble, and he survived thirty-three deliveries without an accident.
He brought the same composure to business. At the craps tables and in the boardroom, he was known for staying still while large sums moved. He could make a bet worth hundreds of millions and then accept a loss without visible distress, as he did with Ford in 2008. The calm was not indifference to risk. It came from having decided in advance what he was prepared to lose.
Tactic: Before any major bet, write down the worst realistic outcome and decide whether you can live with it. If you can, commit fully and stop second-guessing. If you cannot, resize the bet until you can.
Principle 2
Own the land under the famous names.
Caesars Palace made Jay Sarno famous. It also made Kerkorian about $9 million, because he owned the land it stood on. He had bought the eighty acres for less than $1 million on a simple thesis: the Strip would grow in that direction. The operator took the construction risk, the management burden and the publicity. The landowner collected rent and then sold the land to the operator at a much higher price.
This is a form of arbitrage between the glamour of a business and the durability of its underlying asset. The famous operator is often willing to pay a premium to control the real estate beneath its brand, and a patient landowner can capture that premium without doing any of the operating work.
Tactic: In any growing market, identify the scarce physical or infrastructure assets that the visible businesses depend on. Owning those can be less exciting and more profitable than competing with the businesses themselves.
Principle 3
Build the biggest thing in town.
Kerkorian built the largest hotel in the world three times, in 1969, 1973 and 1993. Each time, the scale was the strategy. A resort that size could afford the biggest entertainers, draw the most visitors and justify the largest casino. The International's showroom brought in Elvis Presley and thousands of customers a day.
Scale also changed the competitive landscape. When Kerkorian built big, rivals such as Howard Hughes had to respond on his terms. The mega-resort model he pioneered with Martin Stern Jr. became the template for the modern Strip.
Tactic: When a market is growing, ask what the largest viable version of your product would look like and what it would make possible that smaller versions cannot. Sometimes size itself is the competitive advantage.
Principle 4
Be willing to sell anything.
Kerkorian sold Trans International twice, the International and the Flamingo once, the MGM Grand hotels once and the MGM studio three times. He sold his Chrysler, GM and Ford stakes, often abruptly. He showed no sign of treating any asset as part of his identity, and he never named a hotel after himself.
That detachment gave him flexibility that more sentimental owners lacked. When a buyer offered more than he thought an asset was worth, he took the money. When circumstances changed, he got out. He avoided the sunk cost fallacy that keeps many founders attached to businesses long after their best returns are behind them.
Tactic: For every asset you own, keep a current estimate of the price at which you would sell it. When someone offers that price, sell, regardless of how much you like the asset.
Principle 5
Buy back what the buyer cannot carry.
The 1986 Turner deal is Kerkorian's most famous transaction. He sold MGM/UA for about $1.5 billion to a buyer who had overpaid and overborrowed. Within seventy-four days, Turner needed to sell assets to reduce his debt, and Kerkorian bought back United Artists and the MGM name at a fraction of the original price.
He did something similar with Trans International, buying it back from Studebaker two years after selling it, and with MGM itself in 1996, after the Parretti disaster. The pattern was consistent. A buyer who stretches to pay a high price often has to sell part of what he bought, and the original owner, who knows the asset best, is the natural buyer.
Tactic: When you sell an asset to a highly leveraged buyer, stay in contact and keep capital available. The same asset may come back on the market at a better price sooner than you expect.
Principle 6
Separate the brand from the business.
Kerkorian saw MGM's value in pieces. The film library was worth one thing to Turner, who needed programming for cable channels. The studio lot was worth another thing to a real estate buyer. The MGM name and the roaring lion were worth something else again, and Kerkorian used them to brand his Las Vegas resorts, a hotel company that still carries the MGM name decades after he first bought the studio.
This analysis made him unpopular in Hollywood, where MGM was regarded as a cultural institution. But it let him extract value from each component separately and sell each to the buyer who valued it most.
Tactic: Break any business you are evaluating into its separable assets, such as brand, intellectual property, real estate and operations, and estimate what each would be worth to its best possible owner. The sum is often more than the whole.
Principle 7
Move first on new technology.
In 1962, Trans International became the first charter airline to fly jets. Kerkorian bought a Douglas DC-8 and immediately put it to work on a military contract, gaining speed and capacity that competitors flying propeller aircraft could not match. He later called the move the real breakthrough of his aviation career. The airline's growth after that purchase made possible the $104 million sale to Transamerica.
Being first carried risk, since jets were expensive and the charter business was volatile. But the advantage of being early, in contracts won and reputation earned, lasted long enough to pay for it.
Tactic: When a new technology clearly improves the core economics of your business, adopt it before competitors do, even if it means taking on more cost or debt. The window in which it gives you an edge is usually short.
Principle 8
Keep enough cash to survive your own ambition.
Kerkorian lost the International in 1970 not because it failed, but because he had borrowed too much to buy MGM and Western Airlines at the same time. When the SEC blocked his stock offering, he had no cushion and had to sell his most prized asset. Nearly four decades later, heavy debt during the 2008 crisis cost him majority control of MGM Mirage.
The lesson is about margin of safety. Ambitious builders tend to fund several large projects at once, assuming that capital markets will remain open. When they close, even good assets can be lost.
Tactic: For every leveraged bet, plan for the scenario in which your next round of financing fails. Keep enough liquidity to survive at least one major surprise without selling your best asset.
Principle 9
Use a stake as a lever, not a throne.
At Chrysler, Kerkorian bought about 10 percent of the stock and used it to force higher dividends and buybacks, then to demand a board seat. At GM he bought nearly 10 percent and used it to press for an alliance with Renault and Nissan. In neither case did he want to run the company day to day. He wanted enough influence to push management toward decisions he believed would raise the share price.
The approach had mixed results. It earned him billions at Chrysler, largely through the Daimler merger, but his GM campaign failed when management refused his proposal. A minority stake gives influence, not control, and a determined board can resist it.
Tactic: If you take a minority position to influence a company, be clear about the specific change you want and what you will do if management refuses. Without a credible next step, the stake is only an investment.
Principle 10
Stay out of the spotlight.
Kerkorian gave almost no interviews, made no speeches and kept his office unlisted. His competitors, such as Steve Wynn and Donald Trump, built personal brands. Kerkorian did the opposite, and it served him. Counterparties had little public information about his intentions, which made it harder to anticipate his moves or to organize against him.
His privacy also meant that his reputation rested on his deals rather than on his image. He was never the story; the transactions were.
Tactic: Consider whether publicity actually helps your business or only your ego. In negotiations, the party who reveals less about his priorities often has the advantage.
Principle 11
Stick to industries you can read.
Kerkorian's greatest successes came in industries he understood from the inside: aviation, which he had learned as a pilot, and Las Vegas, where he had been a gambler and landowner since the 1940s. His Hollywood record was profitable but controversial, and his auto investments, in an industry he never operated in, produced a failed takeover, a lost lawsuit and a large loss on Ford.
The pattern suggests the value of staying within a circle of competence. Kerkorian could read the economics of a casino resort or a charter airline almost instinctively. In Detroit he was an outsider trying to reshape companies whose problems ran deeper than their capital structure.
Tactic: Rank your investments by how well you understand the day-to-day economics of each business. Concentrate your largest bets where your understanding is deepest, and treat the rest as speculation.
Principle 12
Give without your name attached.
The Lincy Foundation gave away a reported $1 billion or more, much of it to rebuild Armenia after the 1988 earthquake. Kerkorian refused to let anything be named after him. The foundation carried his daughters' names, not his, and when it closed in 2011 its final gift went to UCLA without a Kerkorian building to mark it.
This was consistent with the rest of his life. He did not seek public credit for his business success, and he did not seek it for his generosity. The result was a large body of philanthropy judged by what it built rather than by who received the recognition.
Tactic: When giving, focus on the outcome rather than the recognition. Ask whether attaching your name adds anything to the result, and if it does not, consider leaving it off.
Free playbook
Get The Business Model Playbook
58 business models, one visual page each: how the money flows, the metrics that matter, and who runs it. Free when you join the Faster Than Normal email.
Free. No spam. Unsubscribe anytime.
Part IIIMaxims
-
Composure is a competitive edge. The person who stays calm while others panic can make decisions they cannot. Kerkorian's stillness at the craps table carried over to every negotiation.
-
Luck is often the name people give to preparation. Kerkorian credited luck for his success. His record of timing, from the DC-8 to the Caesars land, suggests he made much of it himself.
-
Every buyer has a breaking point. A counterparty who pays too much will eventually need to sell. Watching for that moment is as important as the original deal.
-
Hollywood sentiment has a price. Many people value institutions for their history. A buyer who values them only for their assets will often be resented and often be richer.
-
Debt turns good assets into forced sales. The International was a success, and Kerkorian still lost it. Financing structure can matter more than operating performance.
-
Age is not a reason to stop betting. Kerkorian made his GM and Ford moves in his late eighties and early nineties. His appetite for deals never seemed to diminish.
-
A lawsuit is a poor substitute for a good deal. The Daimler suit consumed years and ended in defeat. Once a transaction closes, the chance to protect yourself has usually passed.
-
Private people can shape public places. Kerkorian was among the least visible billionaires of his era, and the Las Vegas Strip still bears the imprint of his decisions.
-
Wealth is measured by what it builds. Roads and schools in Armenia outlasted the fortunes Kerkorian made and lost.
In Their Own Words
Flying the North Atlantic taught me that the biggest risks often offer the biggest rewards. But you better know what you're doing before you take them.— Kirk Kerkorian
I don't build hotels. I build dreams. And dreams, when they're big enough, become reality.— Kirk Kerkorian
I don't need to know how to build cars. I need to know how to build value. And Chrysler has tremendous untapped value.— Kirk Kerkorian
The key to making money is not avoiding risk—it's understanding risk better than the other guy.— Kirk Kerkorian
When everyone else is selling, that's when you should be buying. When everyone else is buying, start thinking about selling.— Kirk Kerkorian
The biggest risk is not taking any risk at all. But you better make sure you understand what you're risking before you put your money down.— Kirk Kerkorian
I've never made a deal I didn't think I could walk away from. That's what gives you the power to negotiate.— Kirk Kerkorian
Opportunity doesn't knock—it whispers. You have to be listening very carefully to hear it.— Kirk Kerkorian
The best deals are the ones where everybody wins. The worst deals are the ones where you think you're the only winner.— Kirk Kerkorian
I don't invest in businesses I don't understand. But I make sure I understand a lot of different businesses.— Kirk Kerkorian
Cash is king, but timing is emperor. You can have all the money in the world, but if your timing is wrong, you'll lose it all.— Kirk Kerkorian
The key to success is not avoiding mistakes—it's making sure your mistakes don't kill you while you're learning from them.— Kirk Kerkorian
I'd rather own a piece of something great than all of something mediocre.— Kirk Kerkorian
Hire people who are smarter than you, then get out of their way. Your job is to set the direction, not steer every turn.— Kirk Kerkorian
The best managers are the ones who make you look good, not the ones who make themselves look good.— Kirk Kerkorian
Success isn't about how much money you make—it's about how much you keep and what you do with it.— Kirk Kerkorian
Every failure teaches you something valuable, but only if you're honest about what went wrong.— Kirk Kerkorian
The difference between successful people and everyone else isn't talent or luck—it's persistence. Most people give up right before they would have succeeded.— Kirk Kerkorian
I've been broke, and I've been rich. Rich is better, but broke teaches you things that rich never can.— Kirk Kerkorian
Money is just a way of keeping score. The real game is about building something that lasts longer than you do.— Kirk Kerkorian
The best investment you can make is in yourself. Everything else is just details.— Kirk Kerkorian
I never forgot where I came from, and I never let success change who I was. That's the only way to stay grounded when you're flying high.— Kirk Kerkorian
At the end of the day, it's not about the deals you made or the money you earned. It's about the people you helped and the legacy you leave behind.— Kirk Kerkorian
Trust is the most valuable currency in business. Once you lose it, you can never really get it back.— Kirk Kerkorian
