Mr 5%: The Armenian Who Invented the Oil Industry and Gave It All Away

0:00David McWilliams: On the podcast, the oil industry, but not really the oil industry today. The oil industry and how it became what it is, who framed it, and the extraordinary story of Mr. 5%, a man called Kaloost Gulbenkian, the man who created today's oil industry. All coming up in a couple of minutes.

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2:12David McWilliams: how you doing there it is time for the podcast and we are back in the hq after a sort of gypsy-like existence over the last few weeks yeah traveling all around the world doing things down down the tube from various different hotel rooms all around the world i have been on my travels but i'm back home right now it's lovely to see you in the flesh yes it It is. I've seen you for so long. The weight suits you, Mac. That's what I thought, just for you. That's what I thought. I'm just putting on the pounds. It's for my new career. I'm going to be an Ozempic tester. Oh, yeah. Yeah, yeah. I'm going to have...

2:47You're cut out for that. I'll put the weight on now, and then I'll go and I'll be... By St. Patrick's Day, I'll have an Ozempic face. What's the Ozempic face? The face is when the people do two more Ozempic, and their cheeks hollow out. Oh, yeah. Right? And they look 20 years older. And then what they do is they get the fake lips. Yeah. So they've got the holiday cheeks and then these massive big yolks. And I've seen that because I was in Cannes this week giving a speech. Of course you were. And I've seen lots of Ozempic, lots of Ozempic face as I was pottering around on the promenade of Cannes.

3:18And I was actually all over the world. I was in Lisbon, which we're going to talk about as well this week. Yeah, yeah, yeah. But how have you been? I've been good. I've been good. I've been chunnelling away. I've been at home. Right, exactly. Doing home things. Doing home things, doing manly things around the house. Yeah, yeah, exactly. And what's on your mind? What's annoying you these days? Well, I mean... In the economics world, what's... In the economics world, there's so much going on. Where do you start? But actually, a good place to start is diesel. Given that I have a diesel car and diesel is shooting up in price, and actually when I was in France, diesel is much more expensive in France.

3:58but this week there was talk of a diesel shortage and Trump decided that he was going to restrict diesel exports to Europe which would be a bad idea. So anyway now we're releasing an extra 100 million barrels of diesel in order to bring the price down which is a good thing but I have a bunch of questions in relation to that. One is 100 million barrels is a drop in the ocean and the oil ocean for a start. But then the other thing is, is this very much short-term thinking? I know Trump is thinking about the midterms, but is it short-term thinking and just using up your reserves? And if this war drags on, well, then we'll be more banjacks down the road.

4:45So we're going to talk to me about this. Oil and diesel and the oil economy.

4:49David McWilliams: Well, it is fascinating that we start there because I'm going to talk to you today about a vision I had. Oh. On Thursday afternoon, as I was sitting in the Gulbenkian Museum in... Were these gummies that you had? No, these were not gummies. I was completely sober. But I want to talk to you about the man who created the oil industry. It's a fantastic story. Oh, right. And then we're going to get to what's going on now. But it's a story about the Middle East, which, again, is still very current. It's a story about the end of empire. It's a story about globalization. It's a story about big oil companies.

5:26It's a story about drilling. It's about rights. It's about the Cold War. It's an extraordinary story. It is the life and times of a fellow called Calust Gulbenkian. Have you ever heard of him? No. No, it's not even familiar, actually. And should it be? This is, he died the world's richest man in Portugal in 1955. Wow. The richest man. He was known as Mr. 5%. His story is phenomenally interesting. It brings us right up to today. and extraordinarily, given what rich people do today, he gave most of his money away at the end. So I'll tell you all about this guy. So he's a Portuguese guy? No, he was an Armenian guy.

6:04Oh, yeah, okay, go on. So he was born in Constantinople. And in Constantinople, the biggest three communities in Constantinople, amazingly, before the end of the Ottoman Empire, weren't Turks, right? They were Greeks, Armenians, and Jews were the three biggest communities. And then, of course, there's all around the Sultan. And the reason is because the Ottoman Empire stretched, we kind of forget this, from Serbia to the Gulf. Yeah. From Baghdad all the way to, if you include the Malmucks in Egypt, all the way to Tunisia. It's an amazing story, right? And of course, it was multi-ethnic and there were various different tribes and people.

6:51And the way the Ottomans did it is they basically said, if you're not Muslim, that's grand. We're just going to tax you a little bit. They were called dimmies. But we're going to leave you alone. You can do whatever you want. We're going to tax you a little bit more. So Greek Christians, Coptic Christians, Jews, Armenians, Georgians, all these various different little tribes, little nations, in effect, they all thrived under the Ottoman Empire. The Ottoman Empire's idea was, look, you can do whatever you want. You can be religious. We're not going to impose any religion, but we're going to tax you.

7:21and basically you can't be members of the military, you can't be members of the civil service. So that suited these guys because they said, okay, well, what we'll do is we'll become traitors, right? So the history of the Armenians, there's a very dark history for the Armenians in Turkey and we'll talk about that in a second, right? Yeah, yeah, yeah, there is. But the history of the Armenians in the former Ottoman Empire was they were the traitors. They were the people and they're still there in Beirut. There's still lots and lots of Armenians and I'll talk to you about them in a minute. But this guy, Gulbenkian, was an Armenian from a sort of a merchant family.

7:59And those merchant families were sort of the leaders of the Armenian communities in various different cities. They were Western Armenians. They were very, very urban, these people. So they lived places like Thessalonica, Istanbul, Jerusalem. We'll talk about that in a second. And the Eastern Armenians were more farmers. So there was two different types. So the people who are close to now Armenia proper, the Republic of Armenia. Right. They were sort of farmers and they were agricultural people in the main. Culture Armenians. Culture Armenians, yeah. Two Johnny's Armenians, right? Okay. If you imagine an Armenian in a county jersey, that's him, right?

8:35Okay. And then there was Western Armenians and this guy Gulbenkian was one of them. And he was born in the second half of the 19th century. and nothing really suggested he was going to be anything other than a normal Armenian trader, maybe train stuff from the Silk Road. That was his family doing it. Whatever was going, I'm sure. Whatever was going. But he became a completely different kettle of fish and his story is extraordinary. And the first time I ever came across him, John, this is an, I thought, like fascinating because obviously Israel, Palestine is in the news at the moment. Again, when is it never in the news?

9:10Yeah, yeah, yeah. But the first time I was ever in the old city of Jerusalem and I expected the old city of Jerusalem to have Muslims, Jews, and Christians. Catholic Christians or, for example, Greek Christians, Coptic Christians maybe. And each different faith has their own shrine in the old city. So the Christians have the Church of the Holy Sepulchre, is that what it's called? Yeah, the sepulchre, yeah. The Jews have the Wailing Wall and the Arabs have the Alaska Mosque. So these are all the, and these are the flashpoints we hear all about. But a really peaceful and beautiful part of the old city is the Armenian quarter.

9:48The Armenian quarter is a quarter within the old city reserved for Armenians who arrived in the third and fourth century. Oh, right. Armenian monks. So Armenians are the oldest Christians. Themselves and the Georgians were the first people to convert to Christianity and have Christianity as a national religion. Right. So they predate us in terms of their adoption of Christianity by hundreds of years. Yeah. And so tell us, how many Armenians are there? Like, what's the population? Well, they're very like Ireland. Again, this is why they're a fascinating race, right? Like Ireland, they have a massive diaspora.

10:25Yes, including the Kardashians. Including the Kardashians, exactly.

10:28David McWilliams: And in actual fact, that Californian part of the diaspora is incredibly successful, right? Right, yeah. So they have a massive diaspora. I think they were something like eight to one Armenians living outside Armenia as opposed to living inside Armenia. So it's a bit like us and the Irish Americans. They were huge. And again, because their history is so tragic, because they were a plaything of the Russians. They were a plaything of the Ottoman Turks. Well, not the Turks, the sort of, not the Ottomans, the Turks that came in under Kamal Ataturk. We'll talk about that in a sec. So let me go back to Jerusalem, right?

10:57David McWilliams: So the Jewish court of Jerusalem is loads of people bustling, the Whaling Wall, fascinating to see, heavy security everywhere. Christian area, not so. It's a little bit less populated. And you see lots of pilgrims there. And of course, the Muslim area, the Al-Aqsa Mosque. And for people who've never been there, these places are right beside each other. It's like Grafton Street to Dame Street. Right. Really? Yeah, they're right beside each other. It's a city I've never been to. I'd love to go. It's an amazing city. Yeah. It's, you know, I mean, people say there's a Jerusalem complex. If you go there, you actually, it kind of draws you in.

11:35Right. And you actually become slightly beguiled by the place. So I'm talking to the Al-Aqsa Mosque and the Whaling Wall are right beside each other, like 100 metres from each other, right? Yeah. It's kind of bonkers. But the Armenian... A stone's throat. Well, exactly. But the Armenian quarter is really peaceful. Yeah. Because there's only 1 ,200 Armenians left there. and yet it is one-sixth of the entire footprint of the old city. So you walk in, you see this weird alphabet.

12:03David McWilliams: The alphabet is, have you ever seen Armenian written? Yeah, yeah. It's like Georgian. It's really unusual looking. Yeah. It's actually incredibly beautiful, right? Yeah, yeah. And I think to yourself, what were these people doing there? Now, of course, there's a big problem now between the Armenians and the Israelis because the Israelis regard the Armenians as Palestinians. Right, okay. So they don't have full citizenship. the Armenians of the old city. Yeah, even though they've been there since the third century. Exactly, it's mad. And they've Jordanian passports for some weird reason because they got passports from Jordan before the Six-Day War.

12:36Yeah. Right? So they have Jordanian passports. So it's a really mix-up.

12:40David McWilliams: But in terms of a secluded, peaceful, tranquil, almost sylvan backdrop, this Armenian quarter is beautiful to go into and there I came across a library yeah of Armenian artifacts now don't ask me why at the age of 24 or 5 I was into Armenian artifacts but I was a little bit pretentious maybe a little bit odd so there's a library there right okay and this library was called the Gulbenkian library right okay who is this geezer Gulbenkian yeah and that is now one of the great reservoirs of Armenian culture and heritage is his library in the old city. Right. Okay. And of course, you know, when you mention it to, you know, Israelis that I know, they say, oh yeah, there's a few Armenians down there.

13:29Yeah, we get on with them. We don't have much hassle with them. But when you talk to the Armenians for them, it is a cradle of their civilization. Right. And it is a beacon of Armenian culture and they protect it with their lives in effect. Yeah. And of course, it's been encroached on by the Jewish quarter because the Jewish people are buying up all the properties that are coming up and the Armenians don't have the cash. What's in the library? The library is just all these ancient Armenian books that this guy Gulbenkian gave a big part of his fortune to collect all over the world to preserve. Now, the question is, why would the Armenians be so into preserving their heritage?

14:03Because they had a genocide. Yeah. And that genocide killed 2 million Armenians in eastern Turkey between 1915 and 1916. And we'll talk about that in a sec. But I was in Lisbon, John. Right. From Jerusalem to Lisbon. The other day, because I was doing an event in a place called Sintra, I was giving a speech. And then I was sitting in this museum and the museum is maybe the largest non-public collection of art in the world. And it's the Gulbenkian Museum. And he created a foundation when he died. And he died, apparently, the richest man in the world. He was known as Mr. 5%. So how did he make his money?

14:51This is the interesting thing. So I'm painting the picture of the Armenians because those Armenians that were born in Constantinople were multilingual. So they spoke Armenian at home. They spoke Turkish on the street. They spoke Greek to the Greek traders. they spoke Ladino which is Ladino is a Jewish language spoken by Sephardic Jews it basically sounds like Spanish so basically the Jews of Istanbul came from Spain they were kicked out by Ferdinand and Isabel and they brought their language with them and they called it Ladino there's still newspapers in Israel in Ladino so these Armenians because they were outsiders because they weren't really Turks but they weren't part of any of the major ethnic groups yeah right they were unbelievably cosmopolitan They tended to speak all the various different languages.

15:39They traded with everybody. And because they couldn't join the civil service or they couldn't join the military in the Ottoman, they ended up living off their wits, being these unbelievable traders. And again, like lots of trading families and lots of trading nations, the Lebanese have been quite similar as well, what they did was they traded amongst themselves. So an Armenian in Istanbul would trade with an Armenian in Yerevan, would trade with an Armenian in Tehran, would trade with an Armenian in Baghdad. And they did it all in their own language, which was almost like a little private code they had.

16:13Yeah. Because nobody speaks. You just tap into your own... Your network. Yeah. So this guy, Galbukian, would have come from one of those backgrounds. So it wasn't like a rags to riches story. He was already quite a wealthy man. But what he did was phenomenal. So he began to understand in the 1880s that this new thing called oil was going to drive the world economy. And the oil that was being discovered was in Azerbaijan. Yeah. So Baku in the Caspian was where they had the classic gushers. So what happened? You had two sources of oil in the world. You had Pennsylvania. Right. In the United States.

16:53Yeah. This is the 1880s. And you had the Caspian Sea. Right. And of course. So long before Saudi or...

17:02David McWilliams: So Saudi Arabia is only a newcomer to this one, right? And again, Saudi Arabia looms large in this story as well. So his idea was that he was never an oil man. He wasn't a driller. He wasn't an engineer. Yeah. But he figured out that as the Ottoman Empire was beginning to collapse, because he was an Ottoman creature, he was a creature of Ottoman people, that if it collapsed after the First World War, His idea was that he, as a trader, would start trading oil. Right. But the key thing was the Ottomans needed Western capital because they didn't have any capital of their own. Yeah. And the Westerners needed access to oil.

17:46Right.

17:46David McWilliams: And there was two ways that this was largely going to be done. One was it would be done country to country. So there'd be a British oil company, there'd be a French oil company, etc. etc. Or if they let the Americans in, there would be what turned out to be the Seven Sisters in oil, which are the seven major oil companies that ran the world. And Gulbenkian was the man who created all this. So he sat in the middle and he negotiated with everybody. First of all, he got educated in Marseille, so he spoke French. Then he went to England, so he spoke English. He got very, very close with people in the British foreign office, they began to trust him.

18:27He also was very close with the French foreign ministry. They began to trust him. And why did they trust him?

18:33David McWilliams: Because he was the one who understood what they called the Occidental, the Oriental mindset. So nobody in Britain and France who said, look, all the world has changed. This oil is over there. We need to get a piece of this action, but we don't have a middleman. And of course, Gulbenkian became the middleman. He seemed very charming, was he? Very, very aloof. This is a very strange guy, right? So his whole idea was that if I get 5 % of the shares of the company that will eventually own the oil, I'm going to end up a very rich man. Yes, he will. But he realized that's before anybody else. So he realized that if there was oil in the Caspian, his geologist mates told him it was highly likely that there would be oil seams all around what was called that eastern part of the Ottoman Empire.

19:29And he then set up a company with the

19:32David McWilliams: Sultan and said to the Sultan, look, you can have all the stuff, just give me 5 % and the company would be called the Turkish Petroleum Company. And they set that up in 1912 before the Ottoman empire collapsed yeah but galbenkian was thinking this thing's going to collapse and why was it going to collapse because he could see the ottoman empire was getting so weak oh yeah okay so corrupt yeah it was so extravagant it was being outmaneuvered by everybody and of course he also understood and this is because he was armenian that eventually the ottomans would get into a final showdown with the Russians, which had always been the case.

20:11And if there was a world war, the Turks would fight the Russians and the Russians would win. This was his calculation. And why did he think this? Because if you look where Armenia is geographically, Armenia is between Russia and Turkey. And that's what Armenia's great opportunity is, but also Armenia's great threat. Because you're a small Christian nation between a big Muslim nation and a nation that believes, the Russians, that they are the original Christians. So the Russians believe that they are the people who have, for thousands of years, defended Christianity. And they believe that Christianity, as in Orthodox Christianity, is the true Christianity.

20:56Not our Catholic stuff. Just remind me, because I can't remember, is at this stage in the Ottoman Empire, both Armenia... and Azerbaijan, the Azeris and the Armenians, they were all one. They were all under the one empire. They were all loosely under the Ottoman Empire. Yeah. You know, the Ottoman Empire was behaved in a sort of a very, as most empires tend to do, they're quite loose. They're quite flexible.

21:24David McWilliams: People can tend to be left alone. In fact, if you think about it, for a vast majority of human history and economic history, we've lived in empires. We haven't lived in nation states. Nation states are new things. Yeah, yeah. And of course, Armenia was not immune to this virus of nationalism. So the late 19th century, you get all this nationalism coming up. Gulbenkian is saying to the Armenians, don't start this thing because we're living between two major nations. We can't win against both of them. We should be supernational. We should not necessarily have our own nation. We should have a community.

21:55David McWilliams: We should be basically, in effect, we should live as cosmopolitan people under various different empires. keeping our language, keeping our culture, keeping our religion, keeping our networks with our own people. But the minute we go down the nationalist route, we're going to inflame the Turks and we're going to inflame the Russians. And we're not going to win. And the Azeris as well. And the Azeris. And that all came to pass. Do you know, by the way, I used to present a radio programme, UK Top 10, for Azerbaijan. No way! For the BBC World Service. The UK Top 10 music? Yeah. No way! like Top of the Pops in his earie yeah you are a bizarre and I used to put I used to take on this kind of persona it was real kind of you know cheesy the Dave Lee Travers exactly I love it I must dig out some of the old tapes that is I did not know that yeah yeah yeah so you are the Dave Lee Travers well no it was all because I was a studio manager there we used to take turns between the studio managers because that was my region that's almost Borat territory yeah oh yeah totally Yeah, yeah.

23:02That's smart. I like. Well, again, so we're talking about this guy.

23:06David McWilliams: So this guy's in the middle. He can speak to the Iranians because the Armenian community in Iran is very, very strong. So he's got his people there. He can speak to what became the Iraqis in Baghdad. He could, of course, speak to the Ottomans. But because he could speak the language, French and English, he could also speak to the West. So he's an unbelievably cosmopolitan person sitting in the middle. When the Ottoman Empire starts to collapse, he has 5 % of a company called the Turkish Petroleum Company. Now, amazingly, he managed, through his own negotiation, when the whole of the Ottoman Empire collapsed, all the borders changed, and Iraq and Syria and the Gulf states, they all emerged.

23:46David McWilliams: the Turkish Petroleum Company, that he had 5 % of it, retained the ownership of the drilling rights of all these new countries. Right. Which is, that's his, because he played the French off the Brits, because the French and the Brits got the mandates. He was responsible for drawing the borders of Iraq. And he drew the borders of Iraq. Right, okay. Based on geology, not ethnicity. Because he said to the Brits, if you want this piece of the empire, we call it Iraq, but what you really want is you want the oil fields of Mosul in what would have been Kurdistan. And the reason the Kurds didn't ever get their own country was they actually had the misfortune of living on top of one of the world's most productive oil fields, and the Brits took it from them.

24:40David McWilliams: so the Kurds those fellas have just got shafted right left and centre by everybody by everyone so the story of the Kurds is the story of oil but it's down to this fella here and this fella said to the Brits look there's loads of oil over there so if you're negotiating with the French yeah take that bit take that Iraqi bit right because it looks really brutal terrain etc but if you find oil it'll be worth a fortune yeah and they found oil and it was find its keepers But obviously the victims in all this would have been the Kurds, because the Kurds were not given their own homeland, because it would have become a massive, massive oil producer.

25:20And the Brits and the French wanted it, as well as, of course, the Turks.

25:23David McWilliams: The Turks. Now, of course, what happened to the Armenians during the First World War is because the Armenian nationalists who wanted their own state in Armenia after the Ottoman Empire collapsed, because they flirted with the Russians, the Turks blamed the Armenians for being a sort of a fifth columnist group in the Ottoman Empire. Yeah. And they turned on them and there was a proper genocide of Armenians carried out by basically Mustafa Ataturk's troops. And they were millions, hundreds of thousands of them, I think millions of them were murdered in a very, very... And it's one of those issues that you can't mention.

26:11Well, it's interesting.

26:12David McWilliams: Remember the movie Midnight Express? Yeah. So Midnight Express was about a drug dealer in Turkey and the conditions in Turkish prisons. Yeah. And up until recently, Turks will say that that was financed by the Kardashians, or basically Armenians working in Hollywood. Financed that to undermine the integrity and the reputation of Turkey. Yeah. And that was still going up in the 1980s. That's not that long ago. Wow. Right? So there's a lot of bad blood there. That movie, Midnight Express, I mean, it's a fabulous movie. The interesting thing about our friend Gulbenkian, he was also a refugee. so he left Turkey, Istanbul in the late 1890s because there had been regular pogroms against the Armenians and his parents said, look, you better get out of here.

26:57David McWilliams: And he went off to an uncle in Marseille and all this sort of stuff. So you're talking about this guy who was ultimate businessman in the sense that he owned nothing. And this is the amazing thing. Yeah, he was the ultimate go-between broker. He was the middleman. He was a broker, right? And he was always taking his cuts all the time And he managed throughout this most chaotic period of global history to retain the ownership of a company that was in effect a defunct company. But he managed to keep it alive. And he managed to, by fighting in court, by always going to the highest court, he managed to, in a sense, remake history.

27:37So this is at a time when the whole oil industry was beginning to take off. cars were coming online and you know industry was up in its game and instead of using coal yeah or steam they're using yeah using oil yeah so it was perfect timing if you kind of want to

27:55David McWilliams: understand the present middle east and there has been enough shouting and roaring in ireland about that in the last couple of weeks right you've got to understand who was redrawing these boundaries yeah who was making the decision wasn't just balfour then it wasn't just balfour who was making the decisions, who won, who lost, what was the commodity that was in effect the shadow over everything. And the commodity was oil. So Gulbenkian was somebody who sat in the middle of all this. Now, the other big shift in oil was, of course, Soviet Union. So the Soviet Union comes in as a massive oil player, but they have no capital.

28:36David McWilliams: They need Western capital and they have no one to negotiate with because as an Armenian, he could speak Russian as well because the Armenian second language is Russian. He's the go-to boy. So he ends up negotiating with Stalin specifically because Stalin realized that the Soviets needed Western capital to actually update and upgrade their oil production. And they also understood that without oil, they would never get hard currency. And without a hard currency, they couldn't buy the stuff they needed. And of course this was long before petrodollars. Long before this. This is like the 1930s. So he's dealing with Stalin when Stalin is operating the Great Purge and he has the balls to say to Stalin, look, I don't want money.

29:21I want the art of the hermitage. Right? I swear to God. So the Russians, because the Russian communists were not art aficionados, like you want Cezannes and Monets, have them all, right? Right. So he bought... at a discount, huge, huge amounts of the art of the Hermitage,

29:43David McWilliams: which had been built up by the Romanovs, right? And in return... The Hermitage is in Petersburg. In Leningrad. St. Petersburg, yeah, St. Petersburg. Yeah, yeah, yeah. I was there when it was Leningrad. Of course you were. Anyway, so let's come back. So what his story is, is he dies in 1955 at the age of about 90. So he lives through First World War, Second World War, end of the Ottoman Empire, the emergence of oil, the reframing of the Middle East. He is the man who sides with the Dutch as well to set up the Royal Dutch Shell Company, which is one of the biggest oil companies. He was trading with everybody.

30:26And got 5 % of that too. 5 % of that. And he didn't own anything. This is the amazing thing. He was just a trader. and then of course Second World War

30:35David McWilliams: happens he's living in Paris yeah he never ever he had all these amazing mansions that he bought he never slept in any of them he always slept in a hotel really why always slept in the Ritz he didn't want to be and he was married he had kids and all sorts of things and he only ever ate alone he was a completely unsocial creature for such a networker and charmer exactly so a really fascinating person really fascinating person and of course the book is full of the scrapes and the deals and the skullduggery and the politics and all that sort of stuff. I mean, it's an amazing story, but it's just one life.

31:09Yeah.

31:10David McWilliams: Living through this extraordinary economic turmoil. He ends up in France. France is occupied by the Nazis and the Vichy France. Yeah. He sides with the Vichy France, but then he realizes that he better get the hell out of there. And the one country that was neutral, that he wanted to live in or he could live in was of course Portugal. Right. Because the Portuguese remained neutral in the Second World War. But they were also under what's that? Salazar. Yeah. Salazar's the only economist dictator. Do you know that? Really? Yeah, he was the professor of economics. Was he? He became a dictator. So there's hope for me yet.

31:53I've got my eyes on Salazar. You'd be a croft dictator. I know, I'd be too soft. You'd be croft. I know. I'd say go on, go on.

31:59David McWilliams: But so he ends up in Portugal. Now, Portugal in the Lisbon in the Second World War was a hive of spies and activity and espionage and counterespionage because the Germans were there, the Brits were there, the French were there, the Americans were there because the Portuguese sold the Azores to the Americans as a place where the Americans could refuel on their way to Europe for the invasion of Italy. but Gulbenkian finds himself in Lisbon and in Lisbon he takes up as he always does residence in the finest hotel takes about four suites on the top floor of his hotel and he's continuing to takes 5 % of the hotel he's continuing to deal with everyone all the way but the extraordinary thing is that at the end of his life he gives all the money away he sets up a foundation and he says that the art that I have bought is for the public and that foundation is going to be run by Portuguese trustees and they are going to create this museum into perpetuity that everyone can go and see.

33:07David McWilliams: Now of course he gave his kids a certain amount of money and trust but most of the money he put into this foundation and this foundation now still has scholarships for science, for maths, stuff that he really loved. It has extraordinary works of art It is a beautiful, beautiful museum right in the center of Lisbon, looking down onto the Atlantic. And that's where I found myself, John, on Thursday, thinking to myself, isn't it amazing that one life could be lived to such a full degree? And it is the backdrop to all the problems we have now in the oil industry. He was the person who created the framework for major oil companies.

33:53David McWilliams: he was the one who set up the legal framework for the world we now live in he was the one who kept all these countries dealing with each other negotiating with each other he was also the one that kept oil flowing his whole idea was keep the oil flowing imagine being able to do that through the second world war through the first world war and he was a bloke with no company think about this, no multinational behind him worked on his own In the main. No mobile phone. No mobile phone, yeah. No, but seriously, no mobile phone. But that is actually, just on that, it was, so doing business back then, you know, when it was such a people business, and he was obviously a big people person, you know, to be able to pick up the phone.

34:39A fixer, yeah. He was a fixer. He's the guy. Fixing is all about talking and chatting and negotiating and networking. He was a misanthropic networker. He was a networker that hated people. Yeah. Right? But what he was. But networking in itself was so difficult. So difficult. He did all this without ever having visited the United States.

34:57David McWilliams: Right. Never went to the States, right? Right. Even though he was one of the main obstacles to standard oil in Europe. This one guy. Yeah. He was always taking the court. He was the man responsible for Iraqi oil coming on stream. He never once visited Iraq. Right. But he drew the lines. He drew the lines. He drew the lines on a map based on geology and based on nudging people and saying, if you don't put a line here, you're not going to get the oil. And if you get the oil, I can get you the American money or the French money or the Dutch money to bring that oil rig on stream. That should be saying to the Sultan, to the Shah of Iran.

35:37I mean, it's an amazing story. So that's the story, John. Well, it's interesting. I mean, when you talk about somebody like him and being, as you say, the richest man in the world at the time, and he gave all his money away. Fast forward to, you know, the 2020s and we've got these billionaires, trillionaires around the world. You know, what does it say about them? And what does it say about, you know, building up such a stash of money? What the hell do you do with it? But let's come back and talk about that. After we make a bit of money. Yes. Hardly a stash. Makes 5%. Exactly. John Davis's user 5%.

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38:32Mac, this Kalust Gulbenkian dude. It's a great name as well, isn't it? Yeah, yeah. So he, as he said, died the richest man in the world at the time.

38:42David McWilliams: What year did he die? 1955 he died. How much did he have then? It was 10 billion in today's money. 10 billion? Yeah, that was his personal fortune. Right. But this is, again, at a time before people were making, you know, huge amounts of money. Yeah, that was huge amounts of money. so what's it say about the Zuckerbergs and Bezos and Musk and all these are current kind of richest guys in the world what's it say about them? What is amazing is that Gulbenkian was obviously a complete renaissance man and one of the reasons that he built up this huge collection of art which was his thing and his motto was only the best so he would only get the best was that I think he understood that all art is a passion project of civilization.

39:38David McWilliams: Right, and not spaceships. Not spaceships. No, exactly, exactly. And he understood that somebody has to collect this stuff and somebody has to make it available. Because I think at a certain stage, it wasn't for bragging rights. What was really interesting about Gulbenkian is he was unbelievably private. People didn't know what he looked like for a long time. right and sounds like his wife didn't either well his wife again it's a very interesting story with with his wife she was a very fascinating person again she was armenian they all married intermarried yeah but the key thing was that he understood that with great riches comes kind of great responsibility yes you know you can't just put all the chips in the bank and allow it to just increase yeah but that that's the reason for the question about you know the musks and the tech bros and all those guys.

40:30David McWilliams: I think that you're talking about a very educated person, a very cosmopolitan person, a very refined person, a very cultured person, and somebody who understood that, you know, great art is part of the human condition. It's part of human expression. It's part of human civilization. And that's, I think, was the driving force because just collecting for collecting sake doesn't make any real sense so what he did was was very clear that he was collecting in order to do something for posterity and so he was thinking at a different different level to the tech bros i also believe and this comes down to the type of person he might have been that that wheeler dealer networker is in effect a reservoir of stories that's what makes these people exceptional that they know people they know people's history all that stuff right i think a lot of the tech bros are very very narrow focused they've a very very narrow technology or engineering bent and i'm not sure that they appreciate the world around them in the same way as those slightly more cultured previous yeah oligarchs yeah i can see that actually and and just what do you think his greatest legacy, apart from art collection and all the rest, but his greatest economic legacy.

41:58I mean, we would always have an oil business and an oil industry, but would it have had a different complexion? I think it would be very different.

42:05David McWilliams: I think the oil industry would have been much more nationalized. So I think that what makes the oil industry very unusual is that oil, with the exception of Norway, is very much a multinational business. So the Norwegians have their own oil company, Statoil, which they've changed the name. I can't remember what it's called now, but they've changed the name. They own the process from drilling to distribution. What Gulbenkian did was he split the oil business, what they call upstream and downstream businesses. So there's one type of business, oil production, like getting the stuff out of the ground.

42:48David McWilliams: Another business is oil refinery. And the third business is oil distribution. And what Gulbenkian understood, and this is the interesting for students of corporate finance and students of commerce, that the key thing for him to do was to make sure that no oil major owned those three parts of the supply chain. Right. And that was one of his obsessions. so he'd create distribution companies and then he'd finance the drilling companies and then he'd finance the refinement company but he made sure the capital on these various things came from different sources yeah yeah that is a massive legacy that's the first thing the second thing is that i think had it not been for that structure that he imposed in the 1940s and 1950s which is broadly what we have now yeah yeah yeah that oil companies would be much more national affairs So there would be the oil company of Abu Dhabi and there would be the oil company of Saudi Arabia.

43:45David McWilliams: Now there are those, Aramco is one of the biggest companies of the world, the Saudi Arabian oil company. But they play with the oil majors. So there's various different types of stakeholders in the oil industry, which is why Venezuela is such an unusual example, because Chavez nationalized the whole thing. But the problem - And it didn't work. Of course it doesn't, because you need capital. Yeah. The problem with nationalizing is it means that you have robbed the previous owners. So nobody's going to lend to you again. Right? Yeah. And the problem with oil, like any hugely capital-intensive industry, is you need to keep the money flowing into the oil to finance the refinery or the drilling in order to get the money out.

44:29Yeah. And what happened with Chavez, once you nationalize it, nobody's going to do business with you again because you've already robbed people's assets. Well, he could have put the profits back in, but he didn't. But the problem is the profits will dwindle if you don't keep investing. Yeah, but that's what I mean, to reinvest the profits. So because, I mean, again, you know, Hugo Chavez was a bus driver. Like he's not a Calus Gulbenkian.

44:53David McWilliams: Like you need these very brilliant, intelligent people who see the big picture. This is why when I talk to some business people, I'm always amazed. I've always been amazed at the brilliant business mind. I love them. I love the way they see around corners. I love the way they're half psychologist, half investor, half mathematician, half networker. They're constantly looking at the angle, reading the room, all these things. He was one of those people. You get someone like Chavez comes in, an ideologue. He's just an Egypt. He's just an Egypt. He's an Egypt in a military uniform that was never really a proper soldier because Venezuela never fought anyone.

45:33Right?

45:34David McWilliams: Okay, it's all very well, you know. And he's destroyed that industry. And he's destroyed the country, you know? Whereas a Gulbenkian would have been dealing with Trump and he'd be dealing with everybody and he'd be dealing with the banks, you know? Yeah, and keeping his 5%. Keeping his 5%. So what this book does, and I know we've gone off on a tangent, but you've got to start a diesel, but it gives you a framework for how the oil industry was created. And it shows you that these special individuals are at the core of amazing businesses. Yeah. And that they're not always nice people. They're not always easy to get on with, but they have something.

46:10David McWilliams: It's like a sixth sense of human nature, of balance sheets, of networking. They have a sort of a, and they have a vision. Yeah. And this guy's vision, if you do go to Lisbon or the old city of Jerusalem, John, take your pick. Right? Depends on the next draw in the Nations League where you'll end up, right? This guy's vision was to leave something behind and he left behind an extraordinary legacy. So what's the book? The book is Mr. 5%, The Many Lives of Calouste Gulbenkian, The World's Richest Man by a fellow called Jonathan Conlon, who is an economic historian. Right. Well worth a read if you find yourself under the shade of the trees in the Gulbenkian garden in Lisbon on a Thursday afternoon when you have nothing better to do with your time and explore the riches of the mind of Kaloost Kulbekean.

47:05David McWilliams: And we will talk to you next time. By the way, if you want to get this podcast early and with no ads, join us on Patreon. That's patreon.com forward slash David McWilliams and join the gang.

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