Founders: #111 The Operator: David Geffen Builds, Buys, and Sells the New Hollywood

David Senra David Senra 2/16/20 - Episode Page

What I learned from reading The Operator: David Geffen Builds, Buys, and Sells the New Hollywood by Tom King. 

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He told me he had recently read Buffett: The Making of an American Capitalist, Buffett was Geffen's hero.

Geffen—with searing focus, unyielding drive, and outlandish nerve—had devised and implemented strategies to propel himself to the top of the heap of Hollywood powerbrokers.

I used to have phone conversations with David that would leave me sweaty.

David might not have realized it, but he was being educated by a master entrepreneur. Batya succeeded in teaching him the value of hard work and the possibilities of life under even the most difficult circumstances. She was a brilliant businesswoman who could account for every penny that went into and out of the enterprise. She kept her overhead low by driving hard bargains with her suppliers and by closely monitoring her expenses.

His mother determinedly drilled into him the same advice she often repeated to herself. "You may not be very tall, but you will stand head and shoulders above everyone," she declared. "You think of yourself as head and shoulders above everyone else, and you will be."

Arriving in Hollywood for the first time, David thought he had found paradise. It was even more intoxicating than he had imagined. His life's ambition was soon established after he read a new biography of MGM studio boss Louis B. Mayer called Hollywood Rajah. "I want this job," he thought to himself.

He simply did not have the attention span that college required. He was eager to get into the real world.

She told Geffen that some of the brightest lights in the entertainment business had gotten their start in the mailrooms of the major talent agencies. Although it was not a glamorous job, it was a way to get a foot in the door.
 

Having tossed aside all notions of right and wrong, David Geffen simply lived by different rules than did the rest of society around him. Unconstrained by traditional ideas of acceptable social behavior, he was free to use all of the resources at his fingertips to achieve his lofty goals.

Geffen simply worked harder than anyone else.

The music department, he said, was the place where a young agent could make a name for himself. Brandt's advice had a profound impact on Geffen. He at once rejiggered his career plans.

It was not an undying passion for music that made him decide to try to make his fortune in the business; he did it because he might get rich quickly.

Geffen recognized that publishing was one of the areas in the music business where the real money was being made. Long after an artist's star has faded, publishers benefit financially for years to come, pocketing royalties whenever a group records a song or sheet music is sold.

Having studied Clive Davis, he decided that he, too, had the savvy to make it in the record industry. It was not much of a stretch for him to envision David Geffen, the music mogul.

He remained unsettled and plagued by feelings of insecurity and dissatisfaction. He was driven by a devil that constantly told him he needed to be bigger, more, and something else. He simply was not the kind of man who was going to stand in one place for very long.

While he saw himself most of the time as the smart, fast-rising star he had become, there seemed to be fleeting, dreadful moments when his confidence shattered and he was gripped with fear.

The way Geffen saw it, there was a natural synergy in owning both a record company and a management company. They could use the management company to book and promote the acts it was recording on the label and vice versa. Controlling both sides of the business. But the real advantage, Geffen explained, was that they could use the record deal, which came complete with Atlantic financing, to cover the overhead at the management company.

From the day he opened his new business, Geffen had his eye fixed on the bottom line. He had the foresight to avoid the pitfalls that had proved fatal to so many others who had launched record labels before him. He was overhead averse and did not feel the urge to redecorate or to hire a large staff.

For all his money, David Geffen was turning out to be rather frugal. He well understood that the delicate balance between profit and loss can be upset if expenses are high.

Playing fair, Geffen had learned, was difficult and time-consuming; lying, on the other hand, was easy and effective.

Just thirty, he claimed that his net worth was about twelve million dollars.  But he was surprised to realize that the millions of dollars he had just banked and the trappings he had been able to acquire with it did not make him happy. It hit him when he was in London on a business trip, lying on a bed in a posh hotel, smoking a joint, and staring at the ceiling. All his life he had dreamed of being a multimillionaire, thinking that money would solve his problems. It had not, and he fell into a deep depression.

Geffen saw immediately that Katzenberg had the hustler-like qualities that he himself had displayed at that age.

Used to the relatively quick turnaround of record production, the slow-moving nature of the movie business made him agitated, nervous, and bored. Key to his recipe of success had been his ability to move quickly; but in the movie business, that same pacing proved to be a detriment, and it began to drive him crazy.

It was to be the most important negotiation of Geffen's life, and he successfully extracted an extraordinary deal that within a few years helped make him one of the wealthiest men in the country. In pulling off the deal, he showed himself to be a shrewd, remarkably focused strategist. He had an uncanny ability to understand people, recognize their weaknesses, and capitalize on them. The negotiation also showed once again that Geffen had that rare ability to envision success: He clearly understood his power and knew how to get what he wanted.

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There was one thing Calvin Klein did not tell Geffen: His privately held fashion empire was on the brink of bankruptcy.  Geffen surmised that the company should be transformed from a manufacturing firm to a design, marketing, and licensing company.

"You guys stink at manufacturing," he said. "You need to get out of that business."

Instead, Geffen continued, the company needed to focus on what it really knew: how to design and market the Calvin Klein brand name.

"Calvin, you should only be focusing on the aesthetics," Geffen said. "You should just be designing the clothes and overseeing the marketing and advertising."

Geffen reprimanded Klein and Schwartz for excesses they could not afford. Among other things, he told them to sell their company jet which cost them $2.5 million a year to maintain. He also told Klein to fire his chief financial officer and helped him hire Richard Martin, a top executive at Price Waterhouse, the accounting firm he himself used.

Here was the "fixer" in action: David Geffen was now involved in the kind of problem solving that energized him more than anything else.

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The idea of Geffen joining Katzenberg and Spielberg seemed a bit odd. For one thing, Geffen was Hollywood's greatest entrepreneur and nearly all of his successes were ones in which he alone had made the decisions.

"If I have to sit and convince somebody why I'm enthusiastic about something, I'm already depressed." The idea of himself as a partner was a strange one for David Geffen.

I've been working on myself, and my demons and my nonsense and my fucked-up-ness for a long, long time. Which is not to say that I'm still not a little fucked up. I think you get better and better in tiny increments, and you die unhealed.

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