فصل 6 بخش 8

CHAPTER 6.8

T. BOONE PICKENS: MADE TO BE RICH, MADE TO GIVE

Chairman and CEO of BP Capital Management

T. Boone Pickens, dubbed the “Oil Oracle” by CNBC, has always been ahead of his time. In the early 1980s, he was the original corporate raider—although “shareholder activist” has always been the term he’s preferred. His early focus on maximizing shareholder value, virtually unheard of at the time, has long since become a standard of American corporate culture. As Fortune magazine declared, “Boone’s once revolutionary ideas [are] so completely taken for granted that they have become linchpins of the economy.” By the early 2000s, Pickens had become a hedge fund manager, making his first billion after turning seventy—with a second career investing in energy assets. In the next decade and a half, he’d turn that billion into $4 billion—$2 billion of which he’d lose again, and $1 billion of which he’d give away.

Ever the optimist, Boone recently married for the fifth time, and at 86, he’s got a huge social media presence and shows no signs of slowing down. After falling off the Forbes 400 list last year, he sent a famous tweet declaring, “Don’t worry. At $950 million, I’m doing fine. Funny, my $1 billion charitable giving exceeds my net worth.” When I spoke to him regarding his net worth, he said, “Tony, you know me; I’m going to get the other two billion back in the next couple of years.” Boone, a Depression-era baby, started with nothing. At 12, he delivered papers and quickly expanded his route from 28 to 156 papers, later citing his boyhood job as an early introduction to “growing by acquisition.” After graduating from Oklahoma State University (then known as Oklahoma A&M) in 1951 with a degree in geology, Pickens built an energy empire in Texas. By 1981, his Mesa Petroleum Corporation had become one of the largest independent oil companies in the world. His corporate takeovers of the 1980s were the stuff of legend, with Gulf Oil, Phillips Petroleum, and Unocal being some of his most famous takeover targets.

But Pickens’s fortunes (and fortune) were always shifting. When he left Mesa in 1996, after a downward spiral in the company’s profits, many counted him out—he would soon lose 90% of his investing capital. But Pickens went on to stage one of the greatest comebacks in his industry, turning his investment fund’s last $3 million into billions.

While almost everyone we hear from these days is focused primarily on two asset classes, stocks and bonds, Boone’s BP Capital fund is different: he’s betting on the direction of the energy futures and derivatives markets. And while this book is devoted to helping you achieve financial independence, Boone says our dependence on foreign oil is the single greatest threat not only to national security but also to our economic well-being. Always one to be ahead of the curve, Boone is on a crusade today to free this country from our dependence on OPEC oil and usher in a new wave of energy policy with his Pickens Plan.

I’ve been a fan of Boone’s for as long as I can remember, and I’m now privileged to call him a friend. He’s been gracious enough to speak at many of my wealth events. What follows below is an excerpt of our latest conversations around building wealth, protecting America’s energy future, and his humble beginnings.

TR:

The first thing I have to start with is the incredible story of your birth. You often say you’re the “luckiest guy in the world,” and you really mean it. Tell me about that.

TBP:

My mom got pregnant in 1927, and I showed up in May 1928, in a small town in rural Oklahoma. And the doctor said to my father, “Tom, you’re going to have to make a tough decision here—whether your wife or your child survives.” And my dad said, “You can’t do that. Surely you can figure out how to get the baby without losing either one of them.” And the lucky thing was, that of two doctors in that small town, my mom’s doctor was a surgeon. And he said, “Well, Tom, what you’re asking me to do is a Caesarean section. I’ve never done it. I’ve seen it. I’ve read about it, and I’ll show you how much I’ve read.” So he took him across the room and showed him a page and a half he had on Caesarean sections. “Tom, this is all I have to go on,” he said. My dad read it and looked at him. “I think you can do it.” They knelt down and prayed. And then he talked that doctor into delivering me that day, in 1928, via Caesarean.

TR:

Wow!

TBP:

It was 30 years later before they did another Caesarean in that hospital.

TR:

How incredible that your father had the courage not to accept what other people told him when it came to the life and death of those he loved. He had the courage to say there is another way, and he wouldn’t bend. That certainly has influenced your life, hasn’t it, Boone? You don’t take no for an answer, do you?

TBP:

No, I don’t.

TR:

Well, your father is the ultimate role model of somebody who had the power to make a tough decision. You’re here, and your mama lived as well. What a beautiful story. I now understand the reference to “Luckiest Guy in the World.” TBP:

Yep.

TR:

You’ve also been deeply impacted by the concept of honesty, which for many people, unfortunately, in the financial industry, isn’t a core principle. Talk to me about that.

TBP:

Tony, I was on my paper route [as a boy] when I looked down, and something caught my eye, and it was a billfold in the grass. And I recognized it as a neighbor’s of someone on my paper route, so I knocked on the door of his house, and I said, “Mr. White, I’ve found your billfold.” And he said, “Oh my gosh, this is very important to me, thank you. I want to reward you.” And he gave me a dollar, which I couldn’t believe. I mean, a dollar was a lot of money back then.

TR:

Of course.

TBP:

It was 1940. I was 11 years old.

TR:

Wow.

TBP:

So I went home, and I was very happy, and I started to tell my mom and my aunt and my grandma my story—that Mr. White had given me a dollar. And they were all shaking their heads. I could tell they didn’t like the story, and I said, “Don’t you understand? He was happy that I found his billfold and took it to him.” And my grandmother looked at me and said, “Son, you’re not going to be rewarded for honesty.” So it was decided for me to take the dollar back to Mr. White.

TR:

That’s awesome! So making tough decisions and honesty—those two values have really shaped you. I remember reading a quote from you that inspired me as a kid. I’ve always been fascinated by what makes someone a leader versus a follower, and you said you always lived your life on your own terms. And I think I remember you saying that the secret to leadership was being decisive.

TBP:

We tried to take over Gulf Oil in 1984, and I thought it was a very weak management team. And I said, “These guys can’t even pull the trigger. They just aim, aim, aim, and they never fire!” TR:

That’s great. So you’re able to fire more quickly?

TBP:

A lot of people get put in leadership positions, and it drives me crazy because they don’t make decisions. They don’t want to make decisions; they would like somebody to do it for them. I feel like the decisions I make will be good, and I’ll see good results.

TR:

Well, that theory has certainly proven itself true. You became a billionaire by understanding energy and taking advantage of it.

TBP:

I’m 19 of 21 accurate predictions on oil prices.

TR:

Wow, 19 out of 21?

TBP:

On CNBC, yes.

TR:

That’s absolutely incredible. And you got $4-a-gallon gasoline right, yes? No one thought it would go that high back in 2011.

TBP:

When I spoke at your event, Tony, back in 2011 in Sun Valley, I stuck my neck out and said we were going to see $120 a barrel by Fourth of July weekend, which we did. I remember saying global demand was going to hit 90 billion barrels a day, and the price was going to have to go up to meet that level of demand.

TR:

Many of my Platinum Partners made a lot of money betting on that prediction, Boone. You gave them a synthetic option for taking advantage of that run-up. It was spot-on, thank you. So given your track record: one of the themes I’ve seen over and over with many of the greatest investors has been a focus on asymmetric risk/reward. How do you think about reducing your risk or making sure it’s worth the reward? What’s your philosophy on that?

TBP:

You get an MBA, that’s what they’ll teach you: cut your downside and give yourself a greater upside, and the payoff will come. I never approach investing that way.

TR:

Really?

TBP:

Listen, some deals are better than others, and I think we do a good job analyzing risk. But I can’t tell you specifically how I arrive at a decision. I know if I hit it, I’m going to knock it out of the park. And on the same one, maybe I strike out. I am willing to take big risks to make big rewards.

TR:

Okay, understood. So let me ask you this: If you couldn’t pass on any of your financial wealth, but all you could pass on to your children was an investment philosophy, or a portfolio strategy, what would it be? How would you encourage them so that they could have wealth long term?

TBP:

I really believe that if you’ve got a good work ethic, you probably pass it on. And if you have a good education to go along with a good work ethic, if you’re willing to work hard; I believe you can get there. I think the good work ethic came to me from a small town in Oklahoma. I saw my grandmother and mother and father all work hard; I saw people all around me work hard. I saw those who got a good education make more money.

TR:

It sounds like rather than teach them a portfolio you want to teach them a mind-set, a work ethic.

TBP:

That’s right.

TR:

You’ve made and lost billions. What is money to you? What is wealth?

TBP:

Well, I can tell you when I knew I was wealthy.

TR:

When was that?

TBP:

When I had 12 bird dogs.

TR:

And how old were you?

TBP:

I was 50.

TR:

Really!

TBP:

I was hunting one day. I’d always had bird dogs, and I’d always been a quail hunter. My dad was, and I was too. But I had one bird dog in the backyard, and when I did better, I had two. When I got 12 bird dogs, I had a kennel. And one day I said, “You know, I’m a rich guy. I’ve got 12 bird dogs!” TR:

And you’ve used that wealth to do so much good for this country. I know that you are one of the most generous university benefactors of all time, having given over $500 million to your alma mater, Oklahoma State University, which is absolutely incredible.

TBP:

My goal has always been to make OSU more competitive, in athletics and academics. I am privileged to give to my alma mater.

TR:

Wasn’t your 2005 gift to OSU athletics the single largest in NCAA history?

TBP:

That’s correct.

TR:

That’s just amazing. And I know that’s just part of your contribution and giving, which I so admire. Let’s switch gears and talk about energy independence. You made your fortune in the oil industry. You’re not the most likely candidate to be preaching oil independence for this country, and yet that’s been your mission for the past seven years. Tell me about the Pickens Plan.

TBP:

Here’s the thing, Tony. America is addicted to oil. And that addiction threatens our economy, our environment, and our national security. It’s been getting worse every decade. In 1970 we imported 24% of our oil. Today it’s nearly 70%, and growing.

TR:

Wow. So you’re trying to move us away from that.

TBP:

Well, we’ve put our security in the hands of potentially unfriendly and unstable foreign nations. If we are depending on foreign sources for nearly 70% of our oil, we are in a precarious position in an unpredictable world. And over the next ten years, the cost will be $10 trillion—it will be the greatest transfer of wealth in the history of mankind.

TR:

That’s incredible. So what’s the solution?

TBP:

We can make huge gains by upgrading to renewable sources of energy, but that doesn’t solve our OPEC23 problem. OPEC actually has nothing to do with renewables; wind and solar are not transportation fuels. That’s where natural gas comes in. Seventy percent of all the oil used every day in the world goes for transportation use. The only thing that we’ve got to take out OPEC is natural gas or our own oil.

TR:

So what do we do?

TBP:

We import about 12 million barrels a day, five of which come from OPEC. We need to produce more natural gas here in the United States to get rid of the OPEC oil. And we have the resources to do it. Tony, we’re sitting on a hundred-year supply of natural gas here in America. We’ve got at least 4 trillion barrels of oil equivalent (BOE). That’s three times the amount of the oil reserves that Saudi Arabia has. If we don’t capitalize on that, we’re going to go down as the dumbest crab that ever came to town.

TR:

That’s incredible.

TBP:

And natural gas is so cheap right now. A $100-barrel of oil is equivalent to [about] $16 of natural gas—we’ve never seen $16 natural gas. Whether it’s for trucking, or power generation, anybody that uses energy today has to consider natural gas.

TR:

I know you’ve spent a ton of your own time, energy, and money on the Pickens Plan. You’ve taken your case to the American public and bankrolled a national campaign and media blitz. What do you think—is it going to work?

TBP:

I launched this plan in Washington, DC, in 2008, and I’ve spent $100 million of my own money on this. I feel like I’ve done everything I could on this, and yes, we’re going to get an energy plan for America.

TR:

I talk a lot about asset allocation in this book. Virtually all of your assets are in energy; that’s been most of your life, correct?

TBP:

That’s right, but in energy you have lots of different sectors. We invest across the energy spectrum but don’t go beyond that.

TR:

So that’s your version of asset allocation. If you were an individual investor today, and you had, let’s say, $50,000 to invest, where would you put it?

TBP:

Downstream, you have exploration companies and refineries and all. Most of my time has been spent upstream, on the exploring and producing side of the equation. But right now, natural gas is so cheap. It’s very interesting; that’s the place to be. Overall, I think the oil and gas industry has a fabulous future, because of technology. The advancements we’ve made in technology have been unbelievable. Our country today looks a lot better from a standpoint of natural resources than we did ten years ago. I didn’t feel this way ten years ago. I didn’t feel near as confident as I do today.

TR:

Tell me what drives you, Boone?

TBP:

You know, Tony, what drives me at this point is that I like to make money. I like giving it away—not as much as making it, but it’s a close second. I firmly believe that one of the reasons I was put here on this earth was to be successful, to make money, and be generous with it.

TR:

Be generous?

TBP:

One of my goals is to give away $1 billion before I die. You know Warren Buffett’s and Bill Gates’s Giving Pledge? They called me up and asked me to join. And I said, “If you look at Fortune magazine from 1983, why don’t you join my club, where I said I was going to give ninety percent away?” TR:

That’s spectacular.

TBP:

Every day I go to the office, and I look forward to going to the office. That’s the way it has been throughout my life. And so, my work is everything to me. But you say that, “No, my family is everything to me. You can’t say that.” It’s just all fun. When I’m with my family, it’s fun. When I’m working, it’s fun. The results aren’t perfect, but they’re good enough to make you think the next day is going to be a home run. They may not be, but I still think every day will be.

TR:

You inspire me, like you inspire so many people around the world. I’m inspired by your passion and intensity. At 86, Boone, with so many extraordinary accomplishments, you just keep on growing and giving.

TBP:

Thank you, Tony, you’ve been a successful man too, and helped so many people—probably helped a lot more than I have.

TR:

Oh, I don’t know.

TBP:

But we’re both winners because we do give.

TR:

Yes, I agree. I love you dearly, my friend. Thank you.