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.