It’s tough to sort the bad guys from the good guys... especially when there’s money involved.
We all like to think we’re good at it. We meet somebody or watch an interview and instantly slap a label on them. But so often, we’re dead and dangerously wrong.
As the nation becomes disgustingly obsessed with the presidential election, most Americans have no idea they lost a very powerful man last week. He’s a man that directly affected all of our lives.
He affected our wallets... the economy... our portfolios... and the workforce.
He did far more than even the most powerful of politicians. And yet, the average investor - let alone the ordinary citizen - has no idea.
As investigators work to find out exactly what killed Aubrey McClendon, we can’t help but ask a tough question. Was the man a hero or a villain?
From the start, it’s clear we’re going to be painting in shades of gray.
Those who knew the founder and former CEO of Chesapeake Energy (NYSE:CHK) would agree he was a tremendous risk taker. He was one of the wildest of wildcatters.
What’s incredible, though, is how exorbitantly our capitalist system rewarded him for his good decisions and how efficiently it punished him for his bad ones.
The underlying rule of the capitalist system - and therefore wealth building - is that you will be richly rewarded for giving folks a product or service they want and are willing to pay for.
McClendon did it in spades.
In 1989, he and a partner pooled their cash and started Chesapeake Energy. McClendon was just 29 years old.
But what he lacked in experience, he made up for with an immense competitive spirit.
The new company was an immediate and tremendous success. Just four years after founding it, McClendon took his company public. And over the following three years, his shareholders more than tripled their money. Shares soared over 270%.
And the moneymaking trend had legs...
In 2011, Forbes formally inducted McClendon into its prestigious 20-20 Club. He became just one of eight CEOs who delivered annualized returns of more than 20% for 20 straight years... an incredible feat.
McClendon not only started a successful company, but he made his fellow shareholders rich.
Even more, he created jobs. At its peak, Chesapeake Energy was issuing paychecks to more than 13,000 employees.
As his company perfected the technology that allowed it to tap into tight shale formations, Chesapeake grew its gas production from 5 million to 2.5 billion cubic feet per day through 2013.
Only Exxon Mobil (NYSE:XOM) produced more gas.
But the story goes much further than Chesapeake. McClendon lit a fire under an entire industry. He’s often thought of as the father of modern fracking.
At the same time McClendon and his crew were leasing land all across the country, his competitors were doing the same. They took advantage of Chesapeake’s technology and drilled countless wells of their own.
Tens of thousands of jobs were spurred.
It’s not hard to say McClendon was the pioneering force in America’s energy boom. He’s a chief reason we’re no longer dependent on foreign energy.
He did what no politician could do... and he didn’t need bombs to do it.
Thanks to the power of the capitalist system, McClendon changed the face of America, made us safer, freer and richer... all while building himself an incredible fortune.
If only the story stopped there.
If you’ve been following the news this week, you know McClendon was charged on Tuesday with conspiring to rig land lease deals. On Tuesday, just hours before he was due in court, he died in a fiery, rather suspicious car accident.
If found guilty of the charges, the man who piloted an industry could have done serious jail time.
Of course, this week’s controversy wasn’t the first time the energy pioneer found himself in trouble.
As we said, McClendon was a risk taker... no risk was too big. In fact, we’re told it was hard to get the man to say no to almmost any idea - a great trait in a pioneer, a tough trait for stability.
His passion for risk cost him much of his fortune in 2008. Despite the fact that his compensation package that year topped out at a monstrous $112 million, the risk taker wanted more. His competitive spirit wouldn’t rest.
He was punished for it.
Over the several years prior to the 2008 meltdown, he had leveraged his stake in Chesapeake to immense proportions. When Chesapeake’s shares fell significantly in the maelstrom of the times, it forced an impossible margin call for the highly leveraged McClendon. He lost most of his stake in the company.
Worse, Carl Icahn’s forceful activist hand eventually pushed the “daredevil” McClendon out of his job.
In all, the crisis cost the king of natural gas some $559 million. His reputation was permanently spoiled.
But should we judge McClendon merely by his personal finances and his immense tolerance for risk? After all, he pioneered an industry, created tens of thousands of jobs and made his shareholders rich.
There’s no doubt the man had a greedy competitive side that, purely speculating, may have cost him his life this week. But McClendon did incredible economic good... far more than Yellen, Obama or any politician could dream of.
He created an energy boom, revitalized Oklahoma City, created countless jobs and changed the landscape of the energy industry across the planet.
He had an incredible life. But hero or villain? You tell me.
Nobody is purely one or the other.
Our capitalist system is a funny beast. It doesn’t sort good people from bad. It merely shows us who’s a better allocator of capital... who can deliver the best product to the most people.
McClendon did it incredibly well. No doubt, he was a great capitalist. He changed the world.
Only the history books will tell us if he went too far.