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I Am American Business

Boone Pickens

Producer Notes

BP Capital is on a small floor of a modest corporate building in sprawling Dallas. The young traders in the firm are glued to their computer screens monitoring their positions by the second. The world’s largest proposed wind farm is mapped out on the walls. And there’s a well-equipped company gym, with a full-time trainer available to everyone. Just down the road in one direction is Boone Pickens’ large, lovely home. And, not far in the other direction is the airplane hangar that houses his private jet. You can see what's important to Boone Pickens. It’s all within easy reach. He loves to work, do deals, exercise, and hop the jet to an OSU game, to his ranch, or to Houston for dinner with a friend. But after all, Texas is a big state, and if you’re a busy guy in Texas, it really is nice to have the jet close by.

Video Interview

The "I Am" Q&A

What kind of car do you drive?
I drive a Mercedes.

What is your favorite place to go?
It would be the ranch or Del Mar.

What websites do you like to visit?
Mine.

What was your worst moment in business?
It would have to be the dry hole in West Texas in 1959. I was broke three years after that and didn’t know it. It was bad. I was going for the moon. Bust.

What is your favorite drink?
Diet Dr. Pepper.

What is your favorite food?
I would rather have a steak, but I have just about quit eating it.

What is your idea of fun?
I have fun at home, at the ranch, with my wife traveling. We play golf together. All those are fun, but a good market is the best.

What business weaknesses do you forgive?
I can’t forgive dishonesty. But, a screw-up, working hard, I’ll live with it.

What movie star do you like?
I guess John Wayne would be my favorite or Ronald Reagan.

What personal qualities do you admire in business?
If they are open, that you feel like you can approach them and say hi, I am Boone Pickens and they’ll exchange with you, they don’t pull away. I like that.

Are you doing anything green, anything for the environment?
We got the natural gas that burns 86 percent cleaner than gasoline. That’s green. And we have got the wind, and that’s green. You know, I have been an environmentalist for a long time. Sometimes it’s hard for people to give me credit for being an environmentalist, because they say, “Well, he is industrial America, and oil and everything.” Well, that’s not true, if you go back and look at my record, it’s good as an environmentalist.

What was your greatest moment in life?
The best deal I ever made is when we acquired Hugoton Production Company in 1969. That kind of vaulted us into a big company where we then had some real clout. But there are so many victories along the way, it would be hard to try to tell you all about them.

What is your dream?
Well, right now I would say that to do the wind and water deal is kind of a dream. It’s big. But it’ll be a 10 or 15 billion dollar deal. And it would be the biggest deal that I have ever done so far. So that’s the dream today. I’ll have a different one tomorrow.

Do you have a motto?
Come early. Stay late. And you’ll get the job done. And you’ll win. It’ll be fun. Play by the rules.

And what is your present state of mind?
I did my annual physical last month. The second highest time in 22 years on the treadmill. It was 23 minutes, 15 seconds. The year before it was 24:30. And that was the highest. You know, I like that. And next year, I am going to get back to 24:30.

Transcript

CNBC:
What did your father do?

BOONE PICKENS:
My father was a land man, was in business for himself until about 1940, and then went to work for Phillips Petroleum.

CNBC:
Wasn’t your mother also involved in gas rationing, at one point?

BOONE PICKENS:
My mother was with the Office of Price Administration. The OPA. And that was a rationing arm of, in World War II, for the individuals in the country. They rationed the gasoline, and the sugar, and whatever else.

CNBC:
So, you kind of had tabs on gas and oil, from a very early age.

BOONE PICKENS:
That’s right. That’s been it, for me.

CNBC:
When you decided to study geology, what were you thinking you were going to do?

BOONE PICKENS:
Well, you know, thinking about geology really came from my father. And, I had first thought that I’d be a veterinarian. And, so I got in pre-veterinary medicine. And, after a year, where you could see that, that really wasn’t what I should be, and my dad told me, he said, “Look, get in geology or petroleum engineering, and get the hell out of school.” I remember he said that. And he said, “Your mother and I are set for you to graduate in June of 1951.” And he said, “We don’t think you’re on that same schedule. We want you to get on that same schedule.” And I did, and I got out in June of ’51, as a geologist.

CNBC:
Do geologists always want to find oil? Is that the goal?

BOONE PICKENS:
Well, I think so. If you’re a petroleum geologist, that’s where you start. Sometimes you get sidetracked and do some other things, but it’s always been for me, you know, I’m always looking for a big oil field, or a big gas field.

CNBC:
You used to play basketball and you’ve said that you learned some things, from your coach, in those days?

BOONE PICKENS:
Well, in high school, I played on a very good high school basketball team. I was fortunate enough to play with some good players, and I made the team. And then, when I got out of high school, we had gone to the state finals and when I got out of high school, Texas A&M offered me a scholarship. It was really the only scholarship that was offered to me. And so, it was easy to make a decision. So I went to Texas A&M one year, and tried to play college basketball, and, they cut me at the end of the year, and then I transferred to Oklahoma State.

CNBC:
You have said your basketball coach gave you some values that have stayed with you.

BOONE PICKENS:
You know, he did, I remember, we lost a bi-district game one time, and we were pretty upset about it, the team was. And he said, “Fellas,” he said, “When you’re on the court, you play it for all it’s worth.” He said, “When the game’s over and, you’ve either won or lost, that’s the end of that game.” So he said, “It’s behind you, and now we’re looking to the next game, not the one we just won or lost.” And, you know, I’ve kind of practiced that in business. That, we’re not going to book all wins. I know that. It’s just not the way life is. But, when we take a loss, we take it and move on.

CNBC:
What did he said to you, after you lost the game?

BOONE PICKENS:
Look, Coach Hull was the kind of person that the team listened to very closely. And, we lost an important game, and we were all kind of moping around in the dressing room, and he said “Fellas,” he said “We lost a game, and that game is over. They’ve already put the score up, and there’s no question we lost. Now we’re thinking about the next game.” And, you know, I think that has served me well because, my guys, I’ve seen them when we’ve taken a big loss, and I always tell them, I said, “Fellas, look, it’s going to take two barbers to shave every one of you. Your faces are so long.” And, the first time I said to them, they didn’t know what I meant. And now they laugh at it when I say, “Fellas, I’m going to have to get the barbers in here. Two each, for you guys to be shaved.” And, they laugh you know, because they know that losses aren’t really that serious. It’s not the end of the world.

CNBC:
Is it time for people to move on from what they’ve always thought was going to be our main source of fuel?

BOONE PICKENS:
I’ve had a lot of experience with moving on and adjusting to the situation that I’m in. And there’s no question, you’re going to have fundamental change in America. That when you look at the hydrocarbon era, it extended from the automobile in 1900, and we now have used half of all the reserves in the world. So you say, well, that’s been about a hundred years, so you have a hundred years left. No, that’s not true, ‘cause you’re using at a much higher rate, now. So what’ll happen is that you’ll use up pretty well what you have. Will we not have hydrocarbons? Not oil and gas? But what will happen is you’ll change to another source of energy. And that’ll all happen in the next, it’ll start to change within the next, ten years, and you will have transitioned to another fuel, within fifty years. But, you know, that’s a very short period in geologic time, to have been the hydrocarbon era, to be less than two hundred years.

CNBC:
Why do you think oil prices are going so high right now?

BOONE PICKENS:
There’s only eighty-five million barrels of oil available to the world everyday. And it’s not going to go up from there. Eighty-five million is it. Now, stick with me on that number. If you look at the projection, for oil usage, in the fourth quarter of this year, it’s going to be eighty-eight million barrels a day. So you can’t cover eighty-eight million, with eighty-five million. So what does that mean? Demand’s greater than supply, so the only way you’re going to kill demand, is by increasing the cost of oil. And so as the oil price goes up, then demand should slack off. But, at what level does that happen? We went through fifty, we went through sixty, we went through seventy, and now we’re at eighty. And demand is still up. So you tell me where it goes from here, but I believe it will continue to go up.

CNBC:
Do you believe that oil production has peaked?

BOONE PICKENS:
I think oil production has peaked.

CNBC:
Why do you think people listen to you on the subject of oil production?

BOONE PICKENS:
People do listen to me on the subject. Why? One, I’ve been in the business for over fifty years. I’ve had a successful record, I’ve done well, and I don’t mind making predictions. And so the predictions for the last three or four years, have been dead on. And so, when I make a prediction, people do listen to what I say. I know what I’m talking about.

CNBC:
And also, what you say frequently affects the markets. How does it feel to have what you say affect the market like that?

BOONE PICKENS:
I’m not so sure that’s right, that it affects the market. The market is driven by fundamentals. And you can’t get away from it. Can somebody make a prediction that excites enough people? It could affect the market, momentarily. But, markets are driven by fundamentals.

CNBC:
Why is our country not taking a stand on energy?

BOONE PICKENS:
Well, when you look at Washington, I’ve never seen Washington- and I’ve been around a long time- be proactive. They’re always reactive to whatever the problem is. And once it becomes a crisis, they, you know, they start having hearings. And they’re going to get to the bottom of this, and all, when the bottom of it is, is that, we’re running out of oil. And we need to figure out something else, for our transportation fuel. All the oil used, every day in the world, seventy-five percent of it is for transportation. So, if you could extend the mileage on a car, if you could cut back on use. If you could put more than two people, one or two people in a car, there’s a lot of ways it can be solved. But the thing that you’re lacking is leadership. Leadership is what you really need to solve the problem.

CNBC:
What are some of the alternatives for power generation?

BOONE PICKENS:
The country and the leadership in the country are going to have to focus on what we’re going to do, as we change away from hydrocarbon fuels. And, no question, wind is a big factor, especially in Texas. And, renewables are great. And it’s all going to happen. The government needs to get on board, understand what they can do, to cause all this to happen, and then make it happen. Because, if, for instance, you paid a little more, say, for ethanol, that is an American fuel. And I feel like now, when you buy, foreign oil, and we’re importing 62 percent of the oil, to the United States now, some of that money goes back to the terrorists. No money goes back to the terrorists, if you’re using ethanol, or wind energy. If we can develop our own energy, in America and coal is abundant, in the United States. So if they say, well, it’s dirty. Well, it’s dirty; let’s clean it up. It can be cleaned up. And they say, “What next?” Well, number one would be nuclear. So they say, “Oh well, nuclear, you know, anything can happen.” Well, we’ve been at it a long time, and nothing’s happened. One horrible accident in Russia. The United States, no problems. If you turned the job over to me, I would say, put nuclear on the fast track, clean up the coal, move the natural gas out from power generation, ‘cause it’s too expensive, and put it over to transportation fuel, where it’s cheaper than gasoline and diesel, and cleaner, and a domestic fuel. That my pitch. But nobody asked me to do that.

CNBC:
Can we just hear a little bit about your plans for wind?

BOONE PICKENS:
We’re looking at the wind, it could be the biggest deal I’ve ever done. My neighbors up in Robertson, Gray County, Texas, we have met several times. They’re ready, and now it’s kind of up to me to make the deal, make it happen. But the size of it would be four thousand megawatts of wind power. And four thousand megawatts would be about six times larger than the largest wind farm ever built in the world. And then we would fold into it a coal powered plant, and also a plant, on natural gas. So we could level out the daily fuel. That would be about a thousand megawatts. So the combined thousand, with the four thousand wind- we would have a five thousand megawatt power plant.

CNBC:
What is it about Texas? It’s got wind, it’s got oil, and it’s got gas.

BOONE PICKENS:
We’ve got everything in Texas. That’s why everybody’s moving here.

CNBC:
Let’s talk a little bit about what happened with clean energy. I know you rang the bell at NASDAQ.

BOONE PICKENS:
We’re in the renewables and in wind, but we’re also- we have a company called Clean Energy Fuels. That company went public in May, and we’re the largest in the business. And natural gas is our fuel, both compressed natural gas- we call it CNG- and we have LNG- liquefied natural gas- we sell both of them. And, we manufacture the liquefied natural gas in our plants. We have grown from three stations in 1997, to a hundred and eighty-three now. And we’re building about twenty to forty stations a year. It’s a real fuel. It’s the best. It’s cleaner than gasoline and diesel. It is a domestic fuel. And it’s cheaper.

CNBC:
Would you say this is the most practical alternative to gas?

BOONE PICKENS:
When you focus on natural gas, it is the best alternative out of the fuels, for gasoline and diesel. You say, “Oh, well what about ethanol?” Ethanol’s fine, use it. “Well what about biodiesel?” Use it. Use them all. We’re going to need all of them, in this country. We’ve gone way too far, importing sixty-two percent of our crude oil. So, it’s a chance for everybody. What opened it up for everybody? Eighty-dollar oil. Seventy-dollar oil. That’s when the economics start to line up for all the alternatives. They get a chance now. And that’s good. I don’t have any fuel, in America, that I oppose, or talk against. We need everything we can get.

CNBC:
You have contacts in Washington. They ought to listen to someone like you, shouldn’t they?

BOONE PICKENS:
Washington is a real head-scratcher for me. You know, if you sit down for dinner and talk about these subjects, it seems like they’re pretty well understood. Some of these guys get in front of a camera, and they want to castigate Exxon, for instance, because they’re the biggest. Exxon is the biggest, but is very small in the eighty-five million barrels a day for the world- Exxon produces about three percent of that. If you hear some of these guys on television, it sounds like Exxon’s producing eighty-five million barrels, instead of two and a half or three million barrels. You need to get it, you know, the politicians who I think sometimes understand it, are unwilling to explain it. They don’t want to tell it like it is. And it’d be so much better for the people in America, if they heard it like it was. Exxon’s a great company. It’s great for us. Chevron is. Conoco Phillips. All of them are American companies, but they’re not big in the overall picture, as far as reserves are concerned. 75 percent of all the oil produced everyday is produced from state-owned oil companies. Like, Russia’s gas, Venezuela Petroleus. PEMEX in Mexico. But the United States and Canada don’t have state-owned companies. They’re private companies. And so it’s a little bit confusing to the consumer, to hear the story about how this all unfolds, and where the oil comes from.

CNBC:
You have not been predictable in your career. You’ve taken some interesting turns.

BOONE PICKENS:
I haven’t been predictable, that’s true. I always feel like if you become predictable, then you’ve lost a lot of your advantage. But I do things, I think, that are kind of a surprise. So, I don’t want to be predictable. But at the same time, if people will listen to what I say, that’s what I’m going to do. But they don’t want to do that, because they don’t believe that it’s that easy to understand what Boone Pickens is up to. So, I don't know.

CNBC:
Can you talk a little about leadership?

BOONE PICKENS:
I talk a lot about leadership, because I believe that we have more leadership in America, than any place else in the world. And at the same time, I’m disappointed in our leaders. And, again, they’re seldom proactive, or they’re not proactive enough. They wait until the roof falls in, before they realize that we have a problem with the roof. And so some of them analyze and reanalyze and I always feel like it’s kind of like the guy that, you know, it’s kind of- ready, aim, aim, aim, aim. They’ll never pull the trigger. They can’t fire. And a lot of times maybe I shoot too quick.

CNBC:
You are at an age where a lot of people are playing golf and, that’s about it. What keeps you going?

BOONE PICKENS:
Let me tell you what I do on golf that is kind of interesting. I really enjoy hitting range balls, more than I do playing the game. Because, I can hit so many more, in a shorter period of time. I can hit two hundred range balls an hour. And it takes me four hours to play golf and- and hit ninety balls. I think there’s time to do whatever you want to do. And when you say, “I don’t get to read enough,” you would, if you wanted to read more than you wanted to do something else. So there really truly are only twenty-four hours in a day, and you can spend that however you want to.

CNBC:
Do you think we need a plan in our country?

BOONE PICKENS:
Yeah. A new plan for our country, seems like everybody has a plan, but somehow they don’t get them in place, and they don’t follow through on the plan but, I feel like a fool with a plan, is better than a genius with no plan. And I think at times, we haven’t had a plan up front that we got behind and all carried it out. It seems like we’re all running around in some kind of Chinese fire drill or something. When you were talking about golf a minute ago, and, there’ll be some of my friends, and some people that don’t know me, when I tell this story, they’ll say, “He’s lying.” But I’m not lying. But I was hitting balls at Del Mar Country Club, in California, the other day- a club that my wife owns. And, I don’t even have to pay for anything out there. I just go play on her membership. And they have all the range balls I want. Pro comes out and helps me. Anyway, I was hitting balls, and a guy came up to me, and he said, “We’ve been measuring your drives, and we want you to play in a three-person scramble, in Las Vegas.” And I said, “Really?” I said, and he said, “There’s pretty good betting.” And, I knew the guy, and I said I’m sure that there is. I said, “I’m not even playing that much golf.” He said, “Yeah, but we watched you hit drives here for about an hour.” He said, “We measured the last twenty, and they were between 225 and 252.” And he said, “When you’re seventy and older, you get the forward tees,” and he said, “It’s a scramble, so we hit off your drives.” And so he said, “We want you to join us, and you take care of the driving.” Because if you can get it out there, 232-40 every time, he said it’s going to get us the advantage. I said, “Well, I’m a pretty good putter.” And he said, “We don’t need you as a putter. All we want you to do is drive the ball.” So I was proud of that, but I lift weights, and I can turn back. And finish the swing high. And so, I thought that was kind of neat.

CNBC:
What are your theories about fitness?

BOONE PICKENS:
Working out? I’ve always done it. I’ve never smoked; I’m a modest drinker. I quit drinking scotch seven years ago. It’s too strong for me. But I’ll have a couple glasses of wine. Back at Mesa, we went self-insured before anybody did. We had the lowest insurance costs, the best coverage, the lowest off-time on the deal, and we were a fit company. In fact, we won the most fit company in America, in 1986. And it’s because we all worked out, and we also knew if we were sick, we pay the insurance, so everybody stays in good health. And it was a great plan. But, it’s the same thing where we are now, at BP Capital. Most of our people work out. And we have a gym, just like we’ve always had. =And, you know, it’s part of the deal.

CNBC:
Does it keep you sharp for your business deals?

BOONE PICKENS:
I don't think there’s any question that, the exercise- the lifting somehow, I think, stimulates your brain, and I think it does make you sharp. It gives you a great amount of stamina.

CNBC:
Do you think you’ve got some instinct about oil prices? Do you think you have some seventh sense, from growing up with your dad?

BOONE PICKENS:
You know, I don't know. I’ve been in the business so long, that I see a lot of things that are obviously, not factors to pay any attention to. Whereas somebody else, that has less experience, will run out each one of these things, when I can eliminate half of them, as they don’t count. And I think that’s been important. And it’s helped the young guys I worked with. And I’ve been right on a lot of things to the point where they’re very interested in what I have to say about anything related to energy. But whether it’s some instinct, I’m not sure. But I have stayed current. And, contemporaries of mine say, you know, “I was a smarter geologist than you were.” And, “You went out and made all this money after you were seventy years old. Why didn’t I do that?” And I said, “Well, one thing,” I said, “You retired, and lowered your handicap, and you’re not current.” “Oh, I’m as smart as you are. I know what’s going on.” And I said, “Okay, fine, well, you tell me why you didn’t, then.” But, they don’t stay current. They’re not there, at their desk everyday. They’re not associated with the kind of people that I am, when you’re constantly pushed to think, you have to make a decision, and all these can mean a lot of money. So, that does keep your attention.

CNBC:
What do you like to tell young people who are just starting out?

BOONE PICKENS:
A lot of people ask me, how can I do what you did? And I said, well, the first thing is, is that you’re going to have to work hard. And if you don’t have a good work ethic- and they say, “Well, you know, I’m pretty smart, and my GPA is…” And I said, “Mine wasn’t that high.” And so, I figure I’ve got to work harder. I gave a high school commencement address, at my grandson’s class in Alexandria, Virginia. It just came to me, as I was giving it. And I looked over at this beautiful class of graduates. And I said, “I’m going to offer you something that I can’t fulfill, and you can’t either. But I want to make a point.” And I said, “I think I can make the point this way. You all know who I am. You know that I’m a wealthy guy. You know that I have an airplane, that I have a big ranch. I’ll tell you what I’ll do. I’ll trade you my deal for your deal. And your deal is, is you’re seventeen years old, and you’re graduating, and you’re going to college. I’ll trade with you. And I’ll be seventeen, and you’ll be seventy-nine, but you’ve got everything that you’re trying to get at seventeen, by the time you’re seventy-nine. Now here, you can have it. And I’ll have your deal.” And it was pretty sobering when I said it, because, as I explained what you’re going to get, but also what you’re going to give up, you could tell these kids are listening to me. When it was over, two guys came up and said, “Is there any way we can work that deal out?” And, “Do you have big deer on your ranch?” And I said, “Fellas, you know it won’t work. But you’ve got a better deal than I’ve got.” I said, “To go back to seventeen and give it another run, that’d be fantastic.”

CNBC:
So, it’s not about the things for you, because you’ve got them all, and you’re still going strong.

BOONE PICKENS:
It’s not things. Things are not that interesting to me. I like results.

CNBC:
Who is driving up the price of oil?

BOONE PICKENS:
When I think about who is it that drives up the price of oil? The consumer. The demand. The demand’s greater than the supply. Okay, break up demand. Tell me whom it is, in the demand circle, that is doing the most damage. There’s no question that the United States uses 25 percent of all the oil produced in the world. So we’re using 25 percent of eighty-five million barrels. And we have less than 5 percent of the population. So, less than 5 per cent of the people are using 25 percent of the oil. What does that tell you? Well, we’re a lot more industrialized, and highly developed than these other countries. So, it’s not just apples to apples. But we need to be the leadership that, one- and we’re doing a good, pretty good job- clean up the air. You’ve got Governor Schwarzenegger in California, who has a pressing problem in the state. A lot of people, a lot of pollution. And, he is approaching it like it should be approached. He wants results, measurable results. And that’s good. It’ll move across the country, and it is moving across the country. When you clean up the air, you’re probably going to cut down on the use of hydrocarbons. And that’s all good, too. I was in Beijing the other day. And they were going to stop one million cars on the streets to see how it impacted their air quality, because they’re coming up on the Olympics. So that meant two million cars continued to operate. And, when you think, oh my gosh, if all they’ve got is three million cars, and twenty million people- if this was America, a city with twenty million people, which is bigger than what we have, there would be forty million cars, not three million cars. So, you think, if they were up to our level, can you believe the problems that they would have. Well, they’re moving. They’re moving very fast. So, that three million cars, in ten years, will be, I’m sure, six million, or eight million, or ten million cars, in Beijing. So, we’ve all got to look at it, and try to do something about it and what it is, is we’ve got to use less, conserve and spread it out, so everybody has a piece of the pie.