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David Geffen Says Good Instincts Play Better for Him Than Good Plans

June 2006

Geffen
Geffen

STANFORD GRADUATE SCHOOL OF BUSINESS—Entertainment industry mogul David Geffen created wealth for his clients and investors without depending on long-range plans and strategies.

A self-made billionaire, Geffen told Graduate School of Business students that he relies instead on his instincts, his keen eye for talent, honesty, and a knack for surrounding himself with smart people.

The legendary film and record producer spoke June 1 as the final speaker in the student-sponsored View from the Top speaker series. Geffen is the founder of Asylum Records and Geffen Records and cofounder of Dreamworks SKG (with Steven Spielberg and Jeffrey Katzenberg).

Wearing a T-shirt and jeans and arriving without a prepared speech or notes of any kind, Geffen was banking on the intelligence, curiosity, and collaborative spirit of his audience, along with his well-honed ability to wing it. He opened with a few lines to dispel the myth that he had always dreamed of a career in show business.

"I just needed a job," he said. "Before being hired as an usher at the CBS Theatre, I didn't even know there was a show business!" Witnessing performances by Barbara Streisand, Judy Garland, and Ethel Merman imparted the vision.

"Now, if you have any questions…" Students in the audience thought he was kidding, but—eager to learn the secrets of his legendary success—they quickly got into the spirit of it and fired one question after another. Asked to comment on the leadership challenges related to working with creative people, the renowned master of Hollywood spin and relentless deal-making responded with, "I didn't have a clue!" He said that a lot.

"I wish I could give you a better answer. I didn't have a clue about managing business. I never went to business school. I was just bumbling through a lot of my life," said Geffen. "I was like the guy behind the curtain in The Wizard of Oz.

Throughout his 30-year career, Geffen was an agent, a manager, and a record and movie producer. He struck high-stakes deals with John Lennon, Elton John, Bob Dylan, Joni Mitchell, Jackson Browne, the Eagles, Guns 'n Roses, and Crosby, Stills, Nash, & Young.

As a theatrical producer, Geffen brought the musicals Cats and Dreamgirls to Broadway. His film production companies financed Risky Business, Oh God, Little Shop of Horrors, American Beauty, Gladiator, Saving Private Ryan, A Beautiful Mind, and more.

The companies that Geffen founded ultimately sold for millions—if not billions—of dollars. In 1972, Geffen sold Asylum, his first record company, to Warner Communications for $7 million. In 1980, he founded Geffen Records and 10 years later sold it to MCA for $550 million. Dreamworks SKG was sold to Viacom's Paramount Pictures for $1.6 billion.

Born in Brooklyn in 1943, Geffen was thought by his mother to be a miracle child. She called him "King David" throughout most of his young life. "I was a terrible student. I had dyslexia when there wasn't even a word for it. We were just dumb!" said Geffen.

After his father died, Geffen attended the University of Texas in Austin, where his brother was a student. He dropped out long before earning a degree. His first real job in show business was in the mail room at the William Morris Agency. He was a full-fledged agent in no time.

"In order to get a job at the William Morris Agency, I said I graduated from UCLA. I had gone to another agency first and the guy looked at me and said, ‘Are you kidding?! We only hire college graduates, and you've been fired from seven different jobs!'"

Geffen has had an affection for UCLA ever since. Thirty years later, he established a $200 million endowment at what is now the "Geffen Medical Center at UCLA," the largest financial gift of its kind for a medical center in the United States. He also donated $5 million to the UCLA-affiliated Westwood Theatre, which is now The Geffen Playhouse.

Launching his first company, Asylum Records, wasn't originally Geffen's idea. As Jackson Browne's manager, Geffen tried to talk the head of Atlantic Records into signing him to his label. "I said, ‘You should produce his records! He could make you a lot of money!'"

"And he said, ‘I have a lot of money! You start a record company and produce his records and make a lot of money!' So I did."

That was the beginning of Geffen's career as a big-time producer. Linda Rondstadt, Joni Mitchell, and Laura Nyro followed.

A few years after selling Asylum, Geffen was misdiagnosed with cancer.

"I thought ‘Here I am, I've got all this money. I've worked [hard], and now I've got cancer! It was a very sobering experience. So I decided to go to New York and get high and have some fun."

Geffen spent most nights at the legendary Studio 54, mingling with other luminaries.

Three years later, when Geffen learned that he did not have cancer, he returned to Los Angeles and founded Geffen Records and, subsequently, Geffen Film Company. When Jeffrey Katzenberg was fired as the CEO of Disney by Michael Eisner, Geffen joined Spielberg and Katzenberg to launch Dreamworks SKG.

"I did it for a friend; I did it for the sheer joy of helping out a friend," said Geffen, who raised $2 billion from investors in several days based on the reputation of the three founders. "I was committed to seeing that our investors got their money back. I couldn't deal with the thought that these people who trusted us wouldn't get their money back. I told them that we wouldn't take one penny in salary or bonuses or anything until they got a return. And we didn't."

Ten years after Dreamworks was founded, the creators sold the company to Viacom's Paramount Pictures for $1.6 billion, despite the fact that the company had lost $150 million the previous year.

"The record and film industries have changed dramatically," said Geffen.

"The opportunity for an entrepreneur to start a [record or film] company from scratch today is abysmal," he said, citing the expense of making movies, the diminishing quality of film scripts, the poor response of record companies to anticipate the impact of digital downloads, and the improvement of home viewing.

"When you close your eyes and dream about the future, what do you think about?" asked a student at the end of the hour. "I would like to own the Los Angeles Times," said Geffen. Los Angeles is his home, and he believes it deserves a great paper. He said he wants to transform it, and he has enough money not to have to worry about taking a loss in the process.

"Happy is harder than money," Geffen said. "Anybody who thinks money will make you happy hasn't got money. If you think your life is different if you have many millions or billions, it doesn't change at all; it has no value at all—other than bragging rights."

—Karen O'Leary