Billionaire Next Door Philip Anschutz may be the richest American you've never heard of. But this in many ways ordinary guy is an extraordinary businessman, as we learned when we went hunting for the elusive...
(FORTUNE Magazine) – The intriguing thing about Philip Anschutz is not that he's worth well over $10 billion. It's that he's a genuinely nice guy worth more than $10 billion. He didn't make his money by being a nasty, grasping, miserly bastard. Once he got rich, he didn't turn into a twisted, weirdo billionaire like Howard Hughes or spawn a dysfunctional feuding family like the Koch brothers. As billionaires go, Anschutz, 59, is abnormally normal. He lives in a relatively modest house in Denver, wears a cheap watch, goes to church regularly, calls his wife "sweetie," runs unnoticed in local marathons, and has lots of friends.
Like many wealthy people, he is very private, avoiding public scrutiny of any sort. But the label often given him--"reclusive billionaire"--is not really fair. The people who know him best say he is private because he's truly shy, because he doesn't need a glitzy public persona to help him sell anything, and because he loathes self-promoting egomaniacs.
Every generation or two produces a mysterious, behind-the-scenes tycoon of enormous power and influence, fundamentally different from even the wealthiest corporate titan. Not Henry Ford, not John D. Rockefeller, not Gordon Moore, despite making comparable fortunes in their day, is in this league. As creators and CEOs of giant corporations, they were tethered to, and made their money in, a single industry. A much rarer few, like J.P. Morgan and Philip Anschutz, struck it rich in a fundamentally different way: They operated across an astounding array of industries, mastering and reshaping entire economic landscapes.
Don't be surprised if you've never heard of Anschutz. "I'm better not operating at center stage," he once confided. But you have, in one way or another, experienced his handiwork. He found one of the biggest U.S. oil fields since Prudhoe Bay; he owns more farm and cattle land than almost any other individual in the country; he bought, fixed, and resold the Southern Pacific Railroad; he owns a stake in most of the professional sports teams in Los Angeles; and he started Qwest Communications, one of the nation's newest, biggest telecom companies.
Learning about a person as complex and private as Anschutz required FORTUNE to go to extraordinary lengths: studying what few public documents are available about him; talking to scores of his friends, business partners, employees, and occasional adversaries; even showing up at the rare public business or sports event he was likely to be attending. Anschutz himself politely stated that he did not want to be interviewed or photographed.
If Anschutz has looked within himself and found a talent that has enabled him to prosper in so many different industries, he hasn't told friends or business associates about it. They ascribe his success to qualities both mundane (focus, discipline) and rare: extraordinary patience; a knack for spotting economic and social trends long before anyone else; an aggressive negotiating style; and an ability to engender enormous trust and loyalty in others. One senior adviser, who says he is embarrassed to be so awestruck by the man, declares simply, "He can see around corners."
Whatever his gift, Anschutz had it early. An experience in a northern Wyoming oil field, when he was 27 years old and basically broke, says it all.
At 2 A.M. one fall morning in 1967, a rig supervisor called to tell Anschutz that there had been a big blowout at an exploratory well he was drilling near Gillette, Wyo. Anschutz chartered a small plane to Gillette and persuaded a farmer living near the landing strip to rent him a pickup for the day. By the time he arrived at the site, it was ankle-deep in crude oil and the air was thick with natural gas. Anschutz took the obvious step of getting the well capped. Then he did something few people would have the wits to do in a crisis: He bought up oil leases on the cheap all around the region, before word got out that a big field had been discovered. He didn't have the money to pay for the leases, so he bought them on 30 days' credit, figuring banks would soon lend him whatever he needed.
Later that morning he flew home to Denver and wearily flipped on the TV. The big story: a colossal oil field fire in Gillette, Wyo. Anschutz quickly returned to the site, where all he could see was flames. He was convinced he was ruined. Red Adair, the famed oil-fire fighter, was reluctant to help. He had never heard of Anschutz and couldn't find anyone to vouch for his creditworthiness. "Kid, I checked you out, and you don't check out," Adair told him. Anschutz pleaded with Adair, saying, "You've gotta believe me." Adair relented but warned him: "If you don't pay me, don't ever have another oil field fire." Meanwhile, Anschutz had somehow learned that Universal Studios was doing a movie about Adair. He quickly negotiated a deal with Universal to film the crews fighting his fire for a fee of $100,000--enough to keep him afloat until the banks lent him money to pay for the leases he had bought on credit. Anschutz wound up making millions.
More important, he came away from the fire convinced that by going on the offensive, even in a crisis, he could almost always prevail. He urges his associates to "take action. When you take action, you can create the outcome." A voracious reader, particularly of history, Anschutz sometimes cites Napoleon to illustrate his approach. According to Anschutz, before the battle of Austerlitz, Napoleon's generals advised him not to fight, saying the "circumstances" were bad. Napoleon responded angrily, "What do I care about circumstances? I create circumstances." Anschutz, according to people who have met him, believes the same about himself, confiding matter-of-factly, "I've always believed I could create the circumstances to succeed."
Anschutz actually came fairly close to living in obscure circumstances as a lawyer in Wichita. He was born in Russell, Kan. (home of former Senator Bob Dole, whom he now counts as a friend). His family moved to Hays, Kan., and then to Wichita, where Anschutz attended high school. He was a mediocre student who got better with age; in 1961 he earned a finance degree, with honors, from the University of Kansas. He was just days away from starting law school at the University of Virginia when he decided instead to work at his father's oil company, Circle A Drilling. He spent four years drilling, buying and selling oil leases, and arranging seismic tests before striking out on his own. Within ten years, says Robert Starzel, a lawyer Anschutz hired in 1976, his boss owned oil fields in Montana, Texas, Colorado, and Wyoming. He also bought uranium and coal mines, cattle ranches, and vegetable farms, and even started an oil and metals commodity trading company in New York.
Although Anschutz now has a reputation for being warm and charming among friends, Starzel says it wasn't always so. "He didn't have much of a sense of humor at first," he recalls. "He was juggling a lot." Moreover, says Starzel, the grab bag of businesses that Anschutz plunged into reflected his anxiety more than his desire to make money. "Phil had a philosophy that you had to have a lot going on, because not all things would work out," explains Starzel. "It was risk management of his portfolio. It was sophisticated and naive at the same time."
Anschutz was right about things not always working out. One of the failures in the 1970s produced a rare emotional display in a man who is said never to raise his voice. It happened as Anschutz wrapped up his exit from a disastrous investment in some coal mines that threatened his nascent empire. Starzel recalls the scene as Anschutz finally sold the mines to an electric utility. The utility's negotiator, who presumably thought he'd gotten a good deal, offered to have his chauffeur drive Anschutz and Starzel to the hangar where their plane was parked. Starzel remembers Anschutz's being so elated at having sold the mines that he was ready to pop. "We sat in the back of the limo, rolling our eyes and making gestures, but we couldn't say anything in front of the driver. When we got to the plane and the driver left, Phil flung his briefcase across the hangar. That's how relieved he was. It's the only time I ever saw him show so much emotion." The utility later shut down the money-losing mines.
Anschutz's fortunes waxed and waned for several more years. He drilled 30 dry holes in a row at one stretch, and banks occasionally cut off his credit. But in 1982, Anschutz discovered real money. He and his father had bought a farm in northern Utah in a region where oil companies had explored previously. But Anschutz learned about some new seismic technology, and in the late 1970s he hit pay dirt in his own backyard. He found a billion-barrel pocket of oil a mile underground--one of the largest discoveries since Alaska's Prudhoe Bay. In 1982, not long before oil prices plunged, Anschutz sold a chunk of his find to Mobil for $500 million.
With that much cash, Anschutz was ready to move into a different kind of moneymaking: large, active investments in public companies. "He wanted to get away from too much oil and gas," says Jerry Seslowe, who scouted out business opportunities for Anschutz. "He wanted to do some wheeling and dealing." At the same time, he was ambivalent about highly visible machinations and backed off potentially profitable deals that threatened his reputation or his privacy. Seslowe introduced Anschutz to the Pritzker brothers. He was "very impressed," says Seslowe. "They were much more worldly than Phil."
Anschutz and the Pritzkers formed a company called Resource Holdings, run by Seslowe. In 1984 they began buying shares in ITT. They were contemplating a takeover when ITT learned of their plans and dug in its heels, declaring it would fight. Anschutz and the Pritzkers, reluctant to be dubbed raiders or greenmailers, retreated. They sold their 4.9% stake for much more than they had paid, says Seslowe, but left a lot of money on the table. "It would have been one of the great deals of all time," says Seslowe. Anschutz's diffidence surfaced again when he contemplated a takeover of Pennwalt, then a Philadelphia chemicals company. Gershon Kekst, his New York public relations adviser, warned him that personal details about him and his family would be splashed all over the newspapers if he proceeded. According to Seslowe, that was enough for him to abandon the deal.
Much of Anschutz's concern for privacy appears rooted in his effort to create a normal life for his family--not easy when you've been called "the richest man in Colorado" for 15 years. (According to a Denver reporter, Anschutz once grumbled good-naturedly, "Why do you keep calling me 'Billionaire Philip Anschutz?' My mother never called me 'Billionaire.' ") Reporters, frustrated at his unwillingness to be interviewed, often describe Anschutz as a recluse. By all accounts, however, he is friendly and unpretentious (he wears a Timex watch and, often, blue jeans), with an easy laugh and a good sense of humor. He invites old friends and close business associates to go bird shooting and fly-fishing, or to play golf on a course he designed and built on one of his many ranches.
Anschutz disdains the charity circuit and is far more likely to be found at his Evangelical Presbyterian church near Denver. He is a quietly religious man who has never been heard to swear. Dudley "Bo" Mitchell, a founder of the church, remembers setting up chairs for a Sunday service 17 years ago, when a compact, well-dressed man approached him. "He told me he had been coming to the church for the last few weeks and that he planned to keep coming for the rest of his life." Soon after, Anschutz began supporting a Christian sports camp for needy kids called The Sky's the Limit. "Phil is a humble man," says Mitchell. "He knows you don't do good works for an earthly reward."
It would be easy, now that he is unfathomably rich, to imagine that Anschutz was invariably clairvoyant and that his moneymaking was almost effortless. But his venture into the railroad business almost went belly-up. His perseverance in the face of difficulty says a lot about his flexibility and his ability to take a long-term view.
It began when he bought a midsized Denver railroad in 1984 and then realized that an impending merger between two nearby railroads could put him out of business. He fought the merger with federal regulators for years, until the feds decreed that one of those two wanna-merge railroads had to be sold. Bingo! Anschutz stepped up and in 1988 bought the Southern Pacific, one of the biggest rail lines in the country. It looked like a sweet deal, and in a way it was. He had bought the Denver railroad for just $90 million of his own money. By merging his little railroad into the Southern Pacific and by taking on some debt, he owned both at no added cost to himself.
By the time he got it, though, the San Francisco-based Southern Pacific was a mess. Locomotives, tracks, and freight yards were in dreadful shape. At the same time, the auto industry had shut numerous California plants, and many Western produce shippers had switched to trucks to transport goods east. The SP's service was so poor, and its future so precarious, that many companies refused to use it. "Phil sent several of us out from Denver to San Francisco to work on the railroad," says Cannon "Cy" Harvey, now president of Anschutz's main holding company. "We thought we'd be there for six months. We were there for eight years." Anschutz practically moved there too, spending nearly half his time for several years camped out at a hotel or in a small office at SP headquarters.
Some of the Southern Pacific employees thought the folks from Denver were a pain in the butt. "Phil and his guys were control freaks," says a former senior manager. "It was 'Be there at my beck and call. Do what I say, when I say it.' " One unhappy Southern Pacific chief executive tried to tell Anschutz that he, as CEO, was in charge. To which Anschutz replied tartly, "Well, I am the owner."
For other employees, though, Anschutz's arrival was a big improvement--after an initial shock. Soon after he took over, Anschutz named a new head of labor relations, Tom Matthews, who held the same job under Frank Lorenzo during his bitter, fatal feud with the unions at Eastern Airlines. Railroad union leaders became apoplectic when they heard the news. "To say we were taken aback would be an understatement," says Jim Brunkenhoefer, legislative director of the United Transportation Union. "But Matthews turned out to be terrific. Southern Pacific went from having the worst labor relations in the industry to the best." What impressed Brunkenhoefer was that Anschutz and Matthews always told him beforehand when there was unpleasant business ahead. "They never tried to sneak anything past us. And a handshake with Anschutz was worth more than a signed contract at some other railroads."
Why did Anschutz choose a labor manager certain to raise the hackles of union leaders, at least at first? Robert Starzel says Anschutz sensed that Matthews was unhappy with his experience at Eastern and would work overtime to restore his reputation. "Phil likes to hire people with something to prove," says Starzel.
Besides flagging revenues and fleeing customers, there was another source of pressure on Anschutz for much of his time at the Southern Pacific. Shortly after he bought the railroad, he sold a 25% interest to Morgan Stanley. As the SP's troubles mounted, Morgan Stanley executives urged him to break it up and sell parts to other train lines. Anschutz refused; in fact, he held his first (and possibly only) press conference soon after he bought the SP to declare that he would not dismember it. The temptation to sell was sometimes overwhelming. "There were times we were looking straight into a financial precipice," recalls Starzel, now a senior vice president at the Union Pacific.
Anschutz's uncanny ability to apply experience from other industries helped him cope with, and ultimately profit from, the railroad business. For instance, he used his considerable experience buying and building real estate in Denver to personally evaluate and sell the railroad's surplus land. Starzel says Anschutz could spot value in the railroad business in ways that old-timers could not. "Phil would propose selling some surplus freight yard, and [the old guys] would say, 'But we might need that some day.' And Phil would reply, 'Then restructure your operations so you won't.' " Altogether, Anschutz sold $2 billion worth of SP land, mostly in California and Texas, and much of that was purchased by state and local governments for mass transit. All the money, he later declared, was invested in new tracks and locomotives, and none was siphoned off to him or to Morgan Stanley.
Jerry Seslowe says Anschutz has a gut feel for the hidden value in an investment. "Phil was not as 'smart' as some investors," according to Seslowe. "Other people would analyze cash flow out to the fourth decimal point. Phil would look at the big picture. He'd ask, 'What is this worth to somebody else?' " This was particularly apparent when Anschutz would stare at a map of the SP and ask aloud, "What is the value of this entire footprint?" Myron "Micky" Miller, Anschutz's partner in dozens of real estate deals in Denver, says most developers focus on one building at a time. "Phil would always step back and ask, 'What's next door? What's across the street? How can we pull the pieces together and make them all more valuable?' "
Anschutz's success at the SP illustrates yet another unusual skill: his ability to spot value and trends long before most mortals--his ability, in other words, to see around corners. As the railroad industry deregulated in 1980, Anschutz figured the result would be massive consolidation as scores of regional train lines merged into a handful of huge ones. Like a chess player able to see the endgame early, he figured that one of the big Western railroads would eventually need to buy the SP to remain competitive and that his railroad would be far more valuable intact than in parts. He was right. In 1995 the Burlington Northern bought the Santa Fe, leaving only the Southern Pacific and the Union Pacific as major players west of the Mississippi--each roughly half the size of the new Burlington Northern Santa Fe.
As predicted, the UP came knocking. In 1996, after months of negotiations, which were broken off three times because of Anschutz's aggressive stance, the Union Pacific paid $5.4 billion for Anschutz's railroad, four times what he had bought it for eight years earlier. Anschutz, whose ownership share in the SP had dropped to 25% after several public and private stock offerings, netted more than $1 billion. He exchanged his SP stock for Union Pacific shares and is now the UP's second-biggest shareholder, controlling more than 5% of its stock, currently worth $682 million.
If Anschutz's biggest advantage is his freedom and ability to operate quietly across multiple industries, nowhere is that more apparent than in Qwest Communications, the product of his participation in railroads and real estate, and the crown jewel of his empire.
For years the Southern Pacific railroad had a subsidiary called SP Telecom, which installed fiber-optic cable along its tracks for itself and other telephone companies. Larry Kaufman, a former SP public relations director, says SP Telecom was a sleepy little operation until Anschutz arrived. "The railroad didn't have the capital or the vision to do much with it," he says. Anschutz, apparently, didn't know what to do with it either, but he sensed that SP Telecom would be valuable. Eventually he concluded that the Internet was creating a demand for specially switched networks of enormous capacity. In 1995 he carved SP Telecom off the railroad and merged it with Qwest, then a Dallas-based digital microwave company he bought the same year. He negotiated the right to lay fiber along the SP and most other major railroads, and Qwest began installing fiber and switches for its own use. In 1996 Qwest stunned the telecom industry by announcing it had hired Joseph Nacchio, a top AT&T executive, as CEO.
Since Nacchio's arrival in January 1997, Qwest has installed 18,500 miles of fiber through 150 cities. It is using so-called packet switching, which carries digital data far more efficiently than older networks. Even though much of the fiber is unused, and skeptics question whether it ever will be, Qwest has been caught up in Wall Street's Internet mania. Its shares climbed as high as $48 earlier this year, making Anschutz, who owned 45% of the company at the time, $15 billion richer. In June, when Qwest made a bid for US West, the stock fell 24% the day after the deal was announced, making Anschutz $3 billion poorer, though hardly poor.
Anschutz is involved in one other example of trans-industry synergy, a surprisingly public one, considering how low-key and private he is. He is co-owner, with Fox, of a $375 million sports arena (called the Staples Center because the office-supply company agreed to pay the owners $5 million a year for 20 years to plaster its name all over it) under construction in downtown Los Angeles. He is part or total owner of the Los Angeles Lakers basketball team; the L.A. Kings hockey team; and the L.A. Galaxy soccer team. (He owns two more pro soccer teams in Chicago and Denver, and is trying to sell pro hockey to the masses in London and Prague.) He also owns 30 acres around the arena, where he plans to build a vast "entertainment center" with hotels, theaters, restaurants, and offices.
Anschutz operates his sports business with a dispassion rare among team owners. To a large degree, the teams appear designed to enhance the value of his investment in sports arenas (including one in London) rather than make him famous or fulfill some athletic fantasy. Tim Leiweke, head of Anschutz's L.A. sports operation, says his boss has visited the arena only once in the three years it has been under construction. "He has no ego. He has never told me what athletes to hire."
Pity the fool, though, who tried to get in the way of Anschutz's plans for the arena. Joel Wachs, a city councilman, disapproved of the subsidies the city planned to give Anschutz and threatened a lengthy campaign to put the matter before voters. "I couldn't believe the pressure they brought to bear on me," says Wachs. Besides getting labor leaders and tourist industry officials to scream about the loss of jobs, Anschutz's minions invoked divine authority. Wachs opened the morning paper one day and was stunned to find the Catholic cardinal of Los Angeles blasting his stance. The cardinal then invited Wachs to the rectory for breakfast. "I thought it would last for half an hour," says Wachs. "But when I got there, it was the cardinal, Cy Harvey, Ed Roski [a partner in some of Anschutz's sports ventures], and me. They hammered on me for four hours. I was drenched. I don't understand how they persuaded the cardinal there was a religious aspect to the arena."
Wachs still claims he cut the subsidies from around $70 million to $12 million. The arena is due to open with Bruce Springsteen in October, and even though Anschutz is a staunch Republican, it will host the Democratic convention next summer. The synergies? Anschutz has an underused fiber-optic network he'd like to fill, and he figures that sports are one way to do it. Leiweke notes that the new arena is chock full of the latest electronics designed to send high-definition images of games to your TV--and to your computer. "High definition on the Internet will have a huge impact on sports, and we'll be on the cutting edge," says Leiweke. "That's Phil's vision."
What might Anschutz do for yet another encore? Lately he has been giving to friends copies of a book called Half Time. As the subtitle, Changing Your Game Plan From Success to Significance, suggests, the book encourages middle-aged business types to think hard about their contributions to God and society. The author, Bob Buford, a former cable industry executive, says he has met with Anschutz to discuss such issues. "I would say that he has a latent interest in doing something significant in American Christianity," says Buford. "He is working deliberately and diligently on it." Anschutz, according to one confidant, is mulling over his philanthropy and Christianity but is "still in the process of thinking of what to do and how to do it."
It sounds cynical to say so, but it's hard to resist: Now, perhaps, would be a good time to invest in Heaven. With Anschutz behind him, God could be the next big thing.
REPORTER ASSOCIATE Ann Harrington