By 1926, Louis B. Mayer was the West Coast chief at Metro-Goldwyn-Mayer, and beginning to appreciate that Los Angeles was his city. He had had little education, but he possessed a survivor’s sense of economics. Once, he had been an impoverished kid escaping Russia, and now he was probably the highest-salaried man in America. He knew which was preferable. Plus, he had a wife and teenage daughters who thought they deserved a nice new house as a mark of their status. Why not a place at the Santa Monica beach, where the cream lived?

Mr. Mayer was a problem-solver: he thought of renting, but he liked building better. It was suggested that for a proper house he needed architects, plans, and a lot of time. According to his daughter Irene, he disagreed: “When we need a set at the studio, we build it overnight. We need a big village, we build it in weeks. Don’t be at the mercy of those contractors. Don’t start with the architects. With us, it’s business, it gets done. I will talk to the people at the studio. If it can be done for the summer, we will have the beach house.”

Action! It was done. The head of design at the studio, Cedric Gibbons, drew up some plans and the production manager, Joe Cohn, worked out a schedule for building it—in six weeks. For that they’d need three shifts of laborers a day, working round-the-clock. “Can do?” asked Mr. Mayer. “Can do,” said Cohn, but there was a catch. The studios were about to sign an agreement with the union that looked after studio laborers (soon to be known as the International Alliance of Theatrical Stage Employees). Those guys had secure rates of pay, with overtime. That house was going to cost if studio labor built it. So Cohn suggested using just a few skilled people from the studio and then outsourcing cheap labor. The house was ready to be occupied in the spring of 1926. It was a palace.

But Mr. Mayer was worried. Until this very practical example, he had never quite appreciated the deal made with these carpenters, painters, electricians, et cetera. He began to dread the day when those other people—the so-called talent: the actors, the directors, and worst of all the writers—got the union idea in their heads.

The picture business was working very nicely. The money came in from banks in the East. It built the studios and put the talent under contract. For terrific salaries, those beautiful people did as they were told. When the movies were made and put out on the market, the revenue and the profits belonged to the studio. But just suppose those bastards got organized, with those lousy writers leading the way. Some of those people had education and radical ideas. Mr. Mayer didn’t like to think about it, but they might ask for pensions, health benefits, and—if you’ll excuse the word—residuals, or a cut of the profits.

This could be an undermining revolution and Mr. Mayer was one of those Russians who loathed revolutions. So he got a few friends together and said they needed some formula to make unions unnecessary. It would be a way of settling disputes before they arose. Another thing: the picture business stank in the nostrils of the decent public. Sure, they loved the pictures, and the stars, but the scandals were out of control—there were pretty kids with money to burn, wild on drugs; there had been a couple of murders; and there was the 1926 divorce between Charlie Chaplin and Lita Grey. Seems Chaplin had screwed her when she was underage. He had tried to get her to have an abortion, but the marriage had happened, and then it had gone bust. And in the divorce complaint, Grey had said that Chaplin was crazy about a lot of dirty stuff, like oral copulation. Most Americans didn’t know what that was in 1926, but if the word got around, Hollywood could catch the blame.