This is part of our SALT 2016 coverage stay tuned for more coming! Sam Zell and T. Boone Pickens
Also see SALT 2016: Kyle Bass, Leon Cooperman Diverge On Economy
10:20 AM – 11:00 AM
A Tale of Two Titans: A Conversation with T. Boone Pickens and Sam Zell
Themes for the next decade: Cannabis, 5G, and EVs
A lot changes in 10 years, and many changes are expected by the time 2030 rolls around. Some key themes have already emerged, and we expect them to continue to impact investing decisions. At the recent Morningstar conference, several panelists joined a discussion about several major themes for the next decade, including cannabis, 5G and Read More
T. Boone Pickens
Chairman & Chief Executive Officer, BP Capital
Founder & Chairman, Equity Group Investments
David Westin (Moderator)
Co-Anchor Bloomberg< GO > & Former President of ABC News
Sam Zell and T. Boone Pickens:
Q: “How did you get where you did? Do you see the same opportunities today?”
Boone: Luck comes in handy, but I certainly do see the same opportunities. The opportunities are different. Work ethic never changes though. You’re going to have to take chances and bet on yourself. There’s a lot more billionaires today than there used to be.
Q: “Do you think we’ll see the same rate of growth as last 50 years?”
Boone: “I don’t know anything about growth. I’m a geologist, not an economist. I tell students: the oil business isn’t going anywhere. We’ve had five oil crashes. Four of those five times, the Saudis balanced the market. This time, it’s on us – since we oversupplied it.”
Sam Zell: “At every speech I give to students – when I get to the Q&A – they say, you had so many opportunities! Will I get those? I tell them: every student ever has asked me that. There’s unending opportunity. Anyone who says there’s no opportunities – go talk to Mark Zuckerberg. But I do think the world will have slower growth going forward. The biggest issue is that regulation of our businesses has become so oppressive. The ability to achieve has been reduced by this regulatory burden. Wealth redistribution and growth together are incompatible. When I grew up, the American Dream pushed everyone. I question whether that’s being harnessed and limited by these goals of wealth distribution.”
Q: Where do you see those regulations?
Zell: “In my business – the cost of regulation has gone up 5x in eight years. It’s capital allocation. Before, you were allocating capital to risk and opportunity. Now it’s going to bureaucracy.”
Q: Do you see any emerging market opportunities?
Zell: “Sure, we’ve been big investors in Brazil, Mexico, the Far East. We want to identify where the growth will be and how we can participate.”
Boone: “I disagree – our engineers are far superior to foreign ones. We are the best. I’ve been to the UK, North Sea, all over – they don’t compare.”
Zell: “The difference between your business and mine: if I build a shopping center in India, it won’t affect my shopping center in Chicago. No competition.”
Boone: “It’s less about competition and more that they’ll just tax the hell out of it. If I could set energy policy – first things first – you need to educate people in Washington! We don’t need Middle Eastern oil. That’s it. And then because of that we don’t need the Fifth Fleet in the Persian Gulf. We don’t understand the potential of what we have here at home. But again, Israel is our best partner anywhere – so we can’t leave them – but that’s the only reason to stay there. To help our friend. Why is the Fifth Fleet there? We’re just protecting the cartel. Let the Saudis and Iranians take care of it! It’s their oil! I’ve spent trillions in the Middle East and have almost nothing to show for it. We’re there because in 1970 we “peaked” on oil. In 1973 we had the Arab Embargo. It scared everyone and it seemed we were going to be forever dependent on foreign oil. That’s why the Fifth Fleet is there. If I was in Washington, first thing I’d do is put together an energy plan that puts Canada, Mexico and the US together – after that – you’d never need the Middle East again.”
Zell: I don’t see how you can look at things only through the prism of oil. If we moved out, Iran would take over Saudi Arabia and the rest of the Middle East. We have to stay there along with staying everywhere else in the world.”
Boone: “You know how many aircraft carriers there are in the world? Eleven. Guess how many of them are ours. All of them.”
Q: Thoughts on renewables?
Boone: “I’m for anything American. We have great renewables as well. The Germans are smart – they said they didn’t want to be dependent on Russian gas and so they’ve made a hard push into wind and solar. But they don’t have good wind. We do.”
Zell: “The biggest risk here with renewables is that no one is actually running the numbers…you and I are subsidizing billionaires buying Tesla cars! There is no substitute for cost-benefit analysis. And in all this renewable stuff – there’s been an absence of any focus on that. If we keep plowing money into subsidizing rich people buying Teslas, that won’t solve our problems. Let the free market decide!” Boone: Absolutely. But renewables aren’t the cure for everything. You still need oil, diesel. You can’t move a truck on renewables. The battery will be bigger than the truck.
Q: Thoughts on politics? Do they affect you building a business?
Zell: Politics absolutely matter in building a business. Building a business is like building a wall of bricks. You have to risk putting the brick there before it’s needed and see if demand will make your decision correct. Businesses are built on the confidence of their owners. Can we open another market, can we drill here, etc. – businesses are built on belief! You need confidence in government and leadership. When you don’t have confidence – just look at Jimmy Carter era. Malaise across the board. Today, corporate America has so much cash and isn’t spending any. Why? How can you make future commitments when every day the game changes? The government keeps making new rules. That $4B breakup fee from Halliburton and Baker-Hughes was a wrong-way bet on how the government would react. There’s no consistency or predictability in today’s government. We’re growing so slowly because there’s no confidence. This country needs a leader. We haven’t had leadership in the last eight years. I have never thought in terms of ‘what can the president do for me?’ I think in terms of, ‘what can he do to avoid messing up in my business?”
Boone: “I’ve never asked anything of the government. I ask them to not do something to me! Not to do things for me. We need entrepreneurs. We obviously work best in a capitalistic society. Ronald Reagan knew that. He never did anything for me – he just said get out there and do it!”
Zell: “Immigration as well – immigrants are self-selected risk takers! We’ve encouraged them to be part of our society. Now we’re changing our policy to not be in favor of immigration.”
Q: Thoughts on immigration policy?
Boone: I’d cut off the Muslims coming into the US. We need a better policy. It feels sort of like “wander in.
Sam Zell: I sort of agree – the real problem is execution. The government costs a lot of money and interferes with our lives – YET, wherever they have direct responsibility, they fail. They fail the veterans (the VA). Their failure to execute creates other kinds of problem. Obamacare is the epitome of failed execution. The American people are looking at this long stretch of failed execution now. The San Bernardino guy – how he got in – failed execution! The Trump phenomenon is all about the inability of our government to execute on anything.”
Boone: “You or I could’ve been in Trumps spot. Our timing was the difference. He showed up when the people were fed up! It could’ve been anybody! He had guts enough to get up there! Icahn is a good friend of ours – he has done more to help CEO’s get off their ass and help shareholders than anyone else. Moreover – I don’t see anyone else besides Trump who is going to CHANGE anything. He’s a smart guy. He’ll surround himself by smart people. I’m tired of having politicians as presidents of the United States. I can’t remember one great senator or governor. Reagan was a good governor, that’s it. People are asking the wrong questions about both Trump and America in general. It’s not “how will Trump deal with Putin?” It’s “how will Putin deal with Trump?”
Sam Zell: “I don’t think history will be kind to the last eight years. America today is suffering from a clear lack of leadership. The job numbers are bull$hit. The number of people with jobs is the lowest since 1963. We have more underemployment in the US than anywhere else. We’ve dis-incentivized society. And we have a president who informed me that ‘I DIDN’T BUILD THAT’ – and that’s preposterous.”
Boone: 100% agree.
Q: What are you most proud of?
Boone: I’ve given away more money than I’m worth. I tell my kids: I’m not making one of you rich. I will help you, but I’m not making you rich. That being said – none of them have gotten rich (laughing).