ENCORE: Cruise Ship Wars | Anchors Aweigh! | 1

Summary

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Business Wars Podcast

ENCORE: Cruise Ship Wars | Anchors Aweigh! | Episode 1

Release Date: July 1, 2026
Host: David Brown

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Episode Overview

This encore episode of Business Wars revisits the high-stakes, cutthroat origins of the modern cruise industry. Focusing on the intense rivalry between Norwegian Cruise Line, Royal Caribbean, and Carnival, David Brown explores how ambition, betrayal, and bold innovation transformed ocean travel from a fading necessity into a global, multi-billion-dollar industry. The episode traces the 1960s–1970s birth of cruising as leisure, punctuated by business betrayals, bold gambles, and the outsized personalities behind today’s industry giants.

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Key Discussion Points & Insights

1. Setting the Stage: The Modern Cruise Boom and its Dark Shadows (00:12–01:41)

• Recent news about disease outbreaks (hantavirus aboard a luxury cruise in 2026) illustrates ongoing risks in cruising, despite industry growth.
• Despite past crises like pandemics, AAA predicts 2026 will set new passenger records.
• Carnival, Royal Caribbean, and Norwegian are now household names, but their rise was marked by fierce competition—including betrayal and financial subterfuge.

David Brown [01:41]: "They fought hard—and sometimes dirty—to own the seas, backstabbing, thievery, and plenty of flush times in between."

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2. Founders’ Drama: Norwegian Cruise Line’s Explosive Origins (01:41–05:45; 24:11–26:44; 34:37–39:43)

• Knut Kloster (Norway) and Ted Arison (Israel/U.S.) co-found Norwegian Cruise Line but fall out over financial management.
• Early 1970s: Kloster, suspecting embezzlement, flies to Miami to confront Arison after an auditor reveals $7 million missing (35:10).
• Arison empties company accounts and absconds, sparking years of legal conflict.

Auditor [35:10]: “There's approximately a $7 million difference between what the books say and what's actually in the accounts.”

Kloster [39:43]: “But he's too late. Arison and the money are gone, the safe in the office empty.”

• The episode dramatizes tense confrontations and the shattering of a partnership built on trust, setting up bitter competition.

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3. The Reinvention of Cruising: From Passenger Ships to Floating Resorts (07:16–13:07)

• Post-WWII collapse of ocean liners due to jet travel leads to innovation: cruise lines pivot from transportation to vacation experiences.
• Whimsical and creative enhancements—pools, deck chairs, daily tea—are invented to attract travelers.
• Explosive growth in the 1960s as entrepreneurs see opportunity for leisure cruising in the Caribbean.

David Brown [07:16]: “Traveling by boat wasn't always so sunny and easygoing, though.”

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4. The Ted Arison Story: Reluctant Pioneer, Relentless Operator (11:01–26:39)

• Ted Arison, forced out of the cargo business and facing financial hardship, jumps into cruising almost as an afterthought after predicting an opportunity in chartering ships to the Caribbean (11:43–12:52).
• Loses everything when an Israeli partner goes bankrupt but is encouraged to bounce back by his lawyer. He contacts Knut Kloster, who has a ship but no passengers (15:57).
• The birth of Norwegian Cruise Line results from these complementary needs. Arison negotiates the U.S. operations; Kloster oversees ships and crew.
• Early agreement sows the seeds of future disaster: ticket revenue is held by Arison until post-voyage, creating a trust gap.

Arison [24:28]: “You handle the ship and the maritime staff. I handle the cabins, the food, and the entertainment...”

Kloster [25:32]: “So the money will just sit in your account for a year?”

• Successful national marketing campaign leads to rapid growth—“oodles of money”, but other companies want in (26:42).

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5. Royal Caribbean: The Challenger Emerges (29:07–33:50)

• Ed Steffen, traumatized ex-Yarmouth manager, teams with Pete Whelpton to design a new breed of cruise ship: faster, safer, smaller cabins (so people buy more on deck). European shipping barons Skoggin and Willemson invest.
• Innovative design allows docking at all Caribbean ports—cuts costs, improves guest experience.
• Song of Norway is a sellout hit in 1970, establishing Royal Caribbean as a serious contender.

Steffen [29:38]: “I've designed a ship that is light and fast, so it saves fuel. And with a hull shallow enough that it can dock at every port of call in the Caribbean.”

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6. A Bitter End: The Breakup and the Birth of Carnival (39:43–44:45)

• Court battle follows as Kloster sues Arison; ordered to receivership, Arison withdraws all funds and flees.
• With help from crafty financier Moshulam Rickless, Arison launders the assets and purchases a decrepit Greek ship to start again.
• The battered Mardi Gras becomes Carnival’s flagship. Arison’s son Mickey joins; despite humble beginnings, Arison predicts Carnival will soon dominate.

Arison (to son, on seeing the Mardi Gras) [44:00]: “It's a piece of junk.”
Arison [44:09]: “We're going to start with this bruised and battered old lady and we're going to build the biggest cruise ship company in the world.”

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Notable Quotes & Memorable Moments

• David Brown [07:16]: “During their voyage, they’ll likely gorge themselves at the buffet, drink one too many frozen daiquiris, get sunburned on the Lido deck, and belt out an off-key Adele rendition at Karaoke.”
• Ted Arison [12:13] (on negotiating): “He’s just trying to get a lower charter fee. But you don’t have to take that. I know the cargo business. I’ll move to Miami and take over the charters for the boats myself.”
• Arison [24:52]: “Our job is getting passengers on board and making sure they have a good time once they're there.”
• Steffen [30:23] (on cruise ship design): “On cruise ships, we want people on the decks...we want them buying drinks and souvenirs—spending money.”
• Arison [44:30]: “So I guess...what are we calling this new cruise line? Carnival?”

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Timeline of Important Segments

• 00:12–01:41 – Context: Hantavirus outbreak, the ongoing risks of cruising, and framing the cruise wars.
• 01:41–05:45 – Kloster confronts missing money at Norwegian Cruise Line.
• 07:16–13:07 – History of passenger liners to modern cruising as leisure.
• 11:01–12:52 – Ted Arison discovers the cruise charter opportunity.
• 24:11–26:44 – Founding of Norwegian Cruise Line, profit-sharing arrangement.
• 29:07–33:50 – Royal Caribbean founded, prioritizing operational innovations and service.
• 34:37–39:43 – Kloster uncovers Arison’s accounting tricks, leading to confrontation and legal action.
• 41:44–44:45 – Arison partners with Rickless, launches Carnival with the Mardi Gras.

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Final Thoughts & Tone

The episode is equal parts corporate history and entrepreneurial thriller, dramatically reenacting the ambition, risk-taking, and duplicity that birthed the modern cruise industry. With a cinematic flair, it vividly portrays business as war—where old friends become adversaries, fortunes are built (and lost) on gutsy bets, and even junkyard ships can become floating empires. If you haven’t heard the Cruise Ship Wars saga, this lively episode is a perfect (re)introduction.

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Recommended Reading:

• "Devils on the Deep Blue Sea" by Christopher A. Guerin
• "Selling the Sea" by Bob Dickinson and Andy Vladimir

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Transcript

[Narrator / David Brown]

Audible subscribers can listen to all episodes

[Announcer / Advertiser]

of Business wars ad free right now. Join Audible today by downloading the Audible app. This series originally aired in 2024.

[Narrator / David Brown]

A listener note.

[Announcer / Advertiser]

You might have heard about what the media recently dubbed the Cruise from Hell. This past May, the rare and mysterious hantavirus started spreading aboard a luxury cruise ship that was exploring Antarctica. Health officials confirmed the virus killed three passengers and forced 18 others to endure a 42 day quarant once they return to the U.S. no new cases have been confirmed here. It's the kind of nightmare the cruise industry thought it had put fully in the past. Whether this crisis will dampen future ticket sales remains to be seen, but one thing that is clear since we first aired our Cruise Ship wars series in 2024, cruising has continued to enjoy a rapid ascent. The travel company AAA predicts 2026 will be another record breaking year, with nearly 22 expected to set sail. But the industry has seen its fair share of rough waters, and not just during the peak pandemic years of 2020 and 2021. And while Carnival, Royal Caribbean and Norwegian are household names now, they fought hard and sometimes dirty to own the seas, backstabbing thievery and plenty of flush times in between. We're revisiting all of it in this Business wars series.

[Narrator / David Brown]

It's late 1971 in Miami, Florida. Norwegian Cruise Line co founder Knute Closter marches down the dock of the Miami port. Around him, the place is bustling with workers loading and unloading cargo ships. A light sea breeze ruffles Kloster's thick, wavy hair. He's just off the plane from Oslo, Norway, where temperatures haven't reached above freezing in weeks. The balmy Miami temperatures feel glorious, but Kloster isn't here to enjoy the sun. He's here to confront his business partner, Ted Arison. Five years ago, Kloster and Arison founded Norwegian Cruise Line. Together, the company took cruising to new levels, ferrying people from Florida to various Caribbean islands for a week of fun and relaxation. But recently, a financial dispute drove a wedge between the two men, and Kloster sued his partner. A judge has ordered Norwegian's U.S. accounts put in a receivership, but Kloster doesn't trust Arison to abide by the ruling, so he's flown to Miami to make sure Arison does as he's been ordered. Kloster half runs the last hundred feet to Norwegian Cruise Line's office on the dock. He bursts through the door. A young receptionist sitting at the front desk looks up, startled.

[Receptionist]

Mr. Cluster. I didn't know you were coming in today.

[Narrator / David Brown]

I need to see Ted.

[Receptionist]

He's not in today.

[Narrator / David Brown]

Where is he?

[Receptionist]

I. I don't know.

[Narrator / David Brown]

When's the last time you saw him?

[Receptionist]

A couple of days ago.

[Narrator / David Brown]

A sense of dread overcomes Kloster.

[Ted Arison]

Do you know the combination to the safe?

[Narrator / David Brown]

The receptionist nods.

[Ted Arison]

I need you to open it right now.

[Narrator / David Brown]

The receptionist leads Kloster to Erison's private office in the back. She moves aside a painting of a seascape to reveal a small safe built into the wall. She carefully spins the dial, entering the combination. The lock clicks and the receptionist opens the door.

[Receptionist]

What the hell?

[Narrator / David Brown]

The safe is completely empty except for some ripped rubber bands that had been used to hold bundles of cash. Klosser's mind races. He was willing to go along with Arison's story that his accounting methods were unorthodox, but essentially above board. But as he stares into this empty safe, he can no longer deny the truth. This is theft. Then a more chilling realization hits Kloster. He turns to the receptionist. Get our Miami banker on the phone right away. The receptionist nods and dials, handing the receiver over to Kloster. Yes, this is Knut Kloster with Norwegian Cruise Line.

[Ted Arison]

I need you to look into these accounts. I'll give you the number.

[Narrator / David Brown]

He rattles off the Norwegian Cruise Line account numbers. Yes, I need you to tell me the balance in those accounts straight away.

[Ted Arison]

Just a moment, sir.

[Narrator / David Brown]

There's a pause as the banker looks up the information. Kloster taps his fingers on the desk impatiently. I'm sorry, sir. Those accounts have been closed.

[Ted Arison]

Closed? Yes.

[Narrator / David Brown]

It says here that Mr. Arison withdrew

[Ted Arison]

all the money two days ago.

[Narrator / David Brown]

Kloster hangs up the phone without saying another word. His heart pounds against his chest. He can't believe Arison double crossed him. Of course Kloster can sue him and he'll win. Harrison doesn't have a legal leg to stand on, but it will take years for the case to make its way through the American legal system. And in the meantime, Kloster will have lost his company. Kloster swallows. The odds may be against him, but he's not going to let Harison win.

[Ted Arison]

He's going to do whatever it takes

[Narrator / David Brown]

to keep Norwegian Cruise Line operating. Arison may think he's in the clear, but Kloster is dead set on making sure there are storms on Arison's horizon.

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[Narrator / David Brown]

from wondering I'm David Brown and this is Business Wars. This year, approximately 36 million people around the world are predicted to set sail aboard cruise ships. During their voyage, they'll likely gorge themselves at the buffet, drink one too many frozen daiquiris, get sunburned on the Lido deck, and belt out an off key Adele rendition at Karaoke. It'll be an experience where fun, relaxation and luxury are the main focus. The days at sea are as much an attraction as the ports of call. Traveling by boat wasn't always so sunny and easygoing, though. Throughout the 19th century, ocean liners were the primary form of intercontinental travel, and they weren't a mode of transportation people took for fun. They were a means to an end. Third class passengers were crammed into the steerage quarters, eating meager food with no way to bathe, and the stench of seasickness reached even the most expensive first class cabins. But over the first half of the 20th century, passenger ships faced a slow decline in business as restrictive immigration laws, the Depression and two world wars reduced people's ability to travel overseas. But the nail in the industry's coffin came after World War II with the development of jet trucks travel, which allowed passengers to cross oceans in hours rather than days. But in 1950, an enterprising businessman in Miami got a good deal on an old passenger ship. He decided to start ferrying retirees to the nearby Caribbean islands. And to sell people on the experience of traveling by ship, he decided to make their time on board part of the appeal. He added swimming pools, set up shade structures and deck chairs, and served tea every afternoon. And modern cruising was born. But it wasn't until the 1960s that cutthroat visionaries on both sides of the Atlantic saw the mammoth potential in cruising. Within six years, Norwegian Cruise Line, Royal Caribbean and Carnival were all founded and soon began battling it out to be the top cruise company in the world. In our new four part series, we'll track the corporate skirmishes, boardroom betrayals and brazen thievery that occurred as these swashbuckling CEOs transformed a niche vacation option for retired floridians into a $30 billion industry. This is episode one anchors. It's summer 1966 in Miami, Florida. Ted Arison tosses a ball made of rubber bands between his hands as he sits in the office of his friend Meir Halevi. The two men both grew up in what is now Israel and both went into the freight business. Arison owned air cargo companies while Halevi operates a car freight one. Harrison thumps the ball against Halevi's desk insistently. His barrel chest strains against the buttons of his shirt as he watches his friend with a mischievous twinkle in his dark brown eyes. But Halevi doesn't look up from the report he's reading.

[Ted Arison]

Can we grab lunch already? I didn't fly all the way from New York to watch you futz around with spreadsheets.

[Narrator / David Brown]

Hold your horses, would you? Some of us still have to work for a living. Arison recently sold his air cargo company for several million dollars and as part of the deal, he signed a four year non compete agreement. He's about to move back home to Israel to wait out his forced retirement.

[Ted Arison]

Hey, trust me, I'd much rather be working. I'm 42 years old. These are my prime earning years and instead I'm going to be twiddling my thumbs in Israel. Okay, I'm ready.

[Narrator / David Brown]

He's interrupted by his telex machine, a kind of proto fax machine, clicking with an incoming message.

[Ted Arison]

Oh, wait, hold on. Let me just see what this is. Oh, it's from Lou Fraser. He's the guy I was telling you

[Narrator / David Brown]

about who's chartering two of our ships

[Ted Arison]

and using them to take tourists to the Caribbean. Ah, that.

[Narrator / David Brown]

That's a smart Business?

[Ted Arison]

When I was in Nassau last year, the beach was brimming with people who

[Narrator / David Brown]

had come off one of those cruise ships.

[Ted Arison]

Seemed like they were having a grand old time.

[Narrator / David Brown]

Well, Lou says that business isn't going well and he's facing financial difficulties.

[Ted Arison]

Oh, come on. You're too smart to fall for that BS this is a negotiating tactic. He's just trying to get a lower charter fee. You think? Absolutely. I guarantee you that in a couple of days, he's going to get in touch again and ask for a lower fee. But you don't have to take that. I know the cargo business. I'll move to Miami and take over the charters for the boats myself. Are you being serious? Why not? I need something to do. And how different can moving passengers be from moving freight? All right, well, if Lou tries to renegotiate this deal, I'll let you know. In the meantime, let's get lunch. Finally. I'm starving.

[Narrator / David Brown]

The two men saunter out of the office and into the Miami sun. Arison's mind quickly moves on. He never expects that his off the cuff comment will completely change the course of his life. A few days later, after Arison has returned to Long Island, Halevi receives a phone call from Lou Fraser. Just as Arison had predicted, Fraser tries to negotiate a lower charter fee. But instead, Halevi cancels Fraser's charter and calls Arison. The charters are his if he wants them. One ship, the Neely, is ready to sail. The other will arrive from Israel in a few months, his house already packed up with his family, booked to return to Israel the next day. Arison makes a snap decision. He's not moving back to Israel after all. He's going to Miami. He's in the cruise ship business now. Arison arrives in Florida and quickly gets to work. He negotiates with Lou Fraser to buy out the bookings of passengers who had already paid for voyages. He hires a bulldogged operations manager named Meshalum Zonis to run the hospitality side of the ship, including entertainment. And by the end of September 1966, he's run several weeks of successful cruises. The ships have been full, the passengers happy, and Arison sees nothing but blue skies ahead. But in the fall, he gets word from union leaders in Haifa, Israel. The new ship is ready to sail to Miami, but Halevi's company is in financial dire straits. The union won't let the ship leave port unless Arison deposits guarantees on the crew's salary. Arison doesn't have that kind of cash on hand, so the ship is Trapped in Haifa. It's also the first Arison has heard about his friend's financial difficulties. And those difficulties get worse. Halevi's entire company goes belly up and the Nili is seized by the Israeli government, which owns the mortgage on the ship due to non payment from Halevi. Just months after investing all of his money into the cruise business, Arison has lost everything. He's devastated and feels like a fool. But over Thanksgiving dinner, a solution presents itself. It's Thanksgiving, 1966 in Miami, Florida. Ted Arison sits at the large dinner table at his attorney's house. All around him, people chat and feast. But Arison can't get into the holiday spirit. He's too depressed about losing his business. He pushes food around his plate, too despondent to eat. His lawyer notices Arison's meager attempts at eating. Buck up, Ted. I know things look bleak, but once

[Ted Arison]

you charter another ship, you'll be back in business in no time.

[Narrator / David Brown]

How am I going to get a ship?

[Ted Arison]

I have no money, no credit. You get creative, promise back end on future bookings. You're a smart guy. You'll figure something out. There's got to be some ship owner eager to make a deal. Well, there is one possibility. I was reading Travel Weekly yesterday and read about this brand new ship owned by this Norwegian guy named Knut Kloster. It was supposed to ferry people from England to Gibraltar, but with all the political problems in Gibraltar, the ship can't make the trip. From what the article said, I think it's just sitting empty in England. Well, you see, There you go. Call him up. But I have nothing to offer. And this ship is owned by the son of one of the most prominent shipping families in Norway. Why would he want to work with some putz who got into the cruise ship business less than six months ago? Well, because you have passengers with no ship and he has a ship with no passengers, he'd be a fool not to at least talk to you. Well, doesn't matter because I can't even afford to make a long distance call. Come on, use my phone.

[Narrator / David Brown]

Harrison sits up in his seat, a grin coming over his face. Just the prospect of a deal is improving his mood. He shoves a big bite of mashed potatoes in his mouth. His appetite has returned. That night, Arison calls Kloster and the Norwegian agrees to come to Miami in two days to meet with Arison and see his operation. Arison spends the next two days running around the Miami port, convincing his suppliers and crew to stay on for just two more days so he can present them to Kloster.

[Ted Arison]

Arison needs to sell Kloster on the idea that he has the skills and

[Narrator / David Brown]

resources to run a successful cruise company, even though Arison's company is a house of cards. When Arison picks Kloster up from the airport, he can't hide his nerves. His hands shake and his voice sounds thin and strained. Once they get into Arison's office, each of Arison's suppliers outlines the numbers they ran on the Neely before it was seized. The concessionaires are doing their best, putting on a whole song and dance for Kloster. But as Arison looks at Kloster's face, he can see that the Norwegian isn't convinced. Harrison becomes more and more withdrawn, convinced that this has been a waste of time and that he's doomed to financial ruin. But he's determined to see the meeting through, despite its inauspicious start. So Arison takes Kloster to meet Miami's

[Ted Arison]

newly named port director.

[Narrator / David Brown]

The port is in the midst of massive construction, betting on the future of cruise shipping. A new passenger terminal is half built and piles of dirt and heavy equipment are parked around. Seeing the half constructed port through Kloster's eyes, Arison's mood sinks even further. There's no way Kloster is going to see the potential. The port director bustles up. A retired naval admiral, he still walks with perfect posture and an air of confidence surrounds him. He clasps Arison's hand and grabs his shoulder. Ted, good to see you. He turns to Kloster, shaking his hand with a powerful grip. And you must be Knut Kloster. The business your family has in Norway is most impressive.

[Ted Arison]

Thank you.

[Narrator / David Brown]

I know looking around here, this must seem like a mess, but I have the best engineers working for me and they can get anything built faster than anyone. And if you commit a ship here, you'll get your own terminal. I can promise that. Kloster nods, taking in the chaotic scene around them. You know, people back in Norway think

[Ted Arison]

I'm foolish to get into the passenger trade.

[Narrator / David Brown]

My family made its fortune first by

[Ted Arison]

shipping ice and then oil.

[Narrator / David Brown]

But I don't want to do the

[Ted Arison]

same thing my father and grandfather did.

[Narrator / David Brown]

I want to build my own legacy. Harrison sees an opportunity to make a point.

[Ted Arison]

Cruising is definitely a way to do that. This industry is at the precipice and it's only going to grow. We can be at the forefront. Maybe.

[Narrator / David Brown]

The cruise director jumps in. Ted's right. I fully believe that the future of holiday travel is seagoing leisure, and this port is going to be the premier destination for it. What Ted is offering is an opportunity to shape a whole new industry. Cluster nods, a small smile quivering at his lips. He can't deny that he likes the sound of that. The director puts his hand on Arison's shoulder. And you won't find a better partner than Ted Arison. I watched him run the Neely. This is a man who knows how to run a cruise ship. Harrison knows he owes this port director the best bottle of whiskey money can buy. If Kloster says yes, it'll be because of the director's sales skills, not Harrison's. Gloucester crosses his arms and surveys the scene. Harrison watches him on tenterhooks. Finally, Kloster turns to Arison. Well, I have one condition.

[Ted Arison]

Say it. Anything.

[Narrator / David Brown]

You have to guarantee me half a million in profit a year. If you don't hit that benchmark, our agreement is void.

[Ted Arison]

No problem.

[Narrator / David Brown]

Kloster reaches out his hand and Harrison shakes it. He hopes his shaking hand doesn't betray his nerves about what he's just agreed to. He has no idea if he can turn half a million dollars in profits,

[Ted Arison]

but he's going to figure it out.

[Narrator / David Brown]

Because one thing Arison does know is that he'll never allow himself to lose everything again.

[Ted Arison]

And he will do anything to guarantee that.

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[Narrator / David Brown]

It's November 1966 in Miami, Florida. Ted Arison sits across from Canute Closter in his small office on the Port of Miami. They've recently agreed to work together to start a cruise line, but now it's time to hammer out the specifics. Arison lays out his plan.

[Ted Arison]

Look, I don't think this needs to be complicated. You handle the ship and the maritime staff. I handle the cabins, the food, and the entertainment, yes, as long as it's clear that my staff is in absolute

[Narrator / David Brown]

control when it comes to operating the ship.

[Ted Arison]

Definitely. My people don't know how to operate a ship. Our job is getting passengers on board and making sure they have a good time once they're there.

[Narrator / David Brown]

Now onto the name. I'm thinking Norwegian Cruise Line.

[Ted Arison]

Well, don't you think that might confuse folks? We're sailing from Florida to the Caribbean. Norway's nowhere in that picture. It's a Norwegian built boat, a Norwegian crew operating it. I think it makes sense.

[Narrator / David Brown]

Besides, Norway has a strong nautical tradition. It will give people confidence they are in safe hands.

[Ted Arison]

Yeah, I don't love it, but if it's make or break for you, then sure we can call it Norwegian Cruise Line. Very good.

[Narrator / David Brown]

Next item to discuss. Since you'll be dealing with the travel

[Ted Arison]

agents and bookings, it makes sense for you to collect the booking fees and then send us our cut. Sure, but deposits are just deposits. People cancel and need refunds. So I don't think we should transfer the money until the cruise is completely complete.

[Narrator / David Brown]

Closter wrinkles his brow. Isn't it possible that some people will

[Ted Arison]

book their passages several months, if not a year in advance? Yeah, that's likely. So the money will just sit in

[Narrator / David Brown]

your account for a year.

[Ted Arison]

Well, if that worries you, I can

[Narrator / David Brown]

send you the balances and the budgets

[Ted Arison]

on a regular basis for you to see.

[Narrator / David Brown]

Closter thinks for a moment, then nods. That will work. Arison grins.

[Ted Arison]

I think this is the beginning of a beautiful friendship. Me too. And a lucrative one. Absolutely.

[Narrator / David Brown]

With the agreement worked out, the two men get to work. Kloster dispatches one of his ships to the port of Miami. Arison's son Mickey drops out of college and starts Working for the company, too. They start a national marketing campaign and almost immediately, Norwegian Cruise Line is a hit.

[Ted Arison]

Every week they sell out their cabins.

[Narrator / David Brown]

And when a ship is full, a ship makes money. Lots of money. Seeing the potential for growth, Kloster invests his money into building brand new ships. Soon, Norwegian Cruise Line has three ships sailing weekly out of Miami. And they're all selling out, making oodles of money. Other companies start to take notice of their success and want a piece of the action. It's late 1967 in Miami, Florida. Pete Whelpton rings the doorbell of his former colleague Ed Steffen's house. As Welton waits for Stefan to answer, he shifts his weight back and forth. His curiosity about why Stefan asked him to come over is making him antsy. Welpton worked with Steffen a few years back for a young company called Yarmouth Cruise Lines. Steffen was the general manager while Welpton served as operations chief. Welpton loved working under Stefan. Stefan was a Korean War vet who had worked his way up in the hotel industry before running Yarmouth. He was brilliant, calm and industrious. Welton would have liked to work for Stefan for the rest of his career. But two years earlier, in November 1965, faulty wiring aboard one of Yarmouth's ships started a fire. It spread undetected for almost an hour. By the time the crew discovered it, the fire couldn't be contained. 91 people died on board. Both Whelpton and Stefan were devastated by the loss of life, and it continued to haunt them. Yarmouth Cruise Line shut down in the wake of the disaster, Whelpton and Steffen went their separate ways, falling out of touch. But Whelpton still misses working under Steffen. He has a new job managing a local hotel. But if Steffen offers Whelpton a job tonight, Welpton knows he'll accept it without even asking the salary. When Steffen answers the door, Welton is shocked at his appearance. There are deep bags under his eyes and his hair flies every direction. Usually an impeccable dresser, his clothes are rumpled and creased. Stefan puts out a hand.

[Ted Arison]

Pete, good to see you. Thanks for coming in on such short notice. I know I called you up out of the blue.

[Narrator / David Brown]

I was thrilled to hear from you. It's been too long.

[Ted Arison]

Yes, come in, come in. I need to show you something.

[Narrator / David Brown]

Welton follows Stefan into the living room. The floor is covered in papers that are filled with what looks like schematics across equations and scribbles that Welton can't decipher.

[Ted Arison]

What's all this designs for a new cruise ship.

[Narrator / David Brown]

Stefan picks out a piece of paper from the sheets carpeting the floor and holds it up.

[Ted Arison]

Look at this. I've designed a ship that is light and fast, so it saves fuel. And with a hull shallow enough that it can dock at every port of call in the Caribbean.

[Narrator / David Brown]

That's brilliant. We cut out the local ferries. Cruise ships that are too large to dock have had to rely on local ferry companies to take passengers to shore.

[Ted Arison]

Exactly. It saves money and makes a smoother experience for passengers. Now look at this.

[Narrator / David Brown]

He picks up another piece of paper, showing a blueprint of the inside of the ship.

[Ted Arison]

Back in the day, when they were building ocean liners, they made staterooms as large as possible. Since crossing the Atlantic was rough, no one wanted to be on deck and passengers spent most of their time in their cabin. But on cruise ships, we want people on the decks.

[Narrator / David Brown]

Right. We want them buying drinks and souvenirs. Spending money.

[Ted Arison]

Exactly. So I've designed significantly smaller cabins. We can pack more people on board, and people won't want to spend much time in their rooms.

[Enterprise Advertiser]

Hmm.

[Ted Arison]

Smart. And of course, I made sure that

[Narrator / David Brown]

the emergency systems are all top of the line.

[Ted Arison]

This will be the safest boat on the water. Good. So what do you think? You want to work for my new cruise line?

[Narrator / David Brown]

Where you lead, I follow my friend.

[Ted Arison]

Good. Norwegian Cruise Line is out there making money hand over fist, and they're still designing their boats to old specs.

[Narrator / David Brown]

We do this right and we could

[Ted Arison]

become the biggest and best cruise line in the world.

[Narrator / David Brown]

Welton nods enthusiastically. Excited to be working with Steffen again, Stefan travels to Norway and secures investments from two shipping magnates, Sigurd Skoggin and Arne Willemson. The three of them form a business arrangement similar to Ted Arison and Knut Klosters. Skagen and Willemson split equal shares in the new company and commit to building two boats. According to Steffen's specs. They will own the ships and oversee the maritime staff. Stephen is named president of the new company and is responsible for the hotel and entertainment side of the business.

[Ted Arison]

They named their new company Royal Caribbean Cruise Line.

[Narrator / David Brown]

They chose the name to signify the high level of service customers could expect from the company. As his first order of business, Steffen hires Whelpton to oversee hotel and restaurant operations. Welpton rents a warehouse in Miami and hires carpenters to build mock ups of different parts of the ship. Then he begins training his newly hired staff. He makes waiters carry heavy trays loaded down with fake food and times how long it takes them to deliver it. He has his porters practice loading and unloading baggage over and over. If people are not fast or precise enough, he fires them. He is determined that Royal Caribbean will

[Ted Arison]

have the best staff.

[Narrator / David Brown]

The first ship is delivered in the fall of 1970 and christened the Song of Norway. It's an instant hit. It sells out every voyage in its first five months, carrying 10,000 passengers. In that time, Norwegian Cruise Line continues to sell out its cabins too. Both companies see nothing but growth ahead. But even though Norwegian Cruise Line is making more money than either Arison or Kloster anticipated, their relationship is about to enter choppy waters. It's fall 1971 in Oslo, Norway. Knut Kloster sits in his office reading through a report, but he can't focus. He's pretty sure he's been staring at the same 10 words for the past hour. At any moment an outside auditor is supposed to deliver his preliminary report on Norwegian Cruise Lines accounts, and Kloster is nervous about what he'll find. A few months ago, an executive came to Kloster and said he suspected that Ted Arison was mishandling company money. Closter didn't believe it at first. The Norwegian and American sides of the company had a long standing rivalry and Kloster had written off the executive suspicions as a political move to cast aspersions on Arison. But when the executive walked Kloster through some of the fuzzy ways Arison was documenting the accounts, Kloster had agreed to the audit. Kloster considers Arison his friend and he hopes this is all a misunderstanding. But there's a little voice in the back of his head that tells him Arison hasn't completely been on the up and up. The phone rings and adrenaline surges through Closter. Kloster answers the phone. It's the auditor. Mr. Kloster. Is now still a good time? Yes. What did you find? Well, first let me say that Mr. Harrison has made it very difficult to decipher his books. He tends to lump everything under the category of accounts receivable and makes no distinction between money that has been received

[Ted Arison]

and money that is owed.

[Narrator / David Brown]

Now, whether that practice is out of ignorance of best practices or intentional deceit

[Ted Arison]

is not for me to say.

[Narrator / David Brown]

Yes, I know the books are a mess. If I could have made sense of

[Ted Arison]

them myself, I wouldn't have hired you. Right.

[Narrator / David Brown]

Well, to get to the point, I have found a significant amount of assets unaccounted for.

[Ted Arison]

How significant?

[Narrator / David Brown]

There's approximately a 7 million dollar difference between what the books say and what's actually in the accounts. Kloster blinks. He can't believe what he just heard.

[Ted Arison]

Did you say $7 million? Yes, sir. That's more than two thirds of our annual revenue.

[Narrator / David Brown]

Kloster hangs up the phone in a daze. It's hard to believe that $7 million could go missing by accident. Kloster knows he has to confront Arison and find out what happened to that money. But this is a devastating development, and Kloster's not sure how Norwegian Cruise Line is going to survive. It's late 1971 in Miami, Florida, Norwegian Cruise Line's US headquarters. Knut Kloster sits across from Ted Arison in Arison's office. Arison sits at his desk, his feet up, paging through the auditor's report on the company's accounts. A few days ago, the auditor informed Kloster that there was a $7 million discrepancy between Erison's books and what's actually in the accounts. Kloster flew to Miami to confront Arison and see if there was some kind of innocent explanation for the missing money. After a moment, Arison closes the report and looks up at Kloster with a smile.

[Ted Arison]

Canute, this is all one big misunderstanding.

[Narrator / David Brown]

Kloster feels the tension in his shoulders ease. This is what he was hoping to hear.

[Raza Jaffrey (Narrator for Spy Who)]

Really?

[Receptionist]

Yeah.

[Ted Arison]

The guy who did this audit is probably a smart man, but he doesn't know the cruise industry at all. This discrepancy is completely normal.

[Narrator / David Brown]

I don't understand.

[Ted Arison]

Remember the arrangement we made? I collect the fees from passengers when they book their trip, and then I send it to you after they complete their voyage. Of course. Well, that money is sitting in my account for a year, and it's silly to have that kind of dough just sitting there doing nothing. So I invested it. Besides, I told you about this. Every time I made an investment, I asked you if you wanted in. You always said no.

[Narrator / David Brown]

The relief Kloster had felt moments ago dissipates in an instant. I didn't know you were making these investments. With my own money.

[Ted Arison]

Well, technically, it's not your money.

[Narrator / David Brown]

What are you talking about?

[Ted Arison]

It's not your money until the cruises are complete, fees for future bookings belong to me. As long as I have the funds to pay you at the completion of the cruise. I don't see what the problem is.

[Narrator / David Brown]

No, the deposits are still company money.

[Ted Arison]

You can't just spend it as you wish. Look, everything's been fine. Haven't I paid you? What you're owed every quarter so far. But these investments you're making. Very risky. That's why I always say no. What if you have a string of bad luck? You're worrying about something that hasn't happened. Just relax.

[Narrator / David Brown]

I'm the ship owner.

[Ted Arison]

I'm liable if a cruise gets cancelled

[Narrator / David Brown]

or some other problem arises.

[Ted Arison]

I can't have you risking my ability to pay for those problems. You need to transfer all of the fees for future cruises into the Norwegian accounts immediately.

[Narrator / David Brown]

Arison's face goes ashen.

[Ted Arison]

I can't do that.

[Narrator / David Brown]

Well, you have to. Foster storms out of the office, furious that he misjudged Arison's character so badly. Harrison doesn't have the funds to transfer the deposits to Kloster. The two men try to work out a payment plan, but the trust between them is broken and they soon reach a stalemate. Fed up, Kloster takes the matter to court. The judge rules that the account should be placed in a receivership until the case is finished. But Arison sees this coming and takes

[Ted Arison]

all the cash on hand from the

[Narrator / David Brown]

Miami office and withdraws all the funds from the accounts. And then he flees to Europe. He refuses to lose everything again. Kloster, suspecting that Arison might pull a maneuver just like this, heads back to

[Ted Arison]

Miami as soon as he can.

[Narrator / David Brown]

But he's too late. Arison and the money are gone, the safe in the office empty. Harrison knows that the court will rule against him and that he will have to pay back all the money. But what he needs is time. Time to start a new business so that reimbursing Kloster won't result in his own personal bankruptcy. Arison wants to start a new cruise line, and he has intel on a ship in Greece. But if Kloster can prove that Arison used Norwegian Cruise Line money to purchase it, Arison's new ship will be considered an asset of Norwegian Cruise Line and the company would be within their rights to seize it. So Arison needs a way to purchase the ship with untraceable funds. Fortunately, Harrison knows someone who can help. It's late 1971 in continental Europe. Ted Arison sits in a small, bustling cafe drinking an espresso. It's afternoon and the sun is already heading down. Christmas lights are turning on all around the city. The door swings open and Arison looks up to see his old friend Moshulam Rickless stride in his long camel hair coat sweeps behind him and his broad cheeks are rosy from the cold. Erison gives him a smile. Rickless and Arison grew up in Tel Aviv together and both immigrated to the United States. But Rickless had gone into finance, where he came up with innovative new strategies to take over companies. He now runs an empire of businesses, including cosmetics manufacturers and a chain of five and dime stores, as well as a travel agency. He's considered brilliant, if ethically flexible. And that's exactly what Arison is looking for. Arison greets Rikless with a hug.

[Ted Arison]

Rick, it's so good to see you.

[Narrator / David Brown]

It's been too long, my friend. But that raises the question, why the sudden urgency to meet?

[Ted Arison]

And I may have gotten myself into a small jam.

[Narrator / David Brown]

He quickly explains the situation with Norwegian Cruise Line, and Rickless grasps why Harrison reached out.

[Ted Arison]

Let me guess. You need me to help you make these funds untraceable. Well, I think it's a great opportunity for us. When we fill our cabins, and I know how to fill cabins, we will make so much money and the industry's just going to continue to grow.

[Narrator / David Brown]

Yes.

[Ted Arison]

Well, I've been watching and I agree that the industry has yet to reach its peak potential. Let's do it. Yes. You transfer me the money, we'll set you up as a subsidiary of my company, American International Travel Service, and I'll buy your ship for you. And you'll do it in a way that no one will know where the money came from.

[Narrator / David Brown]

Rickless laughs.

[Raza Jaffrey (Narrator for Spy Who)]

Please.

[Narrator / David Brown]

That'll be the easiest thing I do all week. All you have to do is turn me a profit. Harrison lets out a sigh of relief. He's back in business. It's December 1971 in Greece. Ted Arison struts down the dock. His son Mickey ambles behind him. Mickey is 22 years old, with hair to his shoulders. He's wearing large sunglasses and a pastel suit with wide lapels. Ted looks back.

[Ted Arison]

Mickey, get a move on.

[Receptionist]

Hey.

[Ted Arison]

Okay, I'm coming, I'm coming. Wait until you see this ship. I'm going to make it the flagship of our Golden Fleet. What do you think? What Golden Fleet? This is our only ship. Don't be so literal.

[Narrator / David Brown]

They make their way to the last berth, where a large old ship sits. Ted throws out his arms with panache.

[Ted Arison]

Ta da. I present to you the Mardi Gras.

[Narrator / David Brown]

Mickey lowers his sunglasses, his mouth agog this. Ted nods, still grinning. But Mickey's confused.

[Ted Arison]

It's a piece of junk.

[Narrator / David Brown]

The ship is filthy and covered in rust with dents and dings all over it.

[Ted Arison]

Who cares?

[Narrator / David Brown]

We're going to start with this bruised

[Ted Arison]

and battered old lady and we're going to build the biggest cruise ship company in the world.

[Narrator / David Brown]

Canute Plaster and the guys at Royal

[Ted Arison]

Caribbean are going to eat our dust.

[Narrator / David Brown]

Mickey nods. He knows there's no point in arguing with Ted.

[Ted Arison]

All right, so I guess, I mean, what are we calling this new cruise line? Carnival?

[Narrator / David Brown]

Mickey nods. It's hard to imagine this ancient ramshackle boat being the cornerstone of a new cruising empire. But Mickey learned long ago not to underestimate his father. If he says Carnival is going to

[Ted Arison]

be the biggest cruise company in the

[Narrator / David Brown]

world, then it will be the other cruise companies. Better get ready to walk the plank.

[Announcer / Advertiser]

Follow Business wars on the Audible app or wherever you get your podcasts.

[Narrator / David Brown]

You can listen to all episodes of Business wars ad free by joining Audible from wondering this is Episode one of Cruise Ship Wars. For Business Wars, a quick note about recreations you've been hearing. In most cases, we can't know exactly what was said. Those scenes are dramatization, but they're based on historical research.

[Ted Arison]

If you'd like to read more, we recommend Devils on the Deep Blue Sea

[Narrator / David Brown]

by Christopher A. Guerin and Selling the Sea by Bob Dickinson and Andy Vladimir. I'm your host, David Brown. Austin Rachlis wrote this story. Our senior producers are Karen Lowe and Dave Schilling. Our producers are Emily Frost and Grant Rutter. Sound design by Josh Morales.

[Ted Arison]

Fact checking by Gabrielle Drollet.

[Narrator / David Brown]

Voice acting by Michelle Phillippe and Kieran Regan. Our coordinating producer is Desi Blaylock. Our managing producer is Matt Gant. Our senior managing producer is Ryan Lohr. Our executive producers are Jenny Lauer, Beckman and Marshall Louie for Wonder.