The first billion is the hardest | T. Boone Pickens

Published: 2008

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T. Boone Pickens was an American oil magnate and financier who made a career in oil exploration in the 1950s and 1960s and became a (in)famous corporate raider in the 1980s. In 2019 Picken’s net worth amounted to $1.4bn and he gave away almost as much during his life. The book was published in 2008 and is primarily a biography but also consists of a plethora of “Booneisms” that convey Picken’s life lessons. Pickens died in September 2019, 91 years old. He had suffered from several strokes had therefore a few years prior to his death closed down his fund (then with $335m in AUM) and put his “Mesa Ranch” up for sale for $250m.

“Be the eternal optimist. Act like the fella who fell off the top of a 10-story building…as he passed the third floor, said, ‘I’m not dead yet. So far, so good.’”

STRIKES OIL. Pickens grew up in an American middle-class family, trained as a geologist and then took a job at Phillips Petroleum. But the young Pickens did not like the bureaucratic big company and left after three years to start Mesa Petroleum. In the 1950s and 1960s, he was a “wildcatter” (one who searches for oil on unexplored land) and drove around the country and bought land from farmers. To grow, Pickens needed capital and in 1964 Mesa Petroleum was listed on the stock exchange.

HUGOTON WAS THE GATEWAY TO ACTIVISM. In connection with the IPO, the general view was that all American oil had been discovered. This led Pickens to look for value elsewhere – on Wall Street. He discovered that the market often valued oil companies lower than the value of their oil reserves. The twenty times bigger competitor Hugoton Production was looking undervalued and became the perfect target for Mesa. But Hugoton’s board members were not interested in selling and or implementing any changes to realize the underlying values. This did not stop Pickens who carried out his first “hostile takeover” and with newly issued shares acquired Hugoton in 1968.

CHEAPER OIL ON WALL STREET. After the success of Hugoton, Pickens was up and running. He realized that oil was significantly cheaper on Wall Street than in the Middle East or in the Gulf of Mexico. But Wall Street oil came with “strings attached”. This was the beginning of Picken’s activist career and the “corporate raider” era of the 1980’s. Together with peers like Carl Icahn and Michael Milken, the sleepy boardrooms around the country would be bluntly awakened and shaken up. The method was always the same. Mesa bought shares and began discussions with the board to realize values. If they were not prone to change, Pickens bought more shares and tried to take over the company.

“Keep focused. When you are hunting elephants, don’t get distracted chasing rabbits.”

GETS RICH AS A RETIREE. In 1996, Mesa became a target for other activists and Pickens was himself outmanoeuvred from his company. He had to buy out Mesa’s trading business, which he converted into the hedge fund BP Capital Management. He was then 68 years old and in order to run the business, he had to pass a financial certification test, a test he failed twice. With $30m from friends and $10m of his own money, Pickens was now a fund manager. After three years, the fund had lost almost all its capital. In 2000, he invested heavily in natural gas, was right, and was back on track. Thereafter the fund made a long series of successful investments in commodity futures which made Pickens a billionaire.

AGE IS NOT A REASON TO SLOW DOWN. Pickens knew he had long since begun his “end game” but never saw it as a reason to slow down. As most people get older, they slow down and become more satisfied. Pickens said it was a choice they made – and a choice he chose not to make. He had always been in a hurry and saw life as a battle against the clock. Pickens prioritized exercise during the latter part of his life “When you’re young, fitness is a sport. As you grow older, it’s a necessity”.

HOME & WORK – THAT’S ALL. Pickens was well aware of the many temptations that ruined the lives of so many businessmen – alcohol and infidelity. He knew that he was not stronger than anyone else, but by actively avoiding situations with great temptations, he knew that he could follow his planned course of life. He said “There is work, and there is home, and there aren’t any stops in between“. However, when all was said and done, the work seems to have received the most focus, as Pickens has had five marriages during his life. Pickens left behind five children.

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