Private Empire - Exxon Mobil And American Power
If you were expecting Private Empire, the latest book by two-time Pulitzer Prize winning author Steve Coll, to serve as a hit piece on Exxon Mobil (XOM) (and "big oil" in general) you'll be somewhat disappointed.
For anyone unfamiliar with his previous work, Steve Coll's earlier books include the highly recommended Ghost Wars, arguably the definitive geopolitical account of the activities of the CIA and other national intelligence agencies in Afghanistan and Pakistan from the time of the Soviet invasion up to the eve of the 9-11. Ghost Wars won the Pulitzer Prize in 2004 for general non-fiction and was one of the books a newly elected President Barrack Obama was reported to be reading upon entering office.
Steve Coll describes in an interview with Charlie Rose what lead him to want to write Private Empire and how his original idea for the book was to tell a broader story about the oil industry in the style of Daniel Yergin's The Prize. He soon realized, however, that he needed a central character and Exxon was for him the only logical choice.
Coll's portrait of Exxon begins in March 1989 with the Exxon Valdez oil spill in Prince William Sound, Alaska, an event which made the company the most reviled in the United Sates. The book's timeline spans the subsequent transformation of the company, which was led by CEO Lee "Iron Ass" Raymond, up through its present day stewardship by current CEO Rex Tillerson. Along the way we learn a great deal about Exxon, including its somewhat peculiar cult-like corporate culture, its blockbuster merger with Mobil, its controversial stance and efforts on global warning, the access it enjoyed to political leaders such as Vice President Dick Cheney, its somewhat misleading approach to reporting oil reserves, and the company's record setting financial success. The book in fact makes for a compelling business case study and students of business history, strategy and management will find much of interest.
The most interesting sections of the book are the ones detailing Exxon Mobil's operations in some of the world's most politically unstable regions. Exxon Mobil's bread and butter business is to invest billions of dollars drilling holes in the ground in countries like Equatorial Guinea and Chad and then spend the next 30-40 years working to make sure that nothing interrupts the company's return on investment. Coll's account of the 2004 attempted coup in Equatorial Guinea by a group of British and South African mercenaries, who were supported from some elements within the Spanish government, is one of the most fascinating stories in the book.
Coll notes the challenge of managing business operations over such a long time frame in unstable regions makes Exxon Mobil's business very different from that of say Apple's, which not too long ago surpassed Exxon Mobil as the world's largest company in terms of market capitalization. As former Exxon Mobil CEO Raymond put it, "Presidents come and go; Exxon doesn't come and go." Or at least the company tries to not "go" as its mixed track record in tap-dancing around resource nationalization movements in regions such as the Middle East attests. What the possible reemergence of the nationalization movement in countries such as Bolivia means for Exxon Mobil's business model is an open question.
The book's narrative is constructed in the style of investigative journalism, and from this list of subjects covered one would perhaps get the sense that Coll, whose roots are in investigative journalism, is fishing for dirt. Coll's portrait of Exxon Mobil, however, is balanced. For example, Coll contrasts Exxon's relatively light lobbying effort in Washington D.C. with that of the "rent seeking" General Electric (page 74). Coll also finds no evidence that Exxon manipulated in-house science or lied in its anti-global warming campaign (page 87). In fact, one of my only criticisms of the book is how several chapters are meticulously constructed only to end in a flat, anticlimactic fashion due to the absence of a smoking gun with which one could indict Exxon Mobil as a bad corporate actor.
From reading the book one almost gets the sense that perhaps Coll went into this project hoping to find more damning evidence against Exxon Mobil but emerged somewhat sympathetic to the company's plight. As Coll states in the Charlie Rose interview, every time an American goes to an Exxon Mobil branded gas station and finds that the price of gasoline has shot up, Exxon Mobil gets the blame. Yet Exxon Mobil arguably asserts very little influence on the price of oil, which is set in the global marketplace.
In sum, Coll's book is extremely well written and enjoyable to read. It provides a balanced, deeply researched examination of one of the world's largest and most powerful corporations and is highly recommended for anyone interested in learning more about Exxon Mobil and the geopolitical dynamics of the global oil industry.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.