October 26, 2012

Who could have known that the Terminator was a true entrepreneur?


Iv'e just finished the book Total Recall: My Unbelievably True Life Story which is a biography written by Arnold Schwarzenegger himself. I didn't really expect much from the book, but it turned out that it was really good, and it changed my thoughts about Schwarzenegger. One may have a preconceived conception about Schwarzenegger, possibly because of his accent in several movies, but it turned out that he was a real entrepreneur.

Schwarzenegger grew up in a smaller village in Austria, and the house where he grew didn't have running water. He has kept many of the habits developed when living in this house to save resources. In the current Schwarzenegger residence, the water is always saved and the family members are only allowed to shower for five minutes, and the lights are always turned off when they leave a room. He never wears anything expensive when skiing.
"And even though I can afford it, I would never wear cashmere to go skiing or play sports. It has to be cotton or wool or something cheaper, like a $10 sweatshirt, before I feel comfortable getting sweaty." 

Before Schwarzenegger began with recording movies, he was sponsored by a gym in the US, but the sponsor money wasn't quite enough, so he began to think about other opportunities to make more money. He realized that people wanted to know how he could be so strong, and what type of exercises he did, and what he ate to grow the muscles. So to respond to these demands, he began selling booklets that consisted of articles and photographs. As the business grew, he added more products such as the "Arnold Schwarzenegger weight-lifting belt."

As the mail-order business grew, he decided to found a construction company. He was strong, and knew many strong body builders, so why not use the strength to carry bricks? They lied a little bit when they said in the ad that they were "experienced" bricklayers, and were "experts" in marble and stone, but no-one noticed that they were not experienced. They also realized that American loved foreign names, such as Italian design, and Swedish massage, so they decided to measure everything in meters to pretend that they had been working in Europe. They did also, on purpose, argue in German in front of their clients about the price the client would have to pay, and it turned out that the client often paid a higher price because of this argument. Once they managed to break an antic window because they were so strong, so when they were going do demolish a wall, the stones flew all over the place, and in the end they didn't profit from the job thanks to the expensive window that had to be replaced.

But every investment decision was not a good one. Schwarzenegger once invested in a large part of a desert where someone had a plan to build a supersonic airport. This was at the times when the Concorde were flying across the Atlantic Ocean, and everyone believed that the Concorde would soon fly around other parts of the world as well. But it turned out that the Concorde never would, and the piece of desert would be worthless.   

But Schwarzenegger never gave up the plans to own real estate, and he decided to invest in houses.
"I wanted an investment that would earn money, so that I could cover the mortgage through rents instead of having to pay it myself." 
He made his research and each day he looked in the newspaper to get a feeling about the prices of the buildings, and he found a mentor, Olga Asat, and eventually he would knew every building in Los Angeles. Finally, he bought a six-unit apartment house, and he took one apartment for himself, and the rest of the apartments would be rented to actors. This way, he could build connections to the movie business. He would later sell this building, and buy more and larger buildings.

When Schwarzenegger began with the acting, his plan was to double his salary with each new movie. It didn't always work, but almost. The first movie he participated in was Hercules in New York, and it failed miserably, but the first successful movie was Conan the Barbarian, and he got $250,000 as a salary from that movie. And so it went on:
  • The Terminator: $750,000
  • Conan the Destroyer: $1 million
  • Commando: $1.5 million
  • Predator: $3 million
  • The Running Man: $5 million
  • Red Heat: $5 million
  • Total Recall: $10 million
  • Terminator 2: $14 million
  • True Lies: $15 million
Before he decided if he wanted to participate in a movie, he always thought about what the return on investment would be. To make more money, he wanted that his movies would go global, and he thought about every possible details.
"Is this movie appealing to an international audience? The Asian market is negative on facial hair, so why would I wear a beard in this role?" 
He wanted to go all over the world to promote the movies, while the movie folks thought that a couple of countries were enough.
"Whenever I finished a movie, I felt my job was half done. Every film had to be nurtured in the marketplace. You can have the greatest movie in the world, but if you don't get it out there, if people don't know about it, you have nothing. Picasso would go into a restaurant and do a drawing or paint a plate for a meal. Now you go to theses restaurants in Madrid, and the Picassos are hanging on the walls, worth millions of dollars. That wasn't going to happen to my movies. Same with bodybuilding, same with politics - no matter what I did in life, I was aware that you had to sell it."    
The lines in the movies were also important to Schwarzenegger. "I'll be back" is the most famous line from The Terminator, but he first argued with the director James Cameron that he didn't want to say the line because it sounded wrong, but Cameron didn't change his mind.

Schwarzenegger always believed that the most important thing was not how much you would make - but how much you would keep of that sum of money. The list of famous entertainers and athletes who have been wiped out financially is long. He recalls how he saw the actor Burt Reynolds and his manager showing up in a Rolls-Royce before the money were all gone.
"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."
The idea was to always "Take one dollar and turn it into two." He wanted big investments that were interesting, creative, and different, and he could tolerate big risks in exchange for big returns - not the kind that would generate 4 percent a year. He also disliked trendy investments such as hotels and clubs - but he did co-found the restaurant chain Planet Hollywood. Schwarzenegger was also proud to pay taxes on the money he earned, so he didn't like offshore corporations and other "gimmicks" designed to minimize the taxes paid.

In the end of the book, Schwarzenegger explains some of the rules he has in his life, including:
  • Turn your liabilities into assets
  • When someone tells you no, you should hear yes
  • Never follow the crowd. Go where it's empty
  • No matter what you do in life, selling is part of it
  • The day has 24 hours
  • Stay hungry