Heroes Page 22
And power networking surely has nothing to do with the fact that Schwartz has earned a reputation as a take-no-prisoners fundraiser for this or that cause. “He phones me up and says, ‘You bank with the Nova Scotia, don’t you? Good, you’ve just committed to being on the tribute committee for Peter Godsoe because I’m running this thing,’” recalls Hershell Ezrin, a friend who shares synagogues as well as banks with Schwartz. “And I said, ‘Well, what am I expected to do?’ He said, ‘We want you to buy five tables.’ When I started to object, he said, ‘We’ve got to get more than that, so I don’t want to hear any of your stories.’ That’s Gerry.”
“Schwartz is very smart,” says Ira Gluskin, the investment guru, getting right down to the nub of how titans tend to keep and wield power. “He is probably smarter than anybody on Bay Street. He’s got a real sense of who’s important. And he knows them all.”
“DID YOU EVER see a woman who’s quite beautiful, but she’s wearing a funny beehive bouffant hairdo?” Gerry Schwartz ruminates, trying to explain something about himself. “And you realize that in the 1960s, when that hairdo was stylish, she saw herself as the most beautiful she would ever be, so she maintained that style, never changing. And of course, she’s quite unbeautiful now with that stupid-looking hairdo in the 1990s. People like that don’t get it; they don’t keep growing. You have to get a haircut at some point. You’ve got to put yourself into a position where you’re back in kindergarten, learning.” Instead of a haircut, Gerry has gone into the movie business, which amounts to the same thing. “For me, part of it is the absolute joy of being back in kindergarten,” he confesses. “Here’s a trade where they talk a different language, where the whole business rests on relationships, where the values are different than anything I’ve seen before, where it’s largely a creative adventure rather than a numbers-driven process. So I knowingly put myself into kindergarten and have been trying to work my way out of it ever since. It has made me grow enormously as a person. Having to deal with creative people, creative issues, people who don’t understand or care about the things that I have traditionally cared about, who don’t measure success at all by the same standards that I do—that’s growth.
“We made The People vs. Larry Flynt and lost money on it. The film had a very narrow audience, but Milos Forman, the director, and the actors who were in it and my partner, Mike Medavoy—they’re all thrilled that they made it. They don’t care if it lost money; they made a wonderful movie. And actually, it was a wonderful film.” Schwartz put $20 million into Phoenix Pictures, a partnership with Medavoy, formerly one of the extravagant honchos who ran Sony’s ill-fated Tri-Star Pictures Inc. into the ground. The new movie company, Phoenix, is due to make $60 million worth of pictures, which already includes Barbra Streisand’s The Mirror Has Two Faces, which grossed about $45 million. “Barbra,” he says as diplomatically as possible, “being the commanding force she is, many people want to accede to not only her every wish, but to what they might perceive as her every wish. Because of this, the studio outspent what it should have on promotion and our costs were enormously high, so the film didn’t do well financially.” That was also true for U Turn, the Oliver Stone movie Schwartz did, as well as several smaller films.
In his Hollywood incarnation, Schwartz has become friends with Robert Redford and bought 15 percent of his Sundance Resort in Utah. So are we witnessing Gerry’s “soft, soft centre” finally oozing out, the guy who cries at movies, letting dread emotion mess up his business instincts? Not really.
“What I want to do here with Mike is build a sausage factory that makes sausages called movies,” Schwartz told Jennifer Wells. “The value isn’t going to be in the given movie. The value is going to be in the factory. If we can create a factory that has the infrastructure, the capability to keep on making four or five movies a year, there’s a huge capitalizable value. Some other entity is going to want to own all or part of our business. There are so many people who are desperate for the output, we’ll sell 30 percent of this company for half a billion dollars.”
The Schwartzes purchased a house in California to be closer to the movie industry. They are building a replica of a 1940s California clapboard home, with a low, shingled roof and a couple of dormers across the top, which will appear conspicuously incongruous among Bel Air’s pseudo-French châteaux and Spanish castles-to-go, designed to show off their occupants’ importance. “It was the first property we were shown, but we couldn’t get into the house to view it. From the moment I saw it to the day I put up the money was about six days. I don’t care about the original house; I didn’t even go inside. I’m going to tear it down, but the land is magnificent; it’s four and a-half acres right in Bel Air, and the lot is flat, as opposed to those huge hillsides that you can’t touch.”
Apart from his Hollywood ventures, Schwartz also runs Waterloo Capital with Steve Gross, a lawyer friend from his Winnipeg days who now does real estate equity lending, largely in Toronto. Schwartz also controls Vincor International Inc., Canada’s largest winery, which he acquired by coming to the aid of Leland Verner’s
. Bright & Co. and combining it with Cartier Wines, which Don Triggs had spun out of Labatt. Combining these wineries, plus the prestigious Inniskillin, Dumont and La Salle labels, has been the industry’s greatest success story.
A LOT OF THE BEST VINTAGES get poured whenever Heather and Gerry alight at home in the Rosedale megahouse they have turned into a weekly salon for the hip and lit. The place is a showpiece, far removed from its days as a rundown rooming house. Gerry and Heather gutted the old pile, bought the large house next door, tore that down and extended the dream house into a tasteful château. The Schwartzes now buy mainly British sculptures and sixteenth-century Chinese pottery. Beautifully decorated, the mansion is large enough to comfortably entertain two hundred guests. (The two hundred, for example, who paid $1,000 each to be there one evening in 1995 for a Liberal fundraiser featuring Chrétien and most of his Ontario ministers. “God, it was boring,” remembers Schwartz. “It was in June, and the rain just kept coming down in torrents, buckets; everybody was soaked.”)
As well as his Porsche, Gerry has a Ferrari, a 1957 Thunderbird and a 1967 Austin-Healey that he restored himself. He has his certified auto mechanic’s papers and is definitely eyeing a RollsRoyce. Heather doesn’t own a car; she borrows one of his.
The couple’s attention to aesthetics extends to the Onex offices. For years Schwartz admired Toronto’s Carswell House on the corner of Richmond and University, a Georgian building across from the law courts. He wanted to locate his offices there. Instead, he rented quarters on the forty-ninth floor of BCE’s Canada Trust tower and built a Georgian office suite inside it. Nothing has been forgotten. The floor is fashioned out of rough-hewn planks of old chestnut scavenged from a 150-year-old
Alabama farmhouse. Ancient shutters surround double-hung windows, which give the appearance of being open, but aren’t, because there’s a plate-glass window behind each one.
“We’re in the business of giving people confidence,” Schwartz explains. “When a guy comes up to your office who wants to sell you his company for $600 million, it helps to be in surroundings where he can implicitly assume that we can pay for it—and he kind of understands we don’t need to buy his business. So we built what is basically a theatrical set to support that thesis.”
Standing in that world of Georgian fakery encased by a smooth skyscraper, listening to Gerry Schwartz theorize about the usefulness of façades, the mysteries of the man tantalize all the more. How soft, really, is the centre of any guy who’s been an LBO SOB? I muse about that for a while. And then I ask him when was the last time he cried.
“I was up at IBM headquarters recently,” he replies, matter-of-factly, “which is near West Point. So I drove over. It’s up on a very high bluff overlooking the Hudson River and out to Tarrytown, and it’s gorgeous, really magnificent. I kind of wandered around, saw the parade grounds, the superintendent’s home and the barracks. T
hen I went up on this lookout point, and there were these brass plaques put in at the top of the stone wall. I stood there crying as I read the dedications.”
For more evidence of softness, there is, as well, Heather’s assurance that Gerry Schwartz really is “empathetic and sensitive to what other people go through. For example, we had a young woman who worked in our garden—I’m a very committed garden person—and one day I was talking to her, and she told me that she was so excited because she had been accepted into graduate art school in New York. I was saying how fantastic it was when she said, ‘Of course, I can’t go because I don’t have any money. But I just wanted to see whether I could get in.’” Heather mentioned it to Gerry at dinner that night. “Without telling me first, he called her up, and said he would send her to school for two years, all expenses paid. No one,” says Heather, “knows that he does such things.” Another kind gesture that received no publicity was the time he gave a free office to Bob Donaldson, a leading Bay Street lawyer who got caught cheating on his expenses and was prevented from practising for two years. When Donaldson’s former associates would rather cross the street than say hello to him, Schwartz helped get him back on his feet.
AND THEN THERE is that other mystery, the question of what professional reward will prove enough to satisfy not just Gerry Schwartz, but his father.
“I haven’t actually celebrated any victories, such as selling a company for a tremendous profit,” Gerry confides in a quiet moment. “One of the things that people do in this business is have these closing parties. They’re unbelievably boring. It’s a bunch of people who happened to work together on a single transaction and have nothing in common with each other except that they did a particular deal. So they get together, make silly toasts, drink and then go away never to see each other again. Actually, I even avoid going to our own closing parties.”
One gets the impression that all the slaps on the back from colleagues will never compensate for that brief parental hesitation on the phone, that “sort-of lukewarm” tone in his old man’s voice.
When good things happen, that’s when Gerry’s Presbyterian side kicks in. Those who have adopted that barren outlook know only too well that you must never appear happy or relaxed because that’s the moment the bearded deity chooses to pounce. So if you don’t celebrate too much, there’s not too far to fall, should things go the other way. If you don’t say you want something very much, you don’t feel you’ve failed if you don’t get it. That fear is buried deep in Schwartz’s psyche. And he has no intention of tempting the fates.
“It’s lousy in a way,” he admits, “because you never feel the exuberant joy of revelling in your success. Like when I’m buying some company, people call and congratulate me: ‘Hey, you’ve bought BC Sugar—isn’t that great!’ And I’m thinking these people don’t get it. Anybody can buy a company; all you do is pay for it. What determines the success of the deal is what we do with it. We’ve got to fix it, make it run better, get the costs down, straighten out its market position; there’s real work to do. So I never feel good when I’ve bought something.
“And I never feel good when we sell something, even if we make a big profit, because I don’t feel that legitimate about it. Often the payoff is much bigger than I expected it would be, but I realize that I wasn’t as smart as people say I was because I didn’t know I was going to make that big a profit. I didn’t buy it knowing I’d make ten times the money. I wasn’t a genius.”
Maybe not. But take heart, Gerr. Nobody’s a genius, remember?
—1998
Jimmy Pattison: Canada’s Über-Entrepreneur
DURING THE EARLY 1980s, I spent a few days at Jimmy Pattison’s retreat in Palm Springs, deep in the heart of California. He later purchased Frank Sinatra’s sumptuous estate nearby, but this was a relatively modest villa backing onto the twelfth hole of the Canyon Golf Club. What I remember best from that long weekend (which included sharing the platform with Henry Kissinger in addressing Jimmy’s “partners in pride”—the men and women who run his companies) was our departure. He lent me a car to tour the mountains above the desert, where I enjoyed throwing snowballs while still wearing lightweight cottons. After I reluctantly left both the pine forests and the palm groves, Pattison drove me to the airport, where his private Challenger jet was standing by to whisk us back to Vancouver.
We gave our luggage to a waiting porter, and as Jimmy and I were ambling toward the gates, he veered away, continuing our conversation. I found myself walking beside him as we passed a long row of pay phones. In a ritual obviously evolved from long practice, Jimmy pulled open the change slot of every telephone. He scooped out whatever coins had been forgotten and never missed a beat. I was speechless. Was this the ultimate capitalist— a man so money driven that he felt compelled to collect pay phone leftovers on the way to his multi-million-dollar private jet?
I asked why he was doing it. “Habit,” he deadpanned. “My first job was as a bellhop at the old Georgia Hotel, and I made more money from forgotten telephone change than from tips. So even now, whenever I see a phone, I go for it.”
That’s Jimmy Pattison, sole owner of Canada’s most valuable private company [now fourth largest, with assets of more than $5 billion], ahead of such well-known Canadian-based public enterprises as Power Corporation, Research in Motion and Alberta’s Mannix empire. The significant difference is that Jimmy owns every share of every one of his several dozen profit centres that make up his corporate holdings. Apart from his main activities—marketing and making foods, manufacturing recreational vehicles, producing outdoor advertising and distributing magazines—he owns such eccentric assets as the Louis Tussaud’s Wax Museum in Copenhagen, the global chain of Ripley’s Believe It or Not! exhibition halls, a Swiss bank and a finance company in the Channel Islands.
As proprietor of a private company, Pattison keeps his earnings secret, but he has a net cash flow of at least $10 million a month and probably a lot more. His companies’ total sales first passed $1 billion in 1984. His original target of hitting $5 billion has long been surpassed, putting him in the league that the Eatons and Bronfmans once occupied—except that he has earned every penny himself, instead of inheriting a head start— and is still in business.
Despite his vast monthly income, Pattison takes out only about $150,000 a year as a spending allowance, reinvesting the balance in his more than four dozen subsidiaries. His senior managers benefit from complicated bonus schemes based on performance, but operations are not devoted to expansion for its own sake. “Quality growth is what matters,” he maintains. “Profit is only a by-product of success.” What makes his companies so intriguing is that they work on the Japanese “quality circle” principle, allowing employees at every level to participate in decisions on how to keep enhancing profit margins and productivity.
His secret? “I have a basket behind my desk which lists, on a daily basis, the key indicators of each industry we’re in. Every business has a soft spot, and if you want control of what’s happening, you keep watching those indices. I never wait for the weekly financial statements; there’s too long a lag. I just keep tabs on things like forward bookings on my radio stations, for instance. In the car business, the key is not having any ninety-day used cars on your lot. That’s the kind of thing I worry about. In the food business it’s volume that’s critical because when you have a high fixed overhead, you’ve got to keep sales moving.”
These and the many other indicators of how his companies are doing provide only the theoretical framework for Jimmy’s management style. He acts quickly on what those indicators tell him. Every Friday, for example, he gets a list of every used car that has been on any of his lots more than ninety days. “I get rid of them,” he says, “because that’s where you get in trouble with bad inventory.”
WHAT’S UNUSUAL about Jimmy is that he’s not only solidly in command of his financial worth, but also acts as if he was in charge of his soul. He genuinely believes there is holy sanction involved i
n his success. “I represent what the free enterprise system allows people to accomplish,” he once told me, “and I’m grateful to God that He allowed it to happen.” Yes, he still occasionally attends the Glad Tidings Temple on Vancouver’s Fraser Street, and, yes, he still prays before negotiating major business deals. But he no longer plays the trumpet at the Sunday morning services, preferring the harmonies and rhythms of one of his five Wurlitzer organs. (He has one in Palm Springs, one aboard his boat and three at his home in British Properties.)
Religious inclinations aside, it is because he is so utterly devoid of sham or pretence that his touches of self-righteousness come through as personal strength, rather than arrogance. He makes it easy for people to supply their own reasons for liking him and has surprisingly few enemies or even critics.
This unique proprietorship is made up of, among other assets, the world’s largest floatplane fleet (AirBC and Trans-Provincial Airlines) and the world’s largest neon sign complex (Claude Neon and Neon Products); Canada’s largest manufacturers of recreational vehicles (Vanguard, Frontier and Security), largest automobile dealerships (Toyota and General Motors), second-largest wholesale distributors of periodicals (Mountain City News, Mainland Magazine and Provincial News), largest outdoor advertisers (Seaboard and Hook); leasing companies (Courtesy, Great Pacific and Jim Pattison), supermarkets (Overwaitea and Your Mark-It), soft drinks (Crush, Hires, Sussex, Pure Spring, Wilson’s); and computers (EDP Industries)—as well as real estate and energy suppliers.
He has a private room off his office, where he deals in a major way in gold and silver futures. The seven local airlines he has acquired since March 1979 have given Pattison control over a fleet of one hundred aircraft plying the B.C. coast. He insists that head office staff keep track of safety concerns and fly one of his routes at least seven days before their operations come up for budgetary discussion—and have a cancelled boarding pass to prove it. He holds leases on about sixty-eight thousand electrical signs in Canada, including most illuminated markers for McDonald’s, Holiday Inn, Shell and Household Finance.