American Business Magazine recently sat down with T. Boome Pickens on the very day his energy initiative was rolled out by President Obama, who spoke about the Boone Initiative during his State Of The Union address. It was a privilege to speak with an entrepreneur who is perhaps as well known for his entrepreneurial spirit as he is for shaking things up politically.
GEOFF GABOR: Today must be a pretty big day for you. Could you tell us about it?
T. BOONE PICKENS: It is a very big day for me and for America’s energy independence, Geoff. I’ve worked for some time to get America to be dependent on its own resources. Being energy independent sounds good—nobody ever says energy independence is a bad idea. I started on that a long, long time ago, but I really started to put a lot of money into it July of 2008. That’s when I kicked off the Pickens Plan. It came up in the State of the Union address a couple of nights ago when the president brought up the Boone Natural Gas Plan.
When the president was in Las Vegas today, he referred to companies like UPS, AT&T and other companies that are beginning to convert their fleets over to natural gas. UPS and AT&T are among others leading the way on this. I’m a shareholder in Clean Energy Fuels and they too are a leader in setting this new direction. There was a Clean Energy Fuels truck included as part of the president’s backdrop. It was pretty neat to see the president standing up there talking with a UPS Clean Energy Fuels truck parked behind him. I have to say I felt pretty good about that.
The idea is natural gas is going to eventually replace diesel in the United States for heavy-duty trucks. You’ve got eight-and-a-half million trucks that fall into that category. What it means to the country is that you’ll cut imported oil by twoand- a-half billion barrels. My model compares this to what happened in 1972 when we switched from gasoline to diesel—that took six years to accomplish. It was all because of price. Today, it’s happening again for the same reason. Natural gas is cheaper than diesel by $1.50 per gallon.
GG: I’ve always found you ironic, Boone. People who are proponents of fossil fuel aren’t normally well known as proponents of green energy. You’re a big personality on both sides of that fence. How do you reconcile all of this?
TBP: You can reconcile it because, if you’re from America, you should want American energy in the United States. Two-thirds of our trade deficit is for the purchase of oil and that’s simply not necessary because we have plenty of resources in America. Wind for power generation is great, but that’s only one of our resources we should be using. Wind should be developed along with solar, but with thoughtful consideration of expense and its ability to compete in the market. Currently, [these resources] can’t compete with coal or natural gas for power generation. We will one day get to the point where they will be competitive; therefore, we need to keep investing in research and make it happen. So, it’s easy to for me to reconcile green energy and fossil fuel. I do it because I’m American and I support what is best for America.
I also think there are some inaccuracies put forward about the image of big energy. I don’t think it’s fair to say that people in fossil fuels are not interested in the environment. If you listen to the media, you might think the fossil fuel industry doesn’t pay much attention to ecology and that is simply not true. I believe everyone wants what is best for America—environmentally and economically.
GG: What originally got you interested in geology as a course of study when you were younger?
TBP: I guess I have always had an interest in geology, as well as oil, growing up in Oklahoma. I am a geologist, graduating from Oklahoma State in 1951. My whole career was is the oil and gas industry, but I’m also into wind, too. I’m an energy guy and always have been.
GG: You have strong physical science and engineering acumen. You’re also a bit of a prognosticator. Anyone who stands back and evaluates your successes can see you’ve done well at predicting where to be. What do you use as a dousing stick?
TBP: If you go back and look at my record, I have some successes and some misses. I’m not always right. Of course, I have had a high percentage of success. Where I’ve missed is on timing. I wanted natural gas as a transportation fuel earlier—I started investing in this concept in the 1980s. I thought the market would take off in about three years from the time I first got the notion. That was about 25 years ago, but now we’re seeing it happen. The idea hasn’t gotten advanced as quickly as I would’ve wanted, but I’ve always been optimistic about what I can accomplish.
GG: Our readers are business owners, board directors and executive management. This cross-section of the business world would be interested in what Boone thinks is and is not acceptable risk.
TBP: Are you referring to the risk/reward ratio?
TBP: I’m not a ratio guy, Geoff. The best way I can answer your question is to say I haven’t lost any enthusiasm for taking risk.
GG: Let me rephrase the question then. Did you ever roll the dice on something when you were younger that you wouldn’t gamble on today?
TBP: Listen, when you have many wins and losses, those losses can sober you up. I like to say that I get my fingers smashed in the door every once in a while, but I learn to not go back through the same door. I’ve had my share of losses—2008 was the biggest loss year I ever had. In 2008, I was 80 years old. I asked myself: Why take risks like that? Well, that’s what I like to do. That’s what I enjoy doing.
GG: Do you think being a cowboy is part of what it takes to be a good entrepreneur?
TBP: Well if by “cowboy” you’re referring to the personal stakes, then yeah—an entrepreneur is somebody that puts up their own money. You have to have some cowboy in you whenever you do that.
I remember the first time I was called an entrepreneur. An old lawyer named Ed Sleckman called me an entrepreneur. I thought he had insulted me because I was in my 30s and didn’t know what an entrepreneur was. So, I got out the dictionary and looked up entrepreneur and thought, well, maybe he’s right—that is a lot like me. He, of course, was right because I don’t get in deals that I don’t put my own money in. That was who I was then and who I am now. I couldn’t put in much money during the early days of my career because I didn’t have much money, but I always had my own skin in the game. A lot of guys don’t like to do that. Does that mean I’m right and they’re wrong? No. Entrepreneurs simply have different styles and personalities.
I always say that an MBA will tell you to take the least amount of risk with the greatest opportunity for return. Well, that’s good. But if you put more of your own money in, you get a better return, too—and that has worked well for me.
I was advising a young guy the other day. He asked me why had he not gotten rich by now after all his effort. I asked him if he put any of his own money in and he replied he had not. He said he didn’t want to take the risk. I said, well, when you start putting your own money in and you’re successful, then it will compound his return—that’s just the way things seem to work.
GG: Speaking about putting your own money into something, you have a philanthropic nature. You’ve been a good steward and have given your own money to medicine, education, college sports and the environment. When you look back, where did you have the most profound impact?
TBP: Without question: Oklahoma State University. I’ve given more there to athletics and academics than anywhere else. They both have had great success. Football is the easiest place to check your records because you’re going to have 12 games a year and it’s either a “W” or an “L” after every game. This last year we went to the BCS Bowl. I predicted we would get to the BCS Bowl, but I thought it would take a couple more years. So, it happened sooner than I thought.
GG: What would you like your legacy to be when people remember you years from now?
TBP: I guess the things that I have focused on. I’ve been into oil, gas and alternate energies. I think I’ve had some influence there. I think what I did with corporate governance in the 1980s and 1990s had significant impact. I think a big one will be my push to get America to use its own resources for the betterment of the country. I think all those are things I feel I helped. I think I’ve made an impact I can feel good about. If you want me to sum it up, on the tombstone it would be nice just to say: “Firm and fair.”
GG: What influence did your family have on you growing up?
TBP: While growing up in Holdenville, Oklahoma, my grandmother and Aunt Ethel lived next door to me. They were both widows. My Aunt Ethel had a son Billy Bob who was five years older than I was. I always believed he was a lot smarter than I was. My cousin had a PhD in chemistry from Michigan State. He was an editor for Chemical Abstracts in Columbus, Ohio. He sang in the choir at church and he had a beautiful rose garden. He found exactly what he wanted to do so that, in and of itself, makes him successful. But I think I found that, too. He had no interest in being rich. My cousin wanted to be comfortable and he was. I wanted to make a lot of money and I did.
So there we were, cousins living next door to each other for a number of years. He had a great influence on me. He says he confirmed that he was smarter than me because I would never have made it through second-year algebra if he hadn’t been there. That’s probably true. My interests were different than his, yet we were related closely and grew up together.
My aunt, grandmother and mother all raised me. My aunt was my schoolteacher— bless her heart. She gave a nightly report on me to her sister Grace—my mother—not that I asked her to. We usually ate together as a family. She would just openly say to my mother, “Grace, Boone’s imagination is going to get him in trouble.” I don’t know for sure what that meant, but I was in trouble a lot! I guess my imagination was part of it. We typically ate dinner with all of the family together at my grandmother’s house next door. My mother worked, my aunt taught school and my grandmother had a big garden. Life was that simple.
It was a fabulous upbringing. All three women raised me together. My dad was away a lot. He was a lawyer who worked in the oil business at the time. We went broke in 1939 and then he went to work for Phillip’s Petroleum.
We saw what was truly important in life. People have said to me, gosh, you grew up in The Great Depression. The truth is we never knew that. I would hear conversations at the dinner table about people moving to California for work. As a boy, I understood people were moving because they didn’t have work.
GG: Is there any truth to the story about Jenkins’ wallet? Did your family make you return the dollar bill given as a reward?
TBP: I was taught everybody was expected to have a job. When I was 13 years old, I got a paper route in town. Being the newest paper boy meant I had the smallest route. I had 28 papers to deliver. My route was only one street called Broadway of America. I really believed that it was the “Broadway” of America.
At 13, I had little experience outside of Holdenville, you see. I came home one day and was so excited because one of my customers on the paper route had given me a dollar for finding and returning his wallet. I was proudly telling my grandmother, aunt and mother this story of how I found Mr. Jenkins’ wallet in the tall grass and how he gave me a dollar as a reward. A dollar was a lot of money to a 13-year-old back in those days.
I could see these three women were not as excited as I was for getting a dollar for bringing the billfold back to Mr. Jenkins. They kind of shook their heads at me and then my grandmother said, “Take the dollar back to Mr. Jenkins. We’re not going to be rewarded for being honest.”
I couldn’t believe what I was hearing. I was hoping someone would reconsider. I spent a lot of time that day trying to make my case to everyone. Then, it was explained again that the same conclusion was reached by my aunt and my mother. They were all in total agreement with my grandmother.
GG: So the story is true.
TBP: It’s a true story. To make matters worse, they said I had to take it back to Mr. Jenkins the same day. After realizing that no amount of conversation would change the outcome, I got on my bike and took the dollar back to him. I told Mr. Jenkins why I had to return the dollar. I can still hear him say, “No, Boone, I wanted you to have it.” He took it back after I explained my family said I am not to be rewarded for being honest.
It was raining as I rode my bike home. I had to cross Burgess Street to get home and that’s a drainage street for the town. The rain turned into a cloud burst—it really poured. When I got to Burgess Street I couldn’t cross it without wading through the water, so I pushed my bike through the flooded street and it came up to about my waist. I was really feeling sorry for myself.
When I finally got back, the family was on the back porch finishing their supper. We often ate on the porch in summer. Anyway, I came in trying to look as pitiful as I could. I tried to complain about almost drowning crossing Burgess Street. That is when they made it real clear to me: “If you had gone when we first told you to, you’d have been back before it rained.” So that was the end of that. I dried off and had supper.
GG: You seem to be a political centrist. during the last election, both sides were trying to hogtie you into their corner of the ring with energy policy. How does energy policy impact American businesses and national security, especially with the emerging consumption from China and the like?
TBP: Well, a fight hasn’t happened in Congress regarding energy because the Natural Gas Act got 185 co-sponsors that are half Democrat and half Republican. If the leadership would just bring it to a vote, we would have the start of an energy policy in America. The whole thing is incredible to me when we have resources that we could use today. All we have to do as leadership is say, “This is what we’re going to do.” Unfortunately, that hasn’t happened, but I think it will happen.
GG: The Keystone Pipeline is obviously supported by the Republicans and Democrats who want it, in addition to the unions that want it. Why won’t it get past the president? Is there any downside to the Keystone Pipeline?
TBP: I don’t know of anything. The Keystone Pipeline is going to be very important to America. I think it will pass. The President has put it off until after the election. I think the people are going to demand that it happens, but you’re going to get direction by leadership in Canada because that’s Canadian oil.
Democrats, unions and Republicans may not be politically aligned, but this is about America. It has nothing to do with politics. This is about oil and meeting the energy demands this country runs on. There’s 250 billion barrels of oil at Fort McMurray, Alberta, and that oil is coming down in the Keystone Pipeline and being made available to the United States—not because the Canadians want to do something for America. It’s about doing something for each other.
I used to live in Calgary in the 1960s and I operated in Canada for 30 years. The Canadians are a sovereign country—they have a right to do whatever they want with their resources. We should not treat them like a state in the United States. We act like the Canadians are tied to us and their oil has to be marketed in the United States. That’s a silly idea that some need to get out of their heads. Steven Harper is the Prime Minister of Canada. He is a man that governs the country on behalf of Canada, which is exactly what he should do. But, he’s made it real clear to us that we need to make up our mind whether we want this oil or not. If the United States is not going to take the West Coast of British Columbia oil, it’s going to be shipped to Asia. It would most certainly go to China. We’re fools if we think the Canadians are going to stand around and wait on us. They owe us nothing and the oil is being made available to us first, so we should take advantage of it.
GG: During an interview I had with Ben Stein, he said fossil fuel has been vilified for a long time—going back to the Rockefellers. He thought a lot of it had to do with wealth envy and that petroleum had been vilified, in part, because of equity of gain. What are your feelings regarding what is fair and unfair considering the profits that petroleum makes and equity of gains? Have you ever felt that it’s over-politicized or that you’ve been unfairly judged for being successful?
TBP: I think people have always had things to say. What should be considered is that these natural resources are expensive to discover and produce. This business comes with a great amount of risk. It’s expensive to drill dry holes. I’ve drilled more dry holes than anybody you will ever meet. It would be like somebody criticizing Microsoft. Bill Gates created a company from nothing while risking everything to be a giant in the world. The shareholders have made money out of it; of course, Microsoft makes a lot of money, and they pay a lot of taxes. That’s what makes the economy go and the public finds benefit from the product, too.
GG: What are your feelings about offshore exploration and drilling?
TBP: I know of three bad incidents—two in the United States—that were expensive and cost people their lives. One was the Santa Barbara Channel, which was over 50 years ago in 1969, and then the Macondo Deepwater Horizon in the Gulf of Mexico last year. I’d say that’s a pretty good record for the industry when you look at all the production and people involved worldwide.
GG: How do you feel about oil shale and oil sand mining?
TBP: It’s another plus for the oil and gas industry and for the people in the United States. They came up with horizontal drilling long laterals whereby they can frack many zones along a horizontal hole. That’s technology developed in America. The rest of the world is going to use it, which is good.
GG: Do you think fracking gets a bad rap?
TBP: Most of the criticism comes from people who don’t like fossil fuel. There are over 800,000 wells that have been fracked in Oklahoma and Texas without major incident. Nobody ever focuses on that. In the United States alone we have 100 wells being fracked today without any significant problems. Too much attention is paid to the noise made by very few without any solid evidence of significant problems. I always ask people that are opposed to fracking and fossil fuel exploration a simple “what if ” question. Let’s say we don’t frack anymore. Let’s say we don’t produce any more fossil fuels. What do we do then?
GG: I saw a man wearing a “T. Boone for President” button during the presidential campaign three years ago. How would President Pickens handle OPEC? What would you do if you were in the White House and had that power?
TBP: If you remember, in 1970, Nixon said, “Elect me and we’ll be energy independent.” Every president since Nixon— whether they were Democrat or Republican— has said something very similar. Now, fast forward to Obama when he got the nomination in Denver in July of 2008. He told us, in 10 years, we will not import any oil from the Middle East. That was a little bit more of a focused statement, but there was never a plan after he proclaimed that. I remember it very well.
The only way to accomplish energy independence is to utilize our own resources, such as natural gas. We’re number-one in the world in natural gas reserves. We’re fools if we don’t use natural gas in place of imported oil.
You asked me if I was in the White House, what I would do. I would get off OPEC oil because I know that when oil is purchased from the Middle East, some of the money we pay goes to support the Taliban and other groups who do not like America. We will go down in history as being stupid to pay for both sides of a war. It’s not necessary and we shouldn’t do it.
GG: What’s it like to be famous, Boone?
TBP: Sometimes I don’t like to be interrupted by people I don’t know, but sometimes people have something serious and important to talk about. It doesn’t make me uncomfortable to be well known. I was at a restaurant last night and had two people come up to me and say they appreciate what I was doing for the country the energy plan. I will always feel good when I hear that.
GG: What advice can you give small businesses on how to compete successfully?
TBP: Work hard and work smart and you’ll probably be successful. Work ethic is so important to success—you’ve got to be willing to work very, very hard. It’s not that complicated and you cannot undervalue the importance of hard work. You have to be more than a clock watcher if you want to get anywhere in the business world.
GG: What kind of advice would you give a maturing business owner regarding operational succession? What kind of potholes would you tell him to steer clear of?
TBP: Gosh, no one has ever asked me about succession! So, I’ll answer [this question] for the first time. I would not want to pick somebody that would be exactly like me. I would never look for that. I’ve always told younger men to manage their area better than I could and mix that with my management style. Take the same idea and apply it to succession. Mixed with the owner’s management style, you can come out with something better than what you had before succession.
I know if I could do it over again, there are some things I’d do different. But, when you’re making a cake for the first time, you don’t know as much and there isn’t a recipe to follow. Therefore, you’d better be careful when mixing the ingredients. As you go through your business career, you get to make the cake several times over. Each time, you should improve. I think succession is your last crack at making that happen.
Succession in business is extremely important. It’s important for the one leaving and it’s certainly important for the one coming in.