Sam Wyly: 1,000 Dollars & an Idea

Upcoming Milken Institute Events:

• No forums are scheduled for December.
• January 22nd forum features Allen Tronson (President, California Institute for Regenerative Medicine) discussing stem cell research.
• Private Associates breakfast meetings:
  • December 3rd: Mac McLarty (former White House Chief of Staff under Clinton) to discuss election outcomes.
  • December 9th: Russ Stanton (new Los Angeles Times editor) for a critique session on the newspaper.
• 2009 Global Conference:
  • Scheduled for April 27–29, 2009.
  • Attendance is capped and expected to sell out; registration is urged immediately.

Sam Wiley's Background and Early Career:

• Ancestry traces to 1667 in Maryland; relatives include a 1763 Princeton graduate (James Madison's contemporary).
• Political Activity:
  • Served as an Electoral College elector in 1972 and 1976.
  • Initially supported Chuck Percy (1968); later voted for Nixon at the convention.
  • Chaired the President's Commission on Minority Business Enterprise; outcomes described as mixed.
  • Supported Obama in primaries and general election.
• IBM Tenure:
  • Worked at IBM with Ross Perot; learned on IBM 650 (2,000 words of magnetic drum memory).
  • Left IBM due to lack of promotion; moved to Honeywell to compete against IBM.
  • Collaborated with Perot to advertise used IBM 1401s to bypass IBM's pricing control.

Entrepreneurial History and Ventures:

• University Computing (1963): Early billion-dollar computer leasing company.
• Bonanza Steakhouses (1967): Acquired USA Cafes; sold to John Kluge.
• Earth Resources (1980): Oil refining and silver business sold.
• Daytran: Founded to compete with MCI in the telecommunications sector.
• Sterling Software (1981): Co-founded; sold in 2000 to AT&T and Computer Associates for $8 billion.
• Michael Storrs: Purchased interest for $1 million; sold in 2006 for $6 billion.
• Maverick Capital: Co-founded hedge fund; remains a major stakeholder.
• Wiley Collection: High-fashion boutique venture on Rodeo Drive; deemed unsuccessful economically.
• Green Mountain Energy: Founded in 1998 (11 years ahead of industry trend).

Green Mountain Energy Specifics:

• Origin: Inspired by daughter Christiana's question regarding air pollution in 5th grade.
• Funding: Failed initial IPO attempt (summer 1999); raised $300 million total ($150M from Wiley, $150M from partners) privately.
• Partnership: British Petroleum (BP) acquired 25% stake; Wiley retains ~50%.
• Strategy: Offered customers cleaner energy (wind/natural gas mix) at par with monopoly prices, or pure wind at 10% premium.
• Geographic Focus:
  • Failed in California, Pennsylvania, and Ohio due to regulatory barriers favoring monopolies.
  • Succeeded in Texas due to free-market laws.
• Financials: Projected $350 million revenue and $35 million cash profit for the current year; $21 million in dividends paid.
• Risks: Lost $1 million due to Lehman Brothers bankruptcy (hedging) and further millions due to Hurricane Katrina.

Business Philosophy and Models:

• Michael Storrs (Craft Stores): Acquired without visiting a store; success driven by decentralized management where store managers kept 15% of profits, earning more than corporate VPs.
• Scaling: Emphasized proving profitability in a single unit before scaling to 10 or 100 locations.
• Management Style: Prefers hiring capable presidents to execute operations; focuses on strategy rather than daily execution.
• Failure: Admits to multiple failures, including the Data Transmission Company (founded to bust AT&T monopoly) and the Informatics acquisition, often citing market crashes or interest rate hikes.

Environmental Policy Proposals:

• Carbon Tariff/Tax: Proposes a tariff on the carbon content of imported goods and an equivalent domestic tax, starting at $20/ton and rising annually.
• Revenue Use: All revenue returned to taxpayers via reduction in payroll/Social Security/Medicare taxes (consumption tax replaces labor tax).
• Global Necessity: Argues solutions must be global (e.g., addressing Chinese coal plants) to prevent "leakage."
• Energy Efficiency: Supports Amory Lovins' view that efficiency is the first step; believes carbon pricing will drive innovation in wind, solar, and fuel efficiency.
• Oil Price Volatility: Attributes price drops to supply/demand rather than manipulation; notes oil is cheaper today (inflation-adjusted) than in 1980.

Economic and Social Perspectives:

• Entitlements: Links environmental tax plan to solving Social Security and Medicare solvency.
• Auto Industry: Believes the competitive market and Chapter 11 bankruptcy laws will fix General Motors and similar companies without direct government bailouts.
• Demographics: Views ethnic diversity as beneficial; asserts America remains a land of opportunity where assimilation is key, not a demographic threat.
• Recession Outlook: Compares current economic downturn to the 1973–1975 period (47% stock market drop, doubling interest rates, gas lines).
• Advice for President Obama:
  • Focus on green energy to create 5 million jobs.
  • Ensure renewable tax credits (e.g., wind energy) remain stable for 10 years.
  • Address entitlements through the carbon tax mechanism.

Personal Anecdotes and Influences:

• Family: Six children, ten grandchildren; family always prioritized over business.
• Education: Attended Michigan Business School (1970s) on a scholarship; studied statistics/programming on IBM 650.
• Football: High school coach taught persistence and strategy ("size of the fight, not the dog"); led Delhi High School to a state championship.
• Reading: Lifelong reader influenced by Gone with the Wind; parents read to him before the movie release.
• Sustainability at Home: Uses recycled blue jeans as house insulation (suggestion from daughter Kelly).