Excitable entrepreneurs swashbuckled into history
First published in the Sunday Times on 27th March 2016.
SOME swashbuckling entrepreneurs provoke admiration, controversy and fascination in equal measure. Aubrey McClendon, who died this month, was a prime example of the buccaneering breed. He gambled big in the oil business — and lost — but in the process he “changed the world”, as his Bloomberg obituary states.
McClendon started his career as a “landman”, signing leases for oil drillers in Oklahoma. He founded Chesapeake Energy at the age of 29 and was an early proponent of hydraulic fracturing — fracking — techniques to extract hydrocarbons. His business became perhaps the largest shale oil and gas company in America during the next 25 years, at one point amassing leases over 16m acres. At its peak in July 2008 Chesapeake was valued at $37bn, and it remains the second-largest US natural gas producer.
Undeniably McClendon helped to transform the energy industry. He also broke the rules and took enormous risks. His company’s share price crashed during the financial crisis, and he was forced to sell his shares because of margin calls. He had personally borrowed more than $1bn against his 6% holding to buy stakes of up to 2.5% in the wells Chesapeake drilled. After a corporate governance scandal at the company in 2013, he was forced out.
He immediately started a new business called American Energy Partners, and raised $10bn to keep drilling. But the collapse of the oil price in 2014 was a hammer blow, and last year he was no longer in charge of this business either. Then the US anti-trust authorities filed criminal charges against him on March 1, the day before he died in a car crash. They alleged he had colluded with rivals in rigging bids for oil leases. His death is unexplained — some suggest it may have been suicide.
The rise and fall of McClendon reminds me of a tragic fable about a wildly ambitious hero who never knew when to stop. Yet his life trajectory echoes that of other great innovators who overreached themselves and fell from grace. Harry Selfridge was one of Britain’s greatest retailers. He pioneered the idea of shopping as theatre and is credited with inventing the phrase “the customer is always right”. At 50, flush with cash from selling his Chicago department store, he arrived in London and bought a prime site in Oxford Street. His shopping palace opened in 1909.
Selfridges was the first store to have restaurants and a hairdresser, and cosmetics displayed at the front of the shop. His ideas were revolutionary and very successful. He continued to push boundaries and in 1925 held the first public demonstration of the television. But while he was a retailing genius, he was also addicted to fast women. Despite being married, he had numerous affairs and spoilt his lovers in a madly generous fashion.
Late in life he became transfixed by Jenny Dolly, a dancer. He was 69 and she was 33. He squandered a fortune on pursuing her, paying her gambling debts and buying her a chateau and jewels. In 1939 he was ousted from Selfridges by the board — he owed the company and the Inland Revenue vast sums. He died penniless in a rented flat in 1947, but his creation lives on to this day.
Another figure who bet big and lost — but changed London profoundly — was Paul Reichmann, the Canadian property developer behind Canary Wharf.
His business, Olympia & York, became the biggest property company in the world in the 1980s and his family the seventh richest. But by 1992 it had gone bust, sunk by $20bn of debt and a savage recession. By then he had already bought a Docklands wasteland and started building skyscrapers there. It was a few years before the project really took off, but by 1999 the company was attractive enough to go public. Reichmann was no longer in charge, but he had reacquired a stake in the business.
All three entrepreneurs had huge dreams and bet everything on them. Their hunger to succeed exceeded their abilities, yet communities would be poorer without their bold vision.
Perhaps something in each of their personalities meant they were always doomed to overextend themselves. Yet their audacious, even superhuman projects would never have come to fruition without their overweening desires.
The essayist Thomas Carlyle wrote that “the history of the world is but the biography of great men”. This applies not just in politics but in business too. Not everyone would agree that characters such as McClendon, Selfridge and Reichmann were heroes, yet they each changed the world in important ways.
Critics would argue that they were merely products of their time, not shaping events but slaves to external circumstances. I prefer the idea that individuals do matter and that, for all their flaws, these extraordinary individuals were prime examples of the abiding importance of larger-than-life entrepreneurs.
Even when such risk takers gamble and lose personally, society as a whole can win.