I wanted them to feel their own drive, ambition, and hope, and get up to the same starting line. So it was never hard to work for these kids or to think of the right thing to say. “We love you,” I would tell them. “We care for you. You are great. You can make it. We believe in you, but the most important thing is that you believe in yourself. All these opportunities are out there waiting for you as long as you make the right decisions and have a dream. You can be anything you want to be. A teacher, a police officer, a doctor, you can do that. Or a basketball star or an actor. Or even the president. Anything is possible, but you have to do your end of the work. And we as grownups have to do ours.”
CHAPTER 21
Heart Trouble
MAKING MONEY WAS NEVER my only goal. But I always kept an eye on my earning power as a gauge of success, and money opened the door to interesting investments. True Lies and Junior were both hits in 1994, and that put my movie career back on track. I had plenty of work, and the money poured in: during the rest of the 1990s, almost $100 million from movie paychecks alone. Each year, I was collecting additional millions from videos, cable distribution, and broadcasts of my old films. Even my first film, Hercules in New York, was making money as a cult movie, although I didn’t get a cut. Tens of millions more came in from real estate, Planet Hollywood, books, and other business ventures.
Like many Hollywood stars, I also made money doing commercials in Asia and Europe. Making commercials in the United States would have undermined the Arnold image and the Arnold brand, but commercials by American celebrities had cachet abroad, especially in the Far East. The makers of products such as instant noodles, canned coffee, beer, and Vffuy, a Japanese vitamin drink, were willing to pay me as much as $5 million per ad. And the commercial was usually shot in one day. The deal always included a “secrecy clause” holding the advertiser responsible for not letting the commercial reach the West. That possibility no longer exists—shoot a commercial today, and it’s all over YouTube—but in the mid-1990s the internet was just an odd new idea.
As my business interests expanded, I knew that we’d eventually get into territory where I no longer had time to tend them all and where Ronda would be overwhelmed. She’d been taking business classes, true, but at heart she was an artist. That’s exactly what happened in 1996. She came to me and said, “This is so much money now, it’s beyond me. I don’t feel comfortable anymore.” I loved Ronda and was determined never to make her feel like she was being replaced. I promised that she could keep the work she was comfortable with and that, meanwhile, I’d get help with the bigger projects, where more and more money was at stake.
I always felt that the most important thing was not how much you make, but how much you invest, how much you keep. I never wanted to join the long list of famous entertainers and athletes who wiped out financially. It’s a staggering list, including Willie Nelson, Billy Joel, Zsa Zsa Gabor, Bjorn Borg, Dorothy Hamill, Michael Vick, and Mike Tyson. All those people had business managers; I remember Burt Reynolds and his manager showing up in Palm Springs each driving a Rolls-Royce. Then the money was gone. No matter what you do in life, you have to have a business mind and educate yourself about money. You can’t just delegate it to a manager and tell him, “Half has to stay locked in investments so that we can pay the taxes, and I’ll keep the other half.” My goal was to get rich and stay rich. I never wanted to have the phone call where the manager says, “Something went wrong with the investment. We can’t pay our taxes.” I wanted to know the details.
My interests were so diverse that I could have ended up with a whole grab-bag of specialist advisors. Instead, I worked closely with an extremely smart investment banker named Paul Wachter, whom I’d known for years. Paul was a longtime friend of my brother-in-law Bobby Shriver’s—they became pals after law school in the 1970s while clerking for judges in Los Angeles—and we’d gotten quite close. You wouldn’t think I had much in common with a Jewish lawyer and banker from Manhattan’s Upper East Side who’d never been near a weight room or a movie set in his life. It seemed strange to other people how well Paul and I got along. But he had a strong Austrian heritage: his father was a Holocaust survivor from Vienna, and his mother was from a German-speaking part of Romania. German had been Paul’s primary language at home growing up. And his father, unlike many post–World War II immigrants, had maintained strong connections with the Old World. In fact, his business was importing and exporting ham and other meat products between the United States and places like Poland and Bavaria. Paul had spent his summers in Europe as a kid and later worked as a ski instructor in the Austrian Alps.
Compared to most Americans, he thought a lot like me. We both had alpine scenery in our blood: the snowy landscapes, the pine forests, the big fireplaces and chalets. For example, when I told Paul that I dreamed of building a large chalet overlooking LA for my family, he understood. We were both extremely competitive, and I would challenge him at tennis and skiing. From his father, whom I really liked also, Paul understood the immigrant mentality of coming to America and starting a business and making good.
So here was someone I trusted who was funny and athletic—a guy I could hang and schmooze with; ski, play tennis, and go golfing with; travel with; and shop with. Those things are important to me. I never like business relationships that are purely work. Maria and I are very different in that way. She grew up in a world where a sharp line was drawn between friends and the help. With me, there is almost no line. I find it valuable to work with people I can also be friends with, go river rafting with, go to Austria with and hike in the mountains. And I’m like a little kid who loves to show off and share things that I have experienced. If I go to the top of the Eiffel Tower for lunch and have an extraordinary meal, and someone comes with the cart with five thousand stogies in it, and I like the way they present the cigar and light it, I want all my buddies to experience that. So the next time I’m promoting a movie overseas, I’ll figure out how to arrange for some of them to come along. I want them to see the Sydney Opera House. I want them to see Rome. I want them to experience World Cup soccer games.
—
When I was doing the Planet Hollywood deal, Paul was my unofficial rabbi. He’d encouraged me to bring in my own lawyer when everybody else was using the company’s man. He’d also insisted that we take the time to do the deal right. We spent almost two years negotiating my ownership stake, and while the other stars focused mainly on including freebies and perks in their contracts, the arrangement I ended up with was more lucrative and had more safeguards built in in case the business went south. Over time Paul and the investment bank he worked for, Wertheim Schroder & Co., helped me on other deals. His official specialty at Wertheim was gaming and hotels; he’d sold golf courses, tennis clubs, and ski resorts. But I saw him in action enough to know that he had much greater range. No matter what was thrown at him—a production studio, a winery in Napa, California, a shopping mall development—he always cut to the heart of the deal. He was the quickest study I knew.
He and I had been working together informally for years when Ronda reached her limit. Common sense had been telling me that I needed to diversify beyond real estate, which was the only sector I really knew. The economy was booming, new companies and industries were starting up, and the stock market was expanding like crazy. I wasn’t interested in buying and selling stocks per se or spending my time researching companies. But I knew that the overall market had appreciated in real terms more than sixfold since Jimmy Carter was elected. I wanted to tap into that growth. Paul arranged for me to buy an ownership interest in a privately held mutual fund company called Dimensional Fund Advisers, which had offices right in Santa Monica. I met the founder, David Booth, a student of my hero Milton Friedman, and Paul couldn’t say enough good things about the business.
“I’ve seen hundreds of companies, but never a group of people like this,” he told me. “They are extremely ethical, they are brilliantly intellectual, and they are good businesspeople.” Thoug
h still small and under the radar, DFA was poised to dominate a part of the index mutual fund business that the industry giant, Vanguard, didn’t serve. I jumped at the opportunity, and Dimensional quickly became one of my most valuable assets.
I’d been pushing Paul to go out on his own, and in 1997 he set up shop in my building as an independent wealth manager with exactly one initial client: me. We understood each other so well by then that I gave him just a few instructions. The first was my old motto: “Take one dollar and turn it into two.” I wanted big investments that were interesting, creative, and different. Conservative bets—the kind that would generate 4 percent a year, say—didn’t interest me. Offshore corporations and other gimmicks didn’t interest me; I was proud to pay taxes on the money I earned. The more we paid the better, in fact, because it showed I was making more money. I also wasn’t interested in the investments that often attracted Hollywood business managers, such as trendy hotels and clubs. I could tolerate big risks in exchange for big returns, and I would want to know as much as possible about what was going on. My openness to new ideas and my involvement, plus the amount of money coming in, attracted Paul. He knew there would be plenty to do.
The idea of buying a Boeing 747 snuck up on us slowly. We had an acquaintance in San Francisco, David Crane, whose investment firm had gotten into the aircraft leasing trade. Aircraft leasing is a whole industry that exists because airlines often don’t like to own their airplanes. Owning ties up a lot of capital and can be a big distraction when your real business is flying around passengers and freight. So the airlines often lease the planes from somebody else. In a lease arrangement, the airline operates and maintains the plane for, say, eight years, and then returns it to the owner, who is free to sell it or lease it out again.
David’s firm was working with Singapore Airlines, which I knew had the best reputation in the airline business. It planned to expand its route system aggressively, and to free up capital, it was selling planes and leasing them back through contracts backed by Singapore government guarantees. I did some reading about airlines and leases and let it all simmer in my mind. Then one day I woke up, and the vision was crystal clear: “I’ve got to own one of those 747s!”
As far as I could tell, the opportunity was solid. I also felt a little of the same impulse that came over me when I saw my first Humvee. The 747 was the ballsiest airliner, and the price was as big as the plane. A new one cost anywhere between $130 million and $150 million, depending on the model and on options like the cabin and seating, cargo capacity, instrumentation, and so on. Of course, you wouldn’t pay the entire amount because buying a jet for lease is a little like buying a commercial building for lease. You invest, say, $10 million, and take out bank loans to cover the rest.
We got in touch with David Crane. He was skeptical. Aircraft leasing deals are the realm of huge financial institutions like GE Capital. Individuals had never done it. “I doubt it, but I’ll check,” he said, promising to ask his clients in Singapore.
A week later, he came back to me. “It’s impossible. You can’t do it. They don’t want any individuals, only institutions.”
“Well, I can understand why,” I said. “They probably think this is some Hollywood schmuck who’s made some money overnight, and all of a sudden he thinks that he can buy a 747. But by the time they put together the deal, his movie falls through or something, and he backs out. They don’t want to deal with these Hollywood drug addicts and weirdos. I understand that. So can we get them to meet? Do they ever come to Los Angeles on business?
“Let me check it out.”
The next day, we learned that his clients had a West Coast trip planned in two weeks and were willing to come to my office. “Ah,” I thought. “As is so often the case, something that is impossible slowly becomes possible.” By the time the Singapore Airlines executives arrived, we’d done our homework, and it was easy to sell them on the idea. I spent the beginning of the meeting reviewing the deal, mainly just to show them that I understood how it worked. You could see them relax right away. After thirty minutes, we were taking pictures together and the deal in principle was done. I gave them Terminator 2 jackets as souvenirs, plus Predator gimme caps and bodybuilding T-shirts. I knew that deep down they were fans.
Now came the hard part—for Paul. Sometimes when you look at a deal and you don’t have all the knowledge or are not overly smart about what’s involved, you see less danger and you’re too willing to take the plunge. I saw just what was in front of me, and it all seemed good. Sure, it also looked and smelled risky. But the more risky things are, the more upside there is.
It was my job ultimately to say, “I like this thing.” It was Paul’s job to make sure it was really okay and that we understood the risks. The idea of owning this giant thing . . . You are signing documents and you think you have no liability because maintenance and safety are the responsibility of the airline—but was that totally true? Paul uncovered wrinkles that were bizarre. For example, if the plane crashed, you’d certainly have trouble sleeping at night, but at the same time, there was ample insurance to cover the loss. On the other hand, if other Singapore Airlines planes crashed and the reputation of the airline was ruined, then the value of your investment would be hurt. Other airlines might not want your plane after the lease was up and Singapore Airlines gave it back.
“That’s one way this whole thing could go south,” David Crane explained. “You’d be sitting there with a 747 nobody wants and you’d still have to make your payments to the bank.” It was true that the profitability of the investment depended heavily on this so-called residual value. And residual value could be affected by everything from the reputation of the airline, to the state of the world economy, to oil prices, to technological innovation ten years from now. But when I heard David’s worst-case scenario, I had to laugh. “Right!” I said. “That’s exactly what’s going to happen to me.” I just had faith that it wouldn’t.
Finally, we were comfortable with the deal. I was excited. “You should talk to other people in Hollywood,” I told Paul. “They might like the idea too, and you can do a little business.” He actually went and pitched it to five or six top executives and stars but came back empty-handed. “They looked at me like I had three heads,” he told me. “Mostly what I saw in their eyes was fear. Like the whole thing was just too big and too weird for them.”
The plane we ended up with cost $147 million. Before signing the papers, we went to the airport to see it. There’s a picture somewhere of me literally kicking the tires of my 747. We signed all kinds of confidentiality agreements, of course, but the banks couldn’t help themselves, and the news leaked the first day. I loved it because everybody thought I had bought the 747 to fly around in, like the sheik of Dubai. It didn’t dawn on anyone that we’d do such an outlandish deal as an investment. It paid off very handsomely in profits, in tax benefits, and in pride of ownership. I’d hear guys bragging about their new Gulfstream IV or IV-SP, and then I’d get to say, “That’s great, guys. Let me talk about my 747 . . .” It was a great conversation stopper.
—
Buying the plane was a happy adventure in an otherwise difficult time. During the filming of Batman and Robin, late the previous year, I’d learned at my annual physical that I would have to make room on my calendar for a major heart operation.
The timing had been a surprise, but the problem itself wasn’t—for twenty years I’d known I had a hereditary defect that would someday need to be repaired. Way back in the 1970s, during one of my mother’s springtime visits, I’d brought her to the hospital because she was feeling dizzy and nauseous. They discovered that she had a heart murmur due to a faulty aortic valve, the main valve leading out of the heart. Eventually it would need to be replaced. Middle age is often when you detect those things, the doctor said, and she was then in her fifties. I was only thirty-one, but they checked me too and found out that I shared the defect.
The doctor had told me, “Your valve won’t need treatment f
or a long time. We’ll just keep an eye on it.” So every year I would get my heart checked. He would listen to the murmur and say, “There’s nothing to worry about, just stay in shape and keep your cholesterol low” and blah, blah, blah. And I’d push the problem out of my mind for another year.
Eventually, when they told my mother that it was time for surgery, she refused. “When God wants to take me, I’m ready to go,” she declared.
“That’s funny, you didn’t say that when you had your hysterectomy,” I pointed out. “And you’ve fixed every other health problem all along. So why all of a sudden now with the heart are you are talking about God? God is the one who made the science possible. God trained the doctors. It’s all in God’s hands. You can extend your life.”
“No, no, no.” It was one of those Old World things. Still, even without the repair, she seemed healthy enough and was now seventy-five.
But I wasn’t fine. The first sign of real trouble came after making True Lies. I was home swimming laps in the pool and felt this weird burning in my chest. It was a signal that the valve was beginning to fail. The doctor said, “This is now going to deteriorate slowly and then eventually it’s going to deteriorate very fast. We want to catch it just at the beginning of that rapid slide—that’s the best and safest moment to do the repair. If you wait beyond that, the aorta gets affected and the heart gets enlarged, and you don’t want that. But I can’t tell you when that moment will be. It could be next year, it could be five years from now. Everyone is different.”
I didn’t feel any more symptoms and continued doing my thing. I skied, I made movies, I went to Planet Hollywood openings, I did my public service. But at my annual checkup in 1996, the doctor said, “The moment has come. You need heart surgery. It doesn’t have to be tomorrow, but do it this year.”
Total Recall: My Unbelievably True Life Story Page 46