WHO IS T. BOONE PICKENS?

T. Boone Pickens was born on May 22nd 1928 and he is a financier and business magnate. He founded BP capital and is very famous for his stints during the 1980s as a corporate raider and takeover operator. Currently, Pickens is often seen in the national financial news and media outlets. Pickens talks about his career, personal life and his comeback in this book: The First Billion Is the Hardest.

PRESTON AND STIG’S GENERAL THOUGHTS ON THE BOOK

T. Boone Pickens’ discussion of US’ energy independence is to me so interesting that I would consider buying the book for that part alone. While I think he has some errors in his analysis, I think it’s hard to find authorities that are as knowledgeable about oil and the US energy market as T. Boone Pickens.

On a positive note, the book captures a few entertaining stories about the period and the environment that the author has experienced. In general, I think T. Boone Pickens has written this book as a means to capture his legacy and not necessarily for the reader.

In this very first chapter, Pickens talks about his early life where he spent his time working hard to just provide for the family. He was under a lot of pressure financially when he quit his job at Phillips, but he was also relieved because he couldn’t bring himself to work there anymore. He began to save some money and later founded his own oil company (PEI) along with two other investors. Pickens, a hardworking man, stuck to his principles and work and avoided temptation of all kinds. Perhaps, this was something that helped him focus on his career instead of attracting unwanted problems.

PEI went public in 1964 and the name of the company was changed to Mesa Petroleum. As a company that was debt-free and public, they made a good amount of profit in the very first year and this was definitely a rocking start for them. Although Pickens had no experience in running a company, he took up the responsibility and has set an example to others through his actions.

In this section, Pickens talks about his experiences with big wigs in the oil industry. While he was just setting foot as the leader of his own company, he had other plans to go after Cities service simply because he had the money to do it. There was a lot of politics played in between and Mesa was also caught up in the midst of it all, but they made about $13.5 million as profit in the $4 billion deal. This proved to Pickens that he was ready to surge ahead and search for bigger opportunities.

Next, Pickens talks about the corporate merger that was the biggest deal of his entire life. This was called a battle between Pickens and Gulf Oil and was also covered by the media, especially because it involved $13.2 billion. Pickens had a game plan and stuck to it. Mesa bought shares from Gulf Oil until they became the largest shareholders of the company. As the prices of the shares rose, Mesa made $404 million as profit and although they didn’t win against Gulf Oil, it was definitely a huge victory for Pickens. At the end of this chapter, Pickens describes his “next act” where he left Mesa and started over again.

This chapter focuses on how Pickens made his comeback. He’d left Mesa with just five people in his team and although most people were sure that his best days were history, he had faith in himself. He believed in doing what he knew best and never strayed from it. With no capital to start a business, things certainly looked bleak; however, he knew that his biggest capital was the belief that the best was yet to come. He was 68 years old, but he never gave up no matter how tough it was. Never one to even consider retirement, he gave everything he had to start his new life again. Even though he was in the midst of a divorce, had lost his dear friends and had also moved out from his home and company, he kept striving ahead.

In this chapter, Pickens describes how his bad phase continued and made him hit rock bottom. In 1968, he met Greg Shuttlesworth who spoke at length about deep-water drilling in Mexico. He was convinced that they would make money, but although Pickens wasn’t really convinced, he went on with it. He admits that he committed a costly mistake. Within just a year, $27 million was down the drain and the worst was yet to come. Pickens knew that he was taking hit after hit, yet he refused to back down. It was a critical time in his life and he had lost much more money than he had ever lost in his entire life. At the time, he was also suffering from depression as he was fighting a losing battle both physically and mentally. His divorce had sucked the life out of him.

In this section, Pickens describes how he jumped back into the game or “loaded the boat” in his own words. Greg and Pickens met again, but this time Greg was on the same page as Pickens and the others who believed that the prices of natural gas would rise. By 2000, the prices had peaked to $4.50, thereby igniting a spark. Additionally, companies that dealt with electric power were depending on natural gas for power after they had shifted to them. With the supply down and demand on the rise, it seemed like things were finally working out for Pickens.

By December in 2000, the prices were $10.10 and since Pickens had already prepared for it, thanks to his extensive research and intuition, they were up by $252 million, which meant that had made a whopping gain of 9095%! The fact that they distributed $222 million amongst the shareholders is testament to the fact that they appreciated the people who stood by them in tough times. By February, they were up by $300 million and it’s interesting to note that natural gas that had failed them at Mesa was what helped them at BP Capital.

Pickens shares his secrets to success in this chapter. He states that he was not alone when victorious and credits the team members for their efforts. He believes that the chances of success are more when you work as a team. With just 5 members in his team when he began, he had started all over and their success was sweeter because they worked as a team. He has incredible trust on his team and knows that they will never fail him. While they treat every month like the Super Bowl, Pickens says that he acts like the coach and instead of just managing the team, he leads them by example.

Pickens talks about cheap oil as he begins this chapter. Oil is a diminishing resource and it has been declining all over the world rapidly. While the global oil production is about 85 million barrels every day, it is projected to shoot up to 125 million per day by 2025. This is shocking and although the demand is soaring globally, the production is mediocre and it’s almost impossible to keep up with the demand. Pickens suggests that the key to dissect this problem is known as Peak Oil, which states that the global production of oil would face a major decline by 2006. Here, he talks about several possible scenarios as to what could happen if the Peak Oil theory becomes a reality.

Pickens talks more about Peak Oil in this section. He also talks about how the demand for oil kept rising but the supply was still low. One would think that the companies would try to supply more oil considering the demand, but it didn’t happen. The prices also kept rising because of the demand and Pickens was so confident about the prices that he even began predicting them. It definitely wasn’t magic, but it was pure analysis and simple logic. To Pickens and his team, this was certainly the biggest money-making opportunity in their life time. Pickens adds that such opportunities don’t come knocking your door regularly. If they do come your way, you need to grab it and make sure that you stick to it.

In this section, Pickens shows his sensitive side where he talks about the countless donations and charities he has made. Simply put, he believes that he was born to make money and distribute it to others who needed it. At a very young age, he was taught to help people who would help themselves and Pickens began what he calls the most exciting business venture of his life – his charity foundation. With $135 million as the initial gift, it is interesting to note that the money was highest when compared to any of his business ventures.

In this section, Pickens starts off by saying that a big advantage of being active even when you’re old is that you get to see failed projects becoming successful over time. In 1988, Pickens had bet that the price of natural gas was going to increase because it was cheaper and eco-friendlier when compared to gasoline and diesel. The idea was no doubt good, but the only problem was his timing. Although it doesn’t change the fact that natural gas is indeed better, Pickens had made a colossal mistake of betting on it early and had therefore lost money. However, by 2007, Pickens made Clean Energy Fuels public and a project that had started in 1988 saw success almost two decades later.

In this chapter, Pickens talks about how age is just a number. At the age of 80, he still wakes up at 6 am and starts his workouts by 6.30. When an individual reaches that age, he has a choice – he can either relax, or he can still be active and face new challenges every day. Pickens also talks about water scarcity at this point. When something is scarce, there’s a lot of money to be made out of it. Like Mesa Petroleum made humongous profits, it’s Mesa Water’s turn to do the same.

Talking further about the water crisis, Pickens also talks about his favorite, money-making project – the Wind. He states that his $10 billion mega venture on wind is already making money. The best part is that wind complements water and it’s easier to make money in this business more than anything else. Now, oil prices are rising and this fact gives other resources a chance. Wind hasn’t been considered as an alternative source to clean energy until now, but a study by Times stating that wind can easily satisfy the electricity demand globally makes it obvious that it can make investors a lot of money in the future.

This chapter, according to Pickens, is the most important chapter in the entire book where he talks about the potential danger of the nation’s economy collapsing. The USA spends a lot of money when it comes to energy and Pickens readily says that it’s nothing but war. By spending nearly a trillion every year, America is only making its enemies richer and losing its status in the long run. To encounter this serious problem, Pickens says that America needs leadership that’s eligible enough to take on these problems. In other words, he says that the country’s top priority should be to reduce the dependency on other countries as soon as possible.