The other films I made in those years were The Front Page, Cock of the Air, and Sky Devils, which was Spencer Tracy’s first big film. Ann Dvorak came out in that one too, and became a new star. They wanted to change her name to something more American – you know, Ann Roberts, Ann Dodds. I said, ‘What could be more American than a Polish name? Stick with Dvorak.’
I don’t want to give the impression that my early business life was an unbroken series of coups and money-making ventures. Aside from all the rest of it, I was busy losing a small fortune in the stock market. I took my bath in 1929 just like many others. Of course I had Toolco behind me, so there was no real danger of my losing everything, but nevertheless I dropped in the neighborhood of three or four million dollars. I was pretty heavily invested. I had Westinghouse and RCA, and some U.S. Steel too – all the losers, you might say.
In one day alone, I lost three-quarters of a million on RCA. This gave Noah Dietrich a few gray hairs. It didn’t bother me much. I always figured, that’s the bottom, now the market will bounce back and I’ll make a fortune. That’s how the losers always think.
At first, when I got involved in the market, in 1927, at twenty-one, I had visions of myself as the boy wonder of Wall Street. I thought I had the golden touch. I wanted my own ticker-tape machine set up in my suite at the Ambassador Hotel, where I was living at the time. Western Union didn’t have a line running out to the Ambassador or anywhere near it. So I rented an office on Figueroa, near Seventh, where there was a line. I hooked it up myself. I drove down there in the middle of the night – because the whole procedure was illegal – and with my own two hands I laid this whole thing from downtown Los Angeles along the trolley power-line to my room at the Ambassador Hotel.
But somehow I got the terminals reversed, and this immediately showed up on the Western Union Board as a red light flashing. They sent a couple of workmen to the Figueroa Street office that I’d rented. I wasn’t there at the time, but they found Noah Dietrich in the office, standing there like an idiot with the glass dome of the ticker-tape machine in his hand but no ticker-tape. He called me, and I rushed up there, and paid these guys some money to keep them quiet. When they left Noah told me I had the terminals reversed, and so I hooked the terminals up again properly, and the machine ran perfectly, and my ingenuity only cost me about $4 million when the market crashed.
Did you stay in the market after that after the crash in 1929?
I got out for a while. I’ve been back in since. I owned a little TWA stock at one time. Half a billion dollars’ worth, to be exact. And I had some Northeast airlines stock, Atlas, RKO, and a few others. But I rarely speculated again. Nineteen-twenty-nine took the wind out of my sails, and I decided there were better ways to lose money than in the market.
But even before the market debacle, I put my money in some strange ventures. My father had a Stanley Steamer, one of the first cars in Houston, and I was always taken with the steam car. In fact I still am – it’s never been developed, never showed its true potential. And so in 1928 I decided I was going to build one.
I already owned two – a Stanley and a Doble. The Doble was a great machine, but from my point of view it had two big flaws. For one thing it took anywhere up to five minutes to get up a head of steam, and the garage could burn down in that time. Also you couldn’t get more than seventy or eighty miles to a tankful of water. The motor would burn anything – kerosene, wood, buffalo chips, anything you wanted to throw in – but the water boiled away.
I went out one day to the California Institute of Technology and had a talk with Dr. Richard Millikan – he was president of the university and a Nobel Prize winner – and told him I had work for some of his engineers. I wanted two real bright boys to come and work for me and develop the Hughes Steamer.
He found two young kids named Lewis and Burns – I don’t remember their first names – and I told them I wanted a steamer that would get up a head of steam instantly, or as close as possible, and that would give me four to five hundred miles without having to refill the boiler. I put them in a garage near Caddo’s headquarters on Romaine Street and I turned them loose.
People are always saying that I won’t let people alone, won’t let them do their work. They complain that I interfered in the operation of Hughes Aircraft and TWA and RKO. Damn right I did, and for good reason.
Lewis and Burns came up with the machine. But in the first place, it would cost $50,000 to make each automobile. I’m sure you’ll agree that in 1928 there wasn’t much of a market for an automobile at that price. But we might still have gone ahead with it on a trial basis. I figured I could sell fifty to a hundred of them a year, and I would have had a new car for myself whenever I wanted one.
They showed me the prototype for a jazzy-looking five-passenger convertible. It was stripped down to the metal, because I hadn’t told them yet what color I wanted it painted. They told me they had a flash-firing system worked out where they could get up steam in less than thirty seconds. I was certainly impressed. I asked them how they solved the water problem and Burns said to me, ‘We just made the whole body one big radiator, full of tubes.’
I looked at them – these bright, eager Cal Tech kids – and I said, ‘You mean the whole body is a radiator, including the doors?’ Burns said, ‘That’s right, Mr. Hughes. You can go 400 miles on a tank of water.’
‘So tell me what happens,’ I said, ‘if a car runs into me. Into my door, for example. Won’t I got cooked? Boiled? Burned to a crisp?’
They scuffed their toes like a couple of country boys caught in the pasture humping daddy’s favorite sheep. I walked away, called Noah, and said to him, ‘Turn that goddamnn thing into scrap metal. Project’s finished.’
It cost me $550,000 to have that car developed, made, and scrapped. That’s what happens when you turn technicians loose on a project without close supervision. I realized that right there and then, and I was only twenty-three years old, the same age as Lewis and Burns. But realizing and learning are two different things. It took me twenty years and about $200 million before I really learned.
The experience with the steam car did help me, however, when a crisis arose with the Tool Company in 1932. We were number One, like Hertz, and another company, like Avis, was creeping up from the position of Number Two.
I’ll have to give you some background. Toolco, after my father had invented the cone bit, was way ahead of everybody else in the drilling industry. There was virtually no competition the way we had the patents sewed up. And then a guy named Clarence Reed, who worked for my father, quit Toolco and swiped a set of the blueprints for our bit. He started a company called Reed Roller Bit.
That gave me a lesson very early on in life about keeping things locked up. People have accused me of being oversecretive and being a maniac about security. There was no security then at all – that was the age of innocence – and this was an early example of industrial espionage.
But it backfired on Clarence Reed. When we found out, back in 1922, Reed tried to tell everyone that he’d only taken the blueprints to be sure that when he made his own cone bit he wouldn’t infringe on our patents. He could tell that to a ten-year-old child, but my father knew it was cowplop. He’d come home and say, ‘That fucking Reed,’ which upset my mother because she didn’t like my father cursing in front of her like some wildcatter just turned loose from Spindletop on a Saturday night.
He sued Reed and won the case. There was a $50,000 cash settlement of the lawsuits and, as part of the penalty for the patent infringement, one of my father’s companies – the Caddo Rock Drill Bit Company – was awarded a percentage of Reed Roller Bit’s sales. Since Reed Roller Bit had to send us a check every month, we knew precisely how much they sold and where the competition stood.