Tips from the Top: T. Boone Pickens

Born in Oklahoma in 1927, son of a land man, T. Boone Pickens graduated from Oklahoma State University in 1951 with a degree in geology. He married at 20 and had four children. He took a job as a roughneck for a refinery and then as a geologist with Phillips Petroleum. Citing difficulties with company bureaucracy, he resigned to work for himself. With $2,500, he began well-site and geological services work and soon found some investors to back him on a drilling project. He hit eight in 16 tries. He went on to build an oil and gas company – Mesa Petroleum – that by 1982 had assets of $2 billion. He became a corporate raider, profiting from successful and failed attempts alike. He earned $760 million from his “unsuccessful” attempt to purchase General American Oil.

Today, Pickens is chairman of the billion-dollar energy hedge fund BP Capital Management and ranks among Forbes’ 400 richest Americans with an estimated net worth approaching $2 billion. Earlier this year, he made a donation to his alma mater that is currently valued around $250 million.

 

What tips does he have for the owner of a small private company? Plenty.

• Find assets and put them to profitable use.
• You must have total dedication, at all levels for your organization, to adding value to the customer.
• Instill and nurture entrepreneurial instincts – a willingness and ability to assess risks and make decisions quickly.
• Give employees a “cut of the pie.” It creates a team spirit, with everyone working toward a common goal.
• Strive to constantly improve your ability to communicate the common vision, goals and culture. The result will be a highly motivated, cohesive team working toward the same goals. That, in turn, leads to high productivity – which should translate to higher profit.
• Make sure everyone in your organization is a contributor. Give them responsibility and the authority to get the job done. Fewer people with more authority increases productivity and enables the company to react more quickly to opportunities. Also, fewer and more productive employees enable the company to pay higher salaries and better benefits.

Additional Pickens quotes that offer lessons for private business owners:

About resigning from Phillips Petroleum at age 26 and “going solo”:

 

“(While working for Phillips) … I rode a bicycle to work. It brought a few snickers but it was sure easy to park.”

 

“I was twenty-six years old and on my own. It scared the hell out of me, but I felt as though somebody had taken their boot off my neck.”

 

“Only a few people were as blunt as my wife’s uncle Pete. ‘Boone,’ he told me soberly, ‘you don’t have a chance. You don’t know anything. How could you? You only worked for Phillips for three years.’”

 

“I knew the warm-up was over. I needed to make a deal and fast.”

 

“My back was against the wall. If I could find a good prospect and sell it, I would get some cash and maybe a piece of the action.”

 

“Money was tight. I had learned to hunt squirrels years before, living in Holdenville. Once, Lynn [his wife] asked if I couldn’t shoot some younger, more tender squirrels.”

 

“I was a sole proprietor: I had no employees and even did my own typing.”

 

“I had a prospect that I thought would be an easy sell. I took the deal to a local independent, Walter Caldwell. He would drill two wells … and I would get $2,500 for putting the deal together. Both wells were small gas producers. Caldwell tagged me ‘boy geologist.’”

 

“I had been on my own for about thirty days. The success of those two wells ended any doubts I might have had about leaving the corporate umbrella. This was what I was born to do.”

 

“There was plenty left to learn and mistakes would help me. I just had to avoid making the same mistake twice.”

 

“I tried to distinguish the players from the tire-kickers.”

 

“At some point, it seems everybody starts to pull for you.”

 

“The key to making deals was for me to develop ‘drillable’ ideas.”

 

The Early Years:

 

“I decided that we had to get into an area that was not picked over if we were going to do any good.”

 

“… I was also starting to realize that I wanted to do more than scramble through life as a one-man operation. There had to be a better way.

 

“I had become an independent oilman, which meant a life of difficult decisions, personal risk, and grueling hours. Independence meant you were free to drive a couple of thousand miles a week, eat when you could and try to outsmart leasehounds, big oil companies, the weather and the geology. I thrived on it.”

 

“It was time for me to redefine my idea of success. I wanted to expand my business and hire someone to help carry the load, to handle some of the details. That was the first step toward what became of my larger dream. To build a real company.”

 

“… plenty of opportunity if you could get financing, keep your health and hold on to your sanity while juggling a dozen different deals.”

 

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

 

“The reason for my getting the work was price: I was cheap and fast.”

 

“We were doing whatever it took to survive and we were learning. By the early 1960s, I had enough experience to start doing some interesting things.”

 

“Undercapitalization afflicts 90 percent of the new businesses in America, and we were all too typical. Every time we got a little cash something would happen and we’d be back at the starting line.”

 

“When all was said and done, the chances were slim that any one strategy would ever make us a major player. We needed to fish with more lines out.”

 

When things got really bleak, financially:

 

“We had our backs to the wall again.”

 

“‘Boys,’” I said, ‘this is it. We’ve got to figure out a way to make $300 million, and we’ve got to make it fast. A field goal won’t do it – we need a touchdown.’”

 

“I was used to having my back against the wall. But $300 million was a lot of money – more than half of Mesa’s net worth. You don’t find that kind of money under a rock. We were about to enter a risky game that would make us famous, and in some circle’s infamous, initiating deals involving corporations much larger than Mesa: Gulf, Phillips and Unocal. We would identify the undervalued, mismanaged companies and then make a huge investment in them. We would try to force the managements to do something for their stockholders, including us. And if they refused, we would try to take them over.”

 

About executives of large public corporations:

 

“Far too many executives have become more concerned with the ‘four P’s’ – pay, perks, power and prestige – rather than making profits for shareholders.”

 

“Too often, company managements are more concerned with their own preservation than enhancing their shareholder’s (value). These managements are generally not good risk takers, and their companies suffer from a lack of productivity.”

 

“If you are a stockholder, the chances are that one way or another, most corporations are misappropriating your money. It is legal under the system. Every day this respectable crime is perpetrated in corporate corridors across the country.”

 

On his corporate takeovers:

 

“The corporate world did not lack for poor managements and undervalued companies, so acquisitions would become a key part of our growth strategy.”

 

“The minnow trying to swallow a whale. But what we lacked in size, we would make up for in creativity and tenacity.”

 

General:

 

“Lynn and I decided to get married. Our parents wanted us to wait a few years, but we wouldn’t listen.”

 

“We rented a house for $60 a month and sublet one room for $40 (breakfast included) to a friend. And that, sports fans, is entrepreneurship.”

 

“I just don’t think I look at life the same way a lot of people do.”

 

“Be willing to make decisions. That’s the most important quality in a good leader. Don’t fall victim to what I call the ready-aim-aim-aim-aim syndrome. You must be willing to fire.”

 

“I’ve always believed that it’s important to show a new look periodically. Predictability can lead to failure.”

 

“Keep things informal. Talking is the natural way to do business. Writing is great for keeping records and putting down details, but talk generates ideas. Great things come from our luncheon meetings which consist of a sandwich, a cup of soup, and a good idea or two. No martinis.”

 

“I believe the greatest opportunity lies in a free marketplace. There are powerful forces afoot trying to restrict that freedom in the interests of the vested and already wealthy. I am talking about a relatively small collection of corporate executives who would use the engine of American commerce for their own narrow ends.”

 

“Play every game for all you’re worth. But when it’s over, it’s over.”

 

“Asking people for money is the most essential skill for a young dealmaker.”

 

“… money has frequently been a motivating force in my life. It’s quite a thrill to make money.”

 

“I believed in good planning, and if I could accomplish as much in ten hours as someone else could in twenty, that really made me happy.”

 

“It looked like a cinch – and that should have scared the hell out of me.

My experience today would have told me that there are no cinches in this business.”

 

“I had to adjust my dreams to fit reality – or could I somehow change reality to match my dreams?”

 

“Entrepreneurs need more capital than banks are willing to lend – to expand, to build new plants or just to get started – and they can find that capital by selling their ideas in the equity markets.”

 

“I have found that many CEOs could care less about the mechanics of a deal and depend almost totally on their lawyers and investment bankers. They don’t ask questions because they are afraid of looking stupid. I would rather look uninformed at thirty-six, than stupid forever after.”

 

“I felt that size was meaningless. Results were what mattered.”

 

“If you are a consistent moneymaker, you will be a good decision-maker. Sometimes the window of opportunity is open only briefly. Waiting isn’t a decision, although many people think it is.”

 

“The more objective and the less emotionally involved you are, the more successful you tend to be.”

 

“If I can borrow and get a good return on these funds, it’s more satisfying to me than getting a good return on equity. It’s like a bonus. On the other hand, if you are highly leveraged and lose, your losses are compounded.”

 

“(I don’t worry so much about the interest rate on borrowed money.) If one half of a percent is going to make a difference, then I shouldn’t be borrowing the money anyway. And I’m always confident that I can make several times what the money costs me.”

 

“I get concerned, but I don’t get nervous. You can’t make money consistently if you’re uptight. If you don’t watch out, you’ll spend twice as much time on the losers as you do on the winners. You shouldn’t take a risk in the first place if you can’t handle the loss, because you’re not always going to win.”

 

“I hate losing, but I know that an aggressive investor is going to take some losses.”

 

“Money is a report card.”

 

“It seems as if everything I do is geared to saving time.”

 

Sources:

• Boone. Author, T. Boone Pickens, Jr. Houghton Mifflin Company
• (March 1987)
• 1982 Keynote address to the University of Texas Graduate School of Business Conference, “Small Business and the Entrepreneurial Spirit”
• www.famoustexans.com/boonepickens.htm
• www.brainyquote.com/quotes/authors/t/t_boone_pickens.html
• National Public Radio Broadcast, Morning Edition, January 16, 2006, Interview with T. Boone Pickens
• “Pickens sets record with $165M Oklahoma State Gift,” Associated Press, ESPN.com, Jan. 10, 2006