Behind the Lines
Hang Like a Bulldog
Boone Pickens no longer wears a tie. Herein lies a tale.
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His research is thorough and complicated, but his trading style is simple enough. He makes a decision and sticks to it. “I’m not a day trader,” he said. “We have our own technique, and it has been good to us. I have to get in rhythm and stick with my rhythm. If the fundamentals are there, you just hang like a bulldog and hope I haven’t screwed up my analysis.”
For all his reputation as a raider and a renegade, hanging like a bulldog describes Boone’s way of doing business almost perfectly. He built his company by hanging like a bulldog, and he lost his company doing the same thing. Mesa grew as most energy companies did through the seventies. Then in the eighties, when energy prices collapsed, Boone began making takeover plays on Wall Street. He arrived to almost universal disdain. During his first play, a Wall Street pro said, “There are only twenty people in the whole country who know how to do a deal like this, and Boone Pickens isn’t one of them.” But Boone hung on. He never succeeded in actually taking over another company, but he always bought considerable stock in his target, and when his threats pushed the stock price up, he was able to sell at a large profit. In his attack on Gulf Oil, he bought stock at $40 and sold at $80. None of this was accomplished without risk. It’s forgotten now, but Boone was risking Mesa in these plays. A misstep, a miscalculation, a savvier opponent that Boone couldn’t handle, and Mesa itself would have been taken over and Boone would have been out on the street. Perhaps losing his company now hurts less because he has always been willing to risk losing it.
He believed himself to be a force for the general good since everyone who owned stock, often retirees and pensioners, benefited from a higher price. He combined his raids with a masterful and instinctive public relations effort. He said he was warring on the lazy or ineffective corporate managers who seemed to think they owned the company themselves rather than the stockholders, managers who cared more about their own salary and perquisites than they did about the best interests of the stockholders. He ridiculed top managers who had little or no stock in their own companies. Meanwhile, he maintained a huge position in his own company. It was a message the country was ready to hear for the simple reason that Boone was exactly on target. As late as 1987 he was a frequent and popular speaker at conventions, conferences, and fancy dinners. It was always the same message and he hit hard. At one otherwise enervating conference, I heard Boone describe the head of one oil company as too old and out of touch to be effective. “He’s so old,” Boone said, “he shouldn’t buy green bananas.”
But then he lost his touch. He got into a vindictive fight with the newspaper in Amarillo, where he had lived more or less tranquilly since boyhood. As the chairman of the board of regents of West Texas State, he backed an unpopular president, who was a Boone sycophant. Later takeover attempts fizzled, and he lost the ability to take the high ground of rooting out incompetent management. He moved Mesa from Amarillo to Dallas in 1989 and cast aspersions on the town he’d left behind. Worst of all, Mesa was in trouble. The situation was complicated, but the essence was that Mesa was deeply in debt and could get out only if the price of natural gas went up. Boone believed it would. “My IQ is the gas price,” he told this magazine in 1995. “At $3 I’m a genius. At $1.50 I’m a moron. Don’t talk to me too fast; it’s at $1.53 today.” At the same time, he was making generous dispersions to his shareholders, which was the basis of his business philosophy. He hung in with gas and he hung in with the dispersions and he was wrong on both counts. The price of gas didn’t go up. “We distributed $1.2 billion to shareholders,” he told me, “and the debt was $1.2 billion. If I had it to do over, I would have distributed half. I thought I was right to distribute the whole $1.2 billion, but I wasn’t right at all.” In the end he was able to get new financing to save the company but only at the expense of leaving. “But I stayed with it the whole way,” he said. “I took a $125 million hit myself.”
He thinks American business is much better off today because the management is better: “Today if a manager doesn’t survive a deal, he can go somewhere else. Back then, if they lost the job, they wouldn’t be in demand. Today there’s not one in one hundred who doesn’t check their stock price at least once a day. Back then, a lot didn’t check the price once a month.”
That seems to be his legacy. Some are not as sure as Boone that the concentration on stock price is entirely a good thing, but he can more than hold his own in any debate on the subject. Other than that, he is a man who is used to making a decision and risking his company to see if he’s right. He’s also a man who risked the company once too often, which only meant it was time to move on and start something new. “I started Mesa in September 1956 and I left in September 1996, so that seemed just about right,” he said as we were finishing. As we left, he reached for a tip as the valet parkers rushed in a frenzy to bring Mr. Boone his car.
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