There haven’t been many men like Howard Hughes, and I suppose that’s why he is the subject of a nearly 700-page biography. “Howard Hughes: His Life and Madness” by Donald Barlett and James Steele, first published just a few years after the famed industrialist’s death in 1976, is a sweeping, often plodding, and generally critical take on his life and achievements.
Born on Christmas Eve 1905 in Houston, Texas, Hughes grew up in an affluent, loving home under the doting and worried eye of his mother, Allene. The authors claim that Hughes’s overprotective mother instilled in him a crippling set of neuroses and an irrational fear of germs, which would manifest themselves in a variety of debilitating ways later in life. His father, Howard Sr., was his hero, and a successful entrepreneur. He patented and manufactured an innovative oil drill bit that would revolutionize the industry. His company, Hughes Tool Company, would capture 85% of the global drill bit market and churn out fabulous profits for half-a-century.
In the early 1920s, when Hughes was still in high school, both of his parents died suddenly: his mother in a botched routine surgery, his father of a massive coronary. In 1924, at the age of just 19, Howard Hughes became sole owner of the Hughes Tool Company. Over the next several decades, until he was forced to sell the company in 1972 in the face of a massive $150 million civil lawsuit with TWA, the tool company would churn out roughly $750 million in profits (roughly $6 billion in 2022 dollars). Hughes had absolutely nothing to do with this success. His father built the company and a series of professional managers ran it. Howard Hughes simply cashed the checks and spent the money. And for the most part that’s what this book is really all about – how Howard Hughes nearly frittered away the modern equivalent of $6 billion in cash on a range of often ill-conceived and always ill-managed business ventures.
Before we start with his failures, which are many, let’s consider his achievements, which are few. Surely a man the subject of a 700-page biography has plenty of achievements to crow about, right? Believe it or not, no, there are not. In fact, after a close reading of “Howard Hughes,” I would say that he only had four noteworthy achievements in his life, and three of them were aviation-related and came within three years of each other. First, shortly after acquiring his wealth and independence, he moved to Hollywood and started independently producing motion pictures. He spent three years and millions of dollars producing and directing a film called “Hell’s Angels” about First World War fighter pilots. It was arguably the first big budget action film ever made and it was a box office smash when it was finally released in 1930. Yet is still couldn’t cover its staggering production costs and ended up losing $1.5 million ($17 million today). Second, Hughes helped design and flew an experimental race plane called the H-1, which the authors call “the most advanced plane of its time.” In 1935, he set a new land speed record of 352 mph. Next, in 1936 and 1937, he set and then reset a new transcontinental speed record from Los Angeles to Newark of 7 hours 28 minutes, a record that would stand for over seven years. He was awarded the Harmon International Trophy in 1937 denoting him the most outstanding aviator in the world. Finally, in 1938, with a crew of four additional airmen, he set a new record for an around-the-world-flight of three days, 19 hours, and 17 minutes. The combination of Hollywood blockbusters and aviation heroics made Hughes a national celebrity. He would spend the next forty years virtually imploding.
The great irony of this book is that Howard Hughes somehow developed an international reputation for being “a recluse with the Midas touch” and retained that reputation right up till his death in 1976, when in fact nearly everything he ever touched turned to garbage. Here are some of the more noteworthy examples of Hughes’s incompetence that I was able to glean from this book. It is not exhaustive.
During WWII, Hughes worked tenaciously to land contracts to develop aircraft to support the war effort. He was awarded contracts for a reconnaissance aircraft (XF-11) and a cargo plane (Hercules, better known as “The Spruce Goose”). Hughes never delivered a single aircraft and lost $7.5 million ($120 million) on the Hercules alone. His mismanagement of the contracts led to a widely publicized Senate investigation and hearing.
In 1948, Hughes purchased a controlling share of RKO, the third largest movie production company in the world at the time behind MGM and Twentieth Century Fox. By 1952, RKO’s revenue had fallen 77%. Headcount at the studio had been reduced from over 2,000 to less than 500. Combined losses since Hughes took over four years before were a staggering $22 million ($234 million). He sold RKO in 1955 to General Tire Company (?) for $25 million ($264 million).
Hughes began buying shares of the airline TWA in 1939 and by 1944 owned 78% of outstanding shares. In the first three years after WWII, TWA lost $19 million ($225 million). Hughes bankrolled TWA for the next fifteen years as it rang up operating losses and five different presidents came and went. According to the authors, “TWA suffered grievously under Hughes.” He desperately wanted TWA to lead the way in the transition to jet liners. Hughes placed a $400 million (over $4 billion) order with Boeing and Convair for 63 jetliners, “the largest equipment order in aviation history.” Hughes believed he could both raise the capital needed for the acquisition and retain complete control of TWA. It would turn out to be, according to the authors, “a great miscalculation.” Hughes would lose control of TWA to the banks in 1960. In 1961, TWA sued its principal owner, touching off a legal battle the authors’ call “one of the most momentous and enduring in American business history.” Incredibly, Hughes’s humiliation turned out to be his greatest financial triumph. His ownership in TWA was locked up due to his legal battle. When he was finally able to sell his shares in 1966, the new management had completely turned the company around. TWA profits in the first five years after Hughes ($215 million) were more than double what it made in 15 years under Hughes. His stake in TWA in 1960 when he was in sole control was worth $85 million ($800 million). Six years later, he sold out for nearly $550 million ($4.8 billion)!
By 1960, Hughes Aircraft Company was the 11th largest defense contractor, working mainly on advanced electronics for fighter jets. But Hughes always wanted to be an aircraft manufacturer. In the early 1960s, just as the war in Vietnam was heating up, Hughes aggressively pursued the contract to develop a new light observation helicopter for the Army. Despite having no prior experience in helicopter production, Hughes underbid the leading vendors, Bell and Hiller, by almost 50% and won the contract. Of course, Hughes Aircraft Company couldn’t actually produce the helicopters for anywhere close to what they bid and ended up taking a $90 million ($733 million) loss on the project in 1968.
Finally, we come to Howard Hughes’s Las Vegas years, which really sets him apart as possibly the most incompetent businessman of all time. I always thought that a Las Vegas casino was a license to print money. Evidently, if they’re owned by Howard Hughes, that’s not true. Hughes moved to Las Vegas in 1966 in an attempt to escape California income taxes and established himself in the penthouse of the Desert Inn hotel and casino. When the owner asked him to vacate to make room for high roller guests who spent money at the gaming tables, Hughes just bought the place. He then went on a buying spree, spending $150 million ($1.2 billion) to acquire six major hotels and seven casinos on the Strip. At one point, Hughes controlled 35% of all the hotel rooms on the Strip and 25% in all of Las Vegas. These properties, however, were “outrageously mismanaged.” From 1968 to 1970, Hughes’s Nevada properties lost over $25 million ($182 million) – from Las Vegas hotels and casinos! According to the authors, every other casino in town made a profit.
Then, in the late 1960s, Hughes embarked another of his quixotic business ventures, this one involving gold and silver mines. Over the course of just two years, Hughes spent roughly $20 million ($163 million) on more than 2,000 mining claims across the state of Nevada. The associate Hughes put in charge of the operation, John Meier, had no background or experience in geology or mining and was secretly taking kick backs from the sellers of the largely worthless claims. Meier would eventually flee to Canada to avoid prosecution and Hughes was left with nothing but a pile of Nevada dirt and rocks.
Despite all of these spectacular failures, Howard Hughes somehow remained for a long time one of only two billionaires in America, along with oil king J. Paul Getty. However, his net worth at the time of his death had fallen to $600 – $900 million ($3.0-$4.5 billion), according to the authors’ “best strict estimate.” Had Hughes lived to, say, 85-years-old rather than 70, it is entirely possible he would have run out of money. Between 1966 and 1976, Hughes’s corporate empire received approximately $715 million ($3.5 billion) in cash, mostly through the sale of TWA and the oil tool division, but liquid assets in 1976 had declined to $94 million ($470 million). Hughes reluctantly sold the Hughes Tool Company in 1972 in anticipation of paying a $150 million ($1 billion) fine to settle the TWA lawsuit. Without the sure profits of the Tool Company flowing in every year, Hughes likely would not have financially survived. He died without a last will and testament. His estate largely went to William Rice Lummis, a first cousin he had never met.
That pretty much sums up the magical business career of Howard Hughes, who to some was “a corporate superman blessed with the Midas touch and Napoleonic daring,” according to the authors. So how did all of that happen exactly? The simple answer is: Hughes was insane. He suffered from a severe case of what we now call obsessive-compulsive disorder. The authors write that Hughes had no one close to him who could intervene and ensure that he got the psychiatric help he so desperately needed. He had no siblings, his 15-year marriage to his second wife, Jean Peters, was a bizarre charade, and he had no true close friends in life. “He had long lived in an emotional wasteland,” the authors write, “free of any attachment to any other human being.” In place of loved ones, a corps of small-minded, long-term toadies that unquestioningly followed his every request surrounded him. “They catered to his every demand, no matter how bizarre, no matter how irrational, no matter how degrading, no matter how foolish or injurious to his personal or corporate well-being, and they helped create the make-believe world in which he lived.” The authors compare it to a self-imposed asylum.
The men who made up the small circle of associates that actually interacted with Hughes were virtually all clean-cut Mormons with unimpressive backgrounds as truck drivers and salesmen. Most of them were recruited by one of Hughes’s chief lieutenants, Bill Gay, a Mormon Church elder who worked out of an office on Romaine Street in Hollywood that served as the operations center for the sprawling Hughes corporate empire. These otherwise unexceptional men were paid handsomely – some of them up to $100,000 a year (roughly $800,000) – to ferry notes back and forth, operate the film projector (Hughes would often watch half-a-dozen movies a day), and provide him with his daily supply of codeine and valium. Hughes spent most of his time in bed, naked, unwashed, and blitzed out of his mind (the authors claim that Hughes regularly took forty or even sixty times the daily recommended dose of valium and had built up a tolerance to codeine injections that would have killed other men). He would go weeks without a bowel movement and years without cutting his hair or trimming his beard and nails. At one point, he hadn’t left his bedroom in over six years and had physically interacted with less than ten people. By the time of his death in 1976, his 6’4” frame had shriveled to less than 100 pounds and his teeth were falling out. His autopsy later revealed half-a-dozen broken needles in his arms from codeine injections.
It really is a sad tale. In conclusion, the authors describe Hughes’s ultimate collapse this way: “Unable to cope with adversity, to distinguish the relevant from the irrelevant, to confront the problems of everyday life, he withdrew into the security of a hospital-like environment, where he became hopelessly dependent on its controlled setting and undemanding routines.” He became, in the end, “a hopeless psychotic.” I’m not sure there are any meaningful lessons in life from “Howard Hughes,” other than, “Never let your children inherit too much money, especially an asset that is virtually inexhaustible.”
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