T. Boone Pickens

I just finished reading T. Boone Pickens’s autobiography Boone (autobiography #1 out of 3). I first heard of Pickens a couple years ago when someone mentioned a donation he made to my medical school, UT Southwestern. The terms were that he would give UTSW 50 million, but we had to grow that money to 500 million over 25 years, otherwise the returns on the investment would be given to his alma mater, Oklahoma State University. Recently he has made news by promoting the “Pickens plan” for US energy security, which includes building huge wind farms and promoting natural gas as an alternative fuel for cars. He was also featured in the September Texas Monthly and has a new bookout. He’s a pretty fascinating person. He started out as a traditional oilman with a background in geology before he left to form an independent oil company, Mesa Petroleum.

The book makes the point that for an oil company to be sustainable (in as much as a company whose business model is natural resource extraction can be sustainable) it has to replace its reserves every year through new discoveries. Otherwise the company is just liquidating its assets. Boone originally got into the merger and acquisition business (for which he is probably most well known as a corporate raider) as a means of replacing Mesa’s reserves with the proven reserves of other companies at a lower price and more predictably than through new exploration. As he looked around at the decline in new oil discoveries he became convinced that most oil companies were too large to be sustainable. He thought they were basically just liquidating their assets in an inefficient way by spending their large cashflow drilling lots of dry holes in search of massive new discoveries that would justify their large size, when what they should be doing is distributing that cashflow to shareholders and trimming down their operations. They needed to adapt to new realities in order to thrive. Towards this end he promoted shareholder activism and attempted several hostile takeovers of oil and mining companies.

His passion now is doing what he can to promote a plan for US energy security (while making money at the same time). Despite the flaws, I’m kind of a fan of these guys who make a lot of money but also have a vision for civic responsibility. The ones who write books and use their money and influence towards their vision for improving society- people like Boone Pickens, Ross Perot (full disclosure: I’ve benefited from his support of the UTSW MSTP program), George Soros, and Warren Buffet. I like how they remain dynamic and engaged even into old age (Perot, Soros, and Buffet were born in 1930, Pickens in 1928) when they could be just kicking back and enjoying their money. Soros’s theory of “reflexivity” provided some good insight into the potential for market irrationality, even before the rise of behavioral economics. His support of “open society” contributed to the collapse of communism. Buffet, through the Gates Foundation, is going to improve the lives of millions of people in the developing world. Perot ran a credible presidential campaign, polling higher than both incumbent George HW Bush and challenger Bill Clinton for a while in the 1992 campaign.

These guys were trendsetters and remain relevant. Check out the Pickens plan website. It is similar to Obama’s campaign website in its understanding of new media and attempt to build grassroots support for a plan. If you watch the whiteboard presentation video on the site, it is reminiscent of Ross Perot’s chart-filled infomercials during the 1992 campaign. It is interesting to note how the precedents such as writing books, using media to build a grassroots support base, and communicating through infomercials demonstrated during Perot’s campaigns would prove key in Obama’s successful presidential campaign over 15 years later. Boone’s understanding of grassroots campaigning probably comes from his experience in building support among shareholders for proxy fights. (Tangent- The part of community organizer Saul Alinsky's book Rules for Radicals that I liked best was where he advocated proxy fights as a means for democratic control of corporate power.) Pickens was also ahead of his time in talking about corporate bailouts and the idea of reducing health care costs through preventive medicine. Here are two passages from the biography published over 20 years ago:

“The automobile industry is a perfect example of an industry paralyzed by bureaucratic inertia. The Japanese and Germans focused on building better automobiles while the U.S. automakers rested on their laurels. Then, when the rest of the world caught up, Detroit ran to Washington for bailouts and protection.”

“As early as the 1960s, Mesa paid for employee memberships at the Amarillo YMCA…About three quarters of Mesa’s employees participate in the fitness program…The Fitness Center saves Mesa more than $200,000 in insurance claims annually. We know that employees who exercise regularly average $173 in medical bills a year, whereas it costs $434 for inactive employees.”

These things stuck out to me as examples of how experiences from the past are relevant in informing and shaping our present day. Rich, white, male, capitalists like Pickens and Perot contributed some great ideas, helped fund my medical education, paid for the fancy research building where our lab used to be located, and bankroll the foundations that may fund my research someday. However they will not be around forever. The American standard of living which was built up in large degree by men of their generation is being slowly liquidated. We need to “replace their reserves” by leveraging the investments they’ve made in society to diversify our portfolio and discover the men and women of all backgrounds who will lead our country in the new century. We too must adapt in order to thrive in a changing world.

Microfinace & microbrews meeting report

SeaMo, an organization which seeks to connect the Seattle microfinance community, hosted Evelyn Stark, the new program officer at the Gates Foundation’s “Financial Services for the Poor” office, as the speaker for their bimonthly “microfinance & microbrews” get-together this evening. Here are my takeaways from the meeting:

1) Microfinance = financial services for the poor, not just the microcredit programs that we traditionally associate with microfinance.

2) She asked for a show of hands of how many people thought the poor wanted access to credit. Most people raised their hands. Then she asked how many people thought the poor wanted to go into debt. Not so many raised their hands, even those these two positions are necessarily linked (aside: This reminds me of the saying “Everybody wants to go to heaven, but nobody wants to die”) The point was that credit IS debt and that while we in the U.S. are quite used to the idea of taking on debt, it may not be such an appealing idea to a person in poverty, especially in the context of some cultures where debt can lead to indentured servant/slave status. Just because we get excited about the microfinance concept doesn’t mean its benefits or likelihood of adoption and success are guaranteed in the target community.

3) This leads to Stark’s “Ready, Willing, & Able” framework for planning successful microfinance projects.
Ready- target population needs to be connected to the cash economy, access to markets
Willing- trust issues, must be convinced that you will benefit from taking out a loan
Able- address the cultural factors and context specific barriers to success

4) Savings rates among the poor (abroad) are around 20%. (average U.S. household has a negative savings rate). Possibility of village level savings & loan associations.

5) Question was asked about collateral and/or motivation for loan repayment. Many microfinance programs use a shared risk model where small loans are given to a group of 5 or 6 women who mutually guarantee one another’s loans. This mechanism works through 2 or 3 rounds of progressively larger loans and selects for group members with a track record of loan repayment. After round 3 or so, group solidarity is a less important motivator than an individual’s desire to be approved for future loans. This becomes analogous to our credit history/credit report mechanisms for incentivizing payment of unsecured debt.

6) One of the factors which made microcredit so successful in Bangladesh was population density. It is difficult to maintain cohesion and provide services when clients are distributed over a wide area as is the case in some parts of rural Africa.

Microfinance information and resources:
http://www.seattlemicrofinance.org/
http://www.seepnetwork.org/
http://www.microsave.org/
http://www.themix.org/

Also, if you haven’t checked it out yet, go fund a loan at Kiva, it’s fun!

Health, War, and Economics in Congo

Congo has been in the news a lot lately, so I was excited to attend the Quest Global Presence meeting tonight to hear Harper McConnell talk about the work that HEAL Africa does in the Democratic Republic of Congo. HEAL Africa runs a tertiary care/teaching hospital in Goma, Congo staffed by 16 Congolese doctors and 28 nurses who specialize in orthopedic and gynecological surgeries. These areas of specialization are the unfortunate result of a high volume of patients injured by the violence of war and rape.

Following the 1994 genocide in Rwanda, Hutu militias were forced across the border into Congo. Since that time a number of factions and rebel groups, some backed by neighboring governments, have been at war in Congo. The current fighters around Goma include the Tutsi rebels lead by General Laurent Nkunda whose stated aim is to protect Congolese Tutsis from the Hutu FLDR militias. However, they are also considering overthrowing the Congolese government, so they are fighting the government troops and the pro-government Mai-Mai militias as well as attacking the UN peacekeeping troops. Here are a few articles with background info:

http://news.bbc.co.uk/2/low/africa/7720738.stm
http://news.bbc.co.uk/2/low/africa/7714629.stm

I don’t know a lot about the history and politics of the conflict, but from a healthcare perspective one of the major results is civilian casualties. The doctors and nurses in Goma are doing heroic work to take care of patients wounded by the conflict, and you can donate via the HEAL Africa website (a surgery costs around $400).

In addition to caring for individual patients, public health principles teach us that some of the greatest value per effort comes from primary prevention and attacking the root causes of disease. In this case that means attacking the economic base of support for rebel groups (running an army is pretty expensive). As was the case with conflict diamonds, natural mineral resources play an important role in financing the fighting in Congo. Specifically, coltan (columbite-tantalite) is an ore that can supply the raw material for tantalum capacitors found in most cell phones, laptops, etc. 80% of the coltan reserves are found in Congo, so Senators Brownback (R-KS) and Derben (D-IL) have introduced bipartisan legislation to set up a certification process for coltan in order to ensure that the manufacture of your cell phone and laptop is not indirectly financing the killing of women and children in Congo. A globalized world requires us to exercise global responsibility, so I would urge you to write to your senators and ask them to co-sponsor or support SB 3058, the Conflict Coltan and Cassiterite Act of 2008. You can find a sample letter here and your senators' contact info here.