Boom and Bust

UPDATED: April 28, 2009
PUBLISHED: April 28, 2009

At 80, billionaire T. Boone Pickens could choose to
bask in his successes as a wheeler-dealer in
the oil industry’s drilling fields, boardrooms
and futures markets. But he’s far too restless to
consign himself to such a passive existence.

Instead, the wily billionaire is developing
wind as an alternative energy source, buying
up water rights in Texas, where he lives, and
managing hedge funds. In his spare time, he
gives away his money.

Pickens has operated this way for a halfcentury—
full steam ahead in seeing and
seizing opportunities, working hard, thinking
innovatively and taking calculated risks. His
fortunes have been down at times, and his
key to bouncing back is to build on what he
learns from every experience.

“Feeling the pure joy of work and success—
jumping out of bed in the morning charged
up to accomplish in the day ahead—is necessary
for an entrepreneur,” Pickens says.

“I’m convinced that a person with average
intelligence can work hard and have it made,”
he tells SUCCESS.

“I also think it’s important to get with
people you’re happy with and happy to be
working with.” Happy team-building has
been critical to his success. “I hire people
with a good work ethic…. You don’t want
to be around me if you don’t have a good
work ethic, because you’re going to have to
work hard.”


Pickens’ own work ethic—plus his resilience
and determination—was molded by
his parents and grandmother. Before he
ever set foot in a high school, he showed a
budding awareness of entrepreneurship and
the environment.

“I remember the trees lining the creeks
along the road to Seminole [in Oklahoma]. By
the time I was 5 or 6, they were all dead,” he
writes in his autobiography Boone. “My father explained that it was
because the salt water that came out of the wells was just dumped
into the creeks. ‘Well then,’ I asked, ‘why did they do that?’ [He
answered:] ‘Because that was the easiest way to get rid of it.’ ‘But,’
I persisted, ‘couldn’t they do it another way?’ My father changed
the subject.”

That flicker of Pickens’ environmental awareness later manifested
itself in careful stewardship of his Texas ranch—letting the overgrazed
land renew itself as a wildlife habitat—and in pushing cleanenergy

His entrepreneurial spirit bloomed during a summer of mowing
lawns for his grandmother and in his paper route. At 10 cents a lawn
for his grandmother’s rental properties, the youngster quickly realized
he had settled for a pittance, but his grandmother, whom he
adored, made him live up to their bargain. He says that lesson taught
him not to jump into a deal without a plan.

At 12, Boone earned 28 cents a day, a penny per paper delivered
to each house on his route. “When the route next to mine opened up,
I talked my supervisor into letting me have it, too. A few years later,
the route on the other side became available, and I got it as well,”
Pickens says. “I was delivering 125 papers a day and making more
money than I could imagine.”

As a 20-something geologist working for Phillips Petroleum,
management indecision and wasteful procrastination frustrated
him, he says. “I’ve seen lots of managers who could never say yes or
no. I saw that at Phillips, and it drove me crazy. When you have a
[finished] study and put it before a decision-maker, a manager should
say yes or no. I don’t hold up my people. I’m still impatient, but I’ve
got it under control. [At 80,] I want results now; I don’t have a fi veyear
“I’m convinced that a person with average
intelligence can work hard and have it made.”

But in 1954, three years into the job, Pickens—then the father
of three—abruptly quit Phillips amid a project that was needlessly
stalled. He worked as an independent, taking with him his experience
in analyzing the possibilities in a situation and then taking
appropriate action.

Pickens put in long hours to compensate for his inexperience.
“I would return to the office at night, after the kids had gone to bed,
and work on my maps, looking for places where another well might
be drilled,” he writes in Boone. After that, he still had to fi nd an
investor to drill the well.

In 1963, Pickens needed an infusion of money to pay off a company
debt and to ease cash fl ow in his 7-year-old Petroleum Exploration
Inc. (which became Mesa Petroleum in 1964). With his back against
the wall, he boldly took his small company public—then a business
rarity—to raise funds.

During the late ’60s, Pickens wanted Mesa to become more of a
player in the oil industry. To reach that next level, Pickens engineered
a merger with Hugoton Production Co., many times larger than
Mesa. He traveled the country to build support for this unlikely deal.
He neutralized a hostile leading stockholder by helping him pen his
cows and scored points during an angry showdown with Hugoton’s
board of directors. Pickens won his merger, which he calls “the most
important deal [Mesa] ever made.”

Pickens wasn’t immune to failure, though. In an attempt to diversify,
he steered Mesa into the business of feeding beef cattle in preparation
for sending them to market. The venture concluded with an
$18 million loss and a lesson during the mid-1970s: “We’ll remember
this the next time we’re tempted to diversify,” Pickens says in Boone.

Mesa was in much worse shape in 1982 after disappointing wells
in the Gulf of Mexico. “We’ve got to figure out a way to make $300
million, and we’ve got to make it fast,” Pickens recalls telling Mesa’s
movers and shakers. He had a revolutionary idea for saving the
company. He knew that the Organization of Petroleum Exporting
Countries had propped up oil companies by reducing the crude
supply, which elevated its price. American oil executives continued
enjoying perks and high salaries while living off the accumulated
fat OPEC provided. Management did little to help shareholders, the
owners, prosper.

Pickens exploited that situation during the 1980s, with Mesa
and investment partners buying stakes—often 10 to 20 percent of a
company’s stock—in poorly managed corporations including Gulf,
Phillips and Unocal. Through shareholder showdowns with company
executives, corporations were forced to restructure, and in doing so
shareholders—including Pickens’ investors—reaped tidy profi ts.

One tactic that helped Pickens’ cause was his careful handling
of the news media. Mesa was depicted as an underdog battling for
shareholders, which persuaded many to work with him against
company management.

During the 1990s, Pickens took serious business hits, however.
Mesa was performing poorly, Pickens was involved in a brutal
divorce, and he was forced out as its chief executive offi cer in 1996.

Reeling on all fronts, Pickens never considered retiring: He was off
to his next great adventure. Pickens wasn’t reinventing himself, he
tells SUCCESS; it could be more accurately termed a career progression.
“Do what you know best,” he advises, and he did just that at age
69, beginning his resurgence by founding BP Capital, which runs
hedge funds that mainly invest in natural gas and oil.

“A long time ago, I came to realize the power that change brings.
Because with change comes challenge. So leaving Mesa wasn’t an
end, but the opportunity for a new beginning…. Sure, there were
seeds of doubt,” he writes in his new book, The First Billion Is the
Hardest: Reflections on a Life of Comebacks and America’s Energy Future
“I learned that if you push through the resistance and keep driving
for what you want, you will ultimately achieve rewards beyond any
you had hoped for.”

Early on, BP Capital investors were far from lining up. In some
quarters, Pickens was considered a has-been, although loyal friends
chipped in. The new company got off to a bad start, he writes in The
First Billion
. “I was preoccupied. And a loser. The performance of the
BP Capital Energy Fund mirrored my sinking spirits” with investors
losing 90 percent of what they put in. Pickens ultimately was treated
for depression and “began emerging from a really dark decade.…
Once I put the past behind me, my mind cleared, my focus returned,
and I was on my way.”

And so was BP Capital, a turnaround that Pickens fully and
absolutely expected, he tells SUCCESS. “I knew we were good fundamental
players on commodities. We were sure it would happen, but
we weren’t sure when.”

A crucial ingredient in Pickens’ personal revival was to ratchet
up his commitment to physical fitness with a trainer. “I noticed
a big difference in how I felt,” he writes in The First Billion. “My
stamina improved. So did my powers of concentration. I rarely feel
tired despite one of the toughest business schedules I’ve ever had.”

That schedule has included forays into the purchasing of water
rights with Mesa Water (which could pipe water from the Texas
Panhandle to a city such as Dallas, where he lives) and becoming
an alternative-energy evangelist with Mesa Power LP, a wind
power initiative.

Pickens champions wind power as the centerpiece in his Pickens
Plan, which calls for a nationwide program to eliminate U.S.
dependence on foreign oil. He terms wind power a “pioneer move”
to assure energy security for the United States. “I certainly expect
to make a profi t,” he tells SUCCESS, but says it’s not his main motivation.
The assertion has the ring of truth, because Pickens already
has given away generous chunks of his wealth.

Among his recent contributions have been $265 million in gifts
to his alma mater, Oklahoma State University, and $50 million each
to two University of Texas healthcare institutions: UT Southwestern
Medical Center in Dallas and the M.D. Anderson Cancer Center in
Houston. The UT donations come with a catch. Each must grow to
$500 million within 25 years. If they don’t, all of the money goes to
Oklahoma State University. “The University of Texas is never going
to write a check to Oklahoma State for anything,” he confidently
predicts in The First Billion.

“I like making money. I like giving it away… not as much as
I like making it, but it’s a close second,” Pickens says. “I fi rmly
believe one of the reasons I was put on this earth was to make
money and be generous with it. And that’s what I’ve continually
tried to do.”