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Transcript on deposit at The Southern Historical Collection, The Louis Round Wilson Library
Citation of this interview should be as follows:
“Interview I-0085, in
the Southern Oral History Program Collection #4007,
Southern Historical
Collection, The Wilson Library,
University of North Carolina at Chapel
Hill”
Lonnie Poole describes the slow evolution of his waste management company from business plan to publicly traded corporation. Poole believed that he could earn a profit as a private waste manager and spent years trying to convince counties in North Carolina to cede control of their solid waste to him. After a decade of lobbying, his efforts began to pay off, and Poole found his organization growing. Poole describes the elements that made meeting his goals difficult, the eventual success of his company, and some of the complicating factors—like environmentalism—that pose continued challenges.
Private waste management company owner Lonnie Poole discusses the past and present of his incredibly successful endeavor.
[START OF TAPE 1, SIDE A]
With Lonnie Poole in the Waste Industries headquarters' office in Raleigh, North Carolina, on Monday, March 22, 1999 for the Southern Oral History Program's North Carolina Business History Series. My name is Joe Mosnier. This is cassette 3.22.99-LP. Mr. Poole, to begin I thought we might start with just a quick background sketch on your personal history, education, early career activities.
Native born in Wake County in the country, Eastern part of the county.
Attended public school. Grew up on a farm. Went to high school in
Garner. Went to North Carolina State. Graduated civil engineering, 1959.
While there was in ROTC, three years of military service as an aviator.
Back to UNC Chapel Hill MBA program, two years. [intercom]
I think you had gotten as far as California if I remember from what I had read. Did you get to Oakland?
Yeah, I did. I worked in Oakland and lived in Lafayette. All of those were big moves. I've lived in New York; I lived in Atlanta, Colorado Springs. One son was born in Frankfurt, Germany; one son was born in Berkeley, California.
Tell me this, what was it that led you—how did your thinking come together there around 1970 to head you in the direction of starting a company like this?
I think there was a lot of change in people's goals and objectives.
Getting married and having children has a pretty dramatic impact. The
moving gets to be tougher. You've got more stuff. But it—one of the
driving things was you really need to live where you want to live. Where
I had moved from was where I decided I wanted to move to. So I moved
back to North Carolina. Second, the other two things that I kind of came
to the conclusion is one you need to do what you like doing. Third, you
need to do it with who you like doing it with. Those three objectives,
if you can get those lined up, then everything else
Did you see North Carolina as and the region as a hot growth area? Did you anticipate that in broad terms that the region would take off the way it has?
No.
No. You were just coming home.
I moved back here because I wanted to live here. No it was not—that motive was, the three motives. Live where you want to live, do what you like doing with people you like doing it with. I liked the people of North Carolina and I've grown up here. I liked to live here. Garbage was going to be the first attempt to find something to do. But I was not concerned if that didn't work out, I'd do something else.
Anybody else trying to get a similar sort of business underway on the model that you had in mind early on? Or did you think you had an opportunity to do something different?
There were a few people. Basically the one thing that I didn't fully
understand or take into consideration in writing up my first business
plan, and I did have a five-year business plan, was that the cities were
very involved in it. Little did I realize, that there would be a
reluctance on their part to discontinue what they had been doing. The
more modern up to date term is privatization. Privatization of the
garbage business was really not something that cities were thinking
about a lot in 1970. So when I tried
I want to make sure that I understood you. Your business plan that you drew up did or didn't take up the privatization concept.
Yes, it anticipated that privatization would be welcomed by cities.
And then your experience was that it wasn't.
And the experience was that it wasn't. And where did I kind of come to that conclusion? I lived in California, which had been privatized since the early 1900s. I had lived in a number of places, and the private companies did a substantially greater part of the solid waste function there than they did here. Even that's true until this very day. Overall in the whole country, a little less than thirty percent of the solid waste function is performed by governmental entities. In the South and Southeast and even a broader area than North Carolina, it's probably somewhere between forty-five and fifty percent is still done by city forces.
Tell me about—what were the key initial challenges. For example, how'd you find capital?
A little bit of luck. I had managed to save up some money. So I had the
equity in my house which was about $10,000. That's in 1970 dollars. So I
had that money. What I didn't anticipate was that I had not lived here
in ten years, and that I did not know people in banks, and people in
banks did not know me. So when someone comes in that has moved twenty
times in ten years, you have somewhat of a problem on your application
for a loan, for a house, for a car and especially for garbage trucks or
bulldozers. Anyway, it dawned on me that I was going to need capital,
and I still had to support my family. One thing that I knew how to do
was to sell construction equipment. A friend of mine, a cousin Jim Poole
as a matter of fact, indicated that he was aware of Gregory Poole
Equipment Company and suggested that they were looking for someone. And
I might want to go and talk with Greg Poole who was the owner of
No relation.
Had good credit facilities. They were very successful as contractors then later coal mining, then later Caterpillar Construction equipment sales. So they were well connected with the local banks and whatever. So Greg came to Ohio. We visited, and then I came back here a couple of times. At that point I had not moved. We did in fact, I presented him with a business plan. He became a shareholder almost from inception. We incorporated and issued stock as opposed to it being up until that point a proprietorship. Greg really became what is now termed in the trade as an angel and provided venture capital. Then I in turn issued him actually a majority interest in the company. So the capital was very important. Just by luck, meeting Greg Poole, it just brought it all together. First Union, which he was very affiliated, very much affiliated with at the time, became our first bank. So with First Union's help through loans then we were—.
On your way?
Well, we thought we were on our way. We at least had capital.
Let me ask you to reflect back on your MBA years at Chapel Hill. Were you able to reach back and exploit any kind of relations or connections built during those years this many years later when you arrived here in the early '70s? Were those ties a little too distant and diffuse at that point?
I had one person that I had studied with—when I went back to Chapel
Hill, I had a part-time job. My wife was teaching school. We had one
child. So there was not a lot of time left to develop relationships with
people. I did have a studymate, Jim Nelson, who was with the NCNB
Company. Through Jim Nelson, he was able to introduce me to some people.
But most of it was really through the connection of Gregory Poole
Equipment Company. Being an MBA graduate and a NC State graduate helped
in a general sort of a way. It gave you some kind of instant credibility
because a lot of people that
Did you find your way very quickly into networks of other sorts of entrepreneurs? Were those kinds of networks yet much in place? I wouldn't think maybe so.
No. It wasn't called networking. Networking didn't exist.
Right. Right.
It was, you could call it collaboration. It's not who you know but who you knows. People have been making friends and influencing people for years and years and years. Networking is a recent sort of a terminology given to it. But no it was not a, it was a way of doing business.
How did you turn the first important corner in the business?
The first important corner was very slow coming. As a matter of fact, well there were a couple of important corners. Let me tell you about meeting another person. I guess I had been in business about three or four months. We had incorporated. I'm just running all over the state. Talking with any county or city that would talk to me, trying to talk them into privatizing their landfill operations. They were basically dumps. I was going to clean them up, do it the way it was supposed to be done, and then charge a user fee.
You weren't talking about selling a management service. You were talking about acquiring them, is that right?
That was right. I was going to come in. There were some laws beginning
to emerge that said you had to get rid of the open burning dumps. They
were a health hazard. My sales pitch was that I'll come in and I'll
clean it up. I'll put the fire out. I'll kill off the rats, get rid of
the stench, bury all that stuff and
Key asset.
I made him an offer of a job, and he took it. So Jim Perry who is now
the President and Chief Operating Officer of this company and one of its
major owners joined the company. I don't know if I have kind of made
this up later but people have always said, 'What did you tell him that
you wanted him to do?' I have always said, 'Jim you need to go do
something important, and you need to do it quick.' So anyway, Jim joined
the company, and we divvied the state up. He took half of it and I took
half of it. We went out
How did you find that bit of consultancy work?
Well that was really easy, and it brought in money and paid some bills. But by this time, Jim at four dollars an hour and me at four fifty an hour plus we were paying each other six cents a mile for car, this was really cutting into our equity.
I'm sorry, I didn't put the question very well. What was the connection that led to that consultancy work? How did you have this connection with Wake County?
I was trying to talk Wake County into—.
Your notion.
Into the notion of doing landfills. Well at the time, City of Raleigh
had a landfill, okay and Wake County did not. Wake County thought that
it needed a plan. Wake County had never been involved in the garbage.
City of Raleigh had always been kind of the way it was done. So Wake
County said, 'Okay why don't you do us a plan because we've got a lot of
trash out in the remote areas, the non-incorporated areas?' So that was
what it really was all about. Anyway, after about a year, we still
didn't have any business, and we talked it over, and we decided that we
were just draining our equity. Greg had a job at MacGregor Downs to
develop streets, put in water, and sewer. MacGregor Downs is a golf
course community that his father had started and that the general
manager, president and general manager would be probably retiring within
a year or two. So it was a good fall back position. It was something
that he thought I could do. So if I would, to go out and understudy
Charlie Harris, the President. So I talked to Jim about it and I said,
'Jim this is kind of the way I think I'm going to have to go. We just
aren't hitting it here with the—I mean there's a lot of resistance to
privatization of garbage. So what we need to do is give it a rest a
little bit and do some other things, but still do it on the side and
maybe something will come out of it.' Jim went to work for the Credit
Union, North Carolina Employees' Credit Union, and I went to work for
MacGregor Downs Development Company. Within I think around just a few
months, maybe a couple of months, we got a letter first from Wake County
that they did in fact think they needed to put in a landfill. If I were
to find a site and get it up and going. So there is a contract, which
later turned into two landfills.
Right. But you said that you weren't making money early on in these landfills, the first couple of years, eh?
Well, that brings you up to about the end of—those contracts were put in '71, we did little or nothing except the management contracts. Those contracts were put in in '72. By '73 we were operating actually five landfills: two in Wake County, one in New Hanover, one in Vance, and we were doing one kind of on the side for the town of Wake Forest. We were not making any money. The rate that we could charge at the gate was not enough to support the cost. So we bought the trucks. By 1979, we still were not making very much money in the landfill business. By that time, the EPA had been formed. RRCA, which was one of the driving pieces of legislation, was passed in 1976 by the Congress, Federal.
RRCA?
RRCA, Resource Recovery and Conservation Act of '76. We had seen the first drafts of the regulation, which was not actually promulgated until 1980. But it had a substantial amount of risk associated with operation of landfills. So what little money we were making was not consistent with the degree of risk. So at that time, we got out of the landfill business and concentrated totally on our collection business, which was doing quite well and making money.
Yeah, can you tell me about the transition or the thought process the step through into purchasing the trucks and going the direction of collection?
We bought the first trucks in '73, and we started with six. That probably, if I had it to do over again, I would not have done that. We went into three markets simultaneously, quite remote from each other. But anyway, Jim was at that time running New Hanover County. That was an interesting dinner convincing his wife that he should give up his job with the Credit Union and come back to work for this garbage company that may be successful. But anyway we took her out to a nice Italian restaurant—.
And won her over.
And we were persuasive. I was persuasive. So that involved Jim not only giving up his job but he gave up his job and he moved. He did New Hanover County contract, which was to find a site and get it up and running. Then I did the Wake County sites. Then I acquired a small grading company business, and the guy brought his equipment and everything over to Henderson whole dump and cleaned it up. He became—we bought his equipment, and he became the manager. The thought process at that point was to put in three garbage trucks or two garbage trucks in each of those places. One that picked up the dumpsters and the other one that picked up the big containers that we call industrial. To not only have a landfill to take it to, but to have trucks that could go out and get it because at the time if you charged fifty-five cents, a lot of people would drive their trucks fifteen or twenty miles to avoid having to pay the fifty-five cents. So we decided that what we were going to have to do was get our own trucks and pick it up and we could , since we were closer at hand, we could make it up on the transportation. Anyway, that's the way we did it. The landfill wasn't making money and the collection was, so we just kept adding trucks. Actually we made a goal to open one new collection operation per year. We pretty much stuck to that plan until we went public in 1997. We opened up one new market every year.
What—.
The business plan that we started with in 1970, except for the fact that we discontinued landfill and we added in trucking, we pretty much at the end of the fifth year had gotten to where we wanted to be dollar wise. Maybe we were a little behind on the bottom line. We did another five-year plan, and then we did another five. We just keep doing fives, and then fives turn into twenty, and now here we sit. Our company's twenty-nine years old.
Did you ever have to walk the halls over in the Legislative Building and the Capitol Building and try to twist arms. Was that ever a part of your—.
Oh yeah.
Yeah. How did you find your way into that?
The first ten years, I spent more time in City Halls and County
Courthouses, and our involvement was more at the local level. But I
guess I would have to say that in the middle '80s the Federal acts, you
had the Clean Air Act; you had the Resource Recovery, RRCA '76 Act; as
well as a number of other Federal mandates that that precipitated state
legislation. In that legislation we often found that
On this theme—.
The legislation always was written and the law was written for cities and counties. Well, there were a lot of things that were different in cities and counties. One, we pay taxes; they consume taxes. There was almost, there was an evolving standard that was expected, and the inspections were not made on an evenhanded basis. The inspections were much tougher for a private company than they were for a public company. It was, government when it regulates government is probably seen in its worst form because it was not a level playing field economically or legislatively. So finding myself in the halls of the North Carolina Legislature and South Carolina Legislature was primarily one to try to in some way to level the playing field. It was extremely unlevel at the time. North Carolina was the first state through, and I've got to brag on our company, through Jim Perry and my efforts down there, we were the first state to get three major pieces of legislation, and they may seem small but one was weight relief. Our trucks got stopped and were overloaded, and we paid serious fines. Cities and counties did not. We did not get that practice discontinued totally, but we did get a ruling that cities and counties could be fined for overloading trucks if caught on the public highways.
When abouts did that happen, that ruling? In the '80s.
The second thing is if our trucks did get caught is that we and cities and counties would be entitled to a fifty percent fine rate. So that was good legislation. That was one part of it. Second part is a just comp piece of legislation that says if a city annexes my business, then the city it amounts to a taking, then the city must pay us a multiple of our monthly revenues. That was the second part of it that we got approved.
And that legislation specified the multiple?
It did.
Okay.
And it's still to this day somewhat novel in the entire country. There are probably thirty or forty states that have now adopted that legislation, which was first adopted here in North Carolina. The other was, is that we had to compete against cities, and we were paying fairly substantial fuel taxes. For the large part that fuel was being used to compact the waste, and we were not actually consuming the fuel on the highway. So it was a combination vehicle that used the fuel for dual purpose. One to compact and to collect and lift it up and do all these things plus transport. So we got another piece of legislation called Fuel Tax Rebate, and we actually get back in this state to this day, a third of our fuel tax.
Who were the key legislative allies in these efforts? Can you single people out? I'm interested in particular not so much the names, but how you built relationships with them?
If I just carved out one, and it was a personal friend of mine and I knew him through Poyner, Garety Hartsfield and Townsend is now a part of Poyner and Spruill. The attorney that incorporated us, Tom Norris was from there. But in the process I met a person named Marvin Musselwhite, who later was elected to the House of Representatives. Marvin, we hired to help us walk this legislation through the halls. Then I can't remember the name of, Ramsey from the mountains—.
Liston.
Liston Ramsey, Liston Ramsey's secretary married Joe Barber who came from Garner who actually came from Route 2 Raleigh, which is where I was born. I knew Joe Barber and through Joe Barber I met his wife. His wife was Liston Ramsey's number one person. Then the other person that helped Liston a lot was a fellow named Roger Bone. By that time we were doing work down in Wilson County, and Roger Bone sold International Equipment. We bought some International Equipment from Roger. Roger introduced us around in the Wilson community, and we did garbage work there primarily for Firestone. Roger Bone was one of Liston's right-hand people when Roger was in the legislature.
Did, I don't mean to ask an indelicate question but did you—.
I went to school and graduated with Jim Hunt for goodness sakes.
Ah well. Okay. Okay.
He graduated at NC State in 1959.
So you had known Jim Hunt in college?
I had, I think it was my junior year four of us decided we would put together a slate of officers, and we would run for all of the junior class officers. It didn't look like much competition to us, but unbeknownst to us there was a young farmer boy from Wilson named Jim Hunt. He decided that he wanted to be the junior class president. He kicked our butts so bad it would've been an embarrassment to our mothers. Anyway we did run against him. It may have been our sophomore year, but whenever we ran Jim Hunt even in that day was a master politician, and he really did great. Those are some of the names that come to mind.
Let me ask you this, two questions. One is did this acquaintanceship with Jim Hunt matter in a substantive way over the years to the businesses' fortunes or just it was a helpful thing in the background?
You know I guess, if I had to list it in the debits and credits, I have
served as a resource to Governor Hunt to a much greater extent than I
have, I've never—I don't recall asking him a favor. I have warned him
about legislation that was really bad. I have tried to alert him that
while you gain a lot of authority over garbage, it's one of those things
that you've got to be careful what you wish for. Wishing yourself into a
position of authority over garbage can have both its upside and
downside. I've tried to offer some advice. I've served on a number of
study commissions in the state. I served on North Carolina Energy
Development Authority, which was to investigate ways to convert garbage
into energy through incineration. I've got to turn to those three pieces
of legislation. They became somewhat of a milestone for our national
trade association. It came to light. I didn't think much about it, but
the trade association thought that was absolutely wonderful. So I was
elected to the board of directors of the trade association. Later
elected to last vice chairman, they used a rotation system, last chair,
fifth chair, and fourth chair. So anyway, and ultimately became the
chairman of the NSWMA, which is National Solid Waste Management
Association, which later during my reign really was changed to
Environmental Industry Associations. It was completely reorganized. So I
served for two years as the spokesman of a national trade association.
That got me to Federal, to the Federal level. Actually I testified in
both the House and the Senate on various environmental laws. During my
term as chairman in the first year, as I recall, there were about 880
pieces of state legislation that were up for passage in the various
state legislatures. It was a time of—this was 1991-92. It was a time of
massive amounts of state legislation. Some of which were good and some
of which were bad. Some of which were absolutely adverse to the private
sector. In the early '90s the private
How about that. Let me take you back, and I'm anticipating lots of conversation about those years as well, but first a couple of questions. You had mentioned your sense of the uneven playing field, public trash and landfill operations as against private. Obviously saw an economic opportunity there. Was it also a matter of political philosophy for you? Were you engaged at that level in way of motivation or were your motivations more that it was a business plan that we can execute and make some money?
It was more business than political.
It wasn't that this thing just caught in your craw that they had set up the playing field not in a balanced way, and you had some deep philosophical objection to that that got you out of bed every morning.
Not sure I understand the question.
There are folks you come across—.
I actually was—yeah I got caught up a little bit at the time into the pro-government what government should do and what government shouldn't do. I had my own notion, and it was with bias of course.
It was with bias?
With a lot of bias. Anytime that a governmental entity would decide that
they were going to run their own landfill and charge a fee, which was
essentially my idea. Their reason for doing it was that if I could do it
and make a profit, then they could do it and save the taxpayers money. I
found that argument to be somewhat hollow because technically with an
unlevel playing field, government can do everything less expensively and
save the quote taxpayers money. I'm certainly not of the camp that
believes government should be all things to all people. If they were
already involved in it and running a good show and had a good sanitary
landfill and they complied with all the of the regulations and wanted to
do that as part of a tax supported services, then that was certainly
within the prerogative of the city to do that. But on
These efforts to work the halls in Raleigh and try to make sure that you get some—you mentioned the three key pieces of legislation that finally got passed over there that helped straighten things out for you folks. Did you ever find it necessary as a business decision to be involved in the electoral realm of politics supporting candidates? Did you judge that necessary to the fortunes of the business?
No. As a matter of fact, I've always been pretty careful to—I give what I can to help people finance their campaigns. But there's a real fine line between that and paying off people. I never wanted to consider it to be a bribe or pay off or a kick back. I found—.
I certainly didn't mean to suggest that.
There's somewhat of an inconsistency between the term of the politician and the term of a garbage contract. If you took, we now currently do 155 contracts. My oldest contract is 1973. Never, no interruption, 1973 to current in a city picking up at the house. We are and have been their public works department through many, many, many city council people. Okay, so you have to be real careful is it may get you the engagement, the contract, but it also if not done properly will cost you the contract. The time we got in the business, what do you call it—it's like nepotism it's, partisan politics was the—we didn't have city—.
[END OF TAPE 1, SIDE A]
[START OF TAPE 1, SIDE B]
This is side B of the first Lonnie Poole cassette.
So in the conversation about making contributions, the intent in our contracts is for the contracts to last for long, long periods of time. People run for elected office on two or four years schedules, and even sometime they don't serve out those entire periods of time. So you have to be very, very careful. At the time we got in the business, if the Republicans came into power, basically they got rid of everybody, the county manager if they had one or the county administrator, the clerk, the tax collector, everybody. Some with cities, partisan politics, when a new broom came, it came sweeping out the old. If we weren't very, very careful, we were part of the sweeping. We got swept right away with the politicians that got swept away. So we made it a point to distance ourselves from the electing process, and we basically provided a service for a city. Whoever was in power at that particular time was who we served. It was up to them to get into power, and it was up to them to stay in the power. We did a good service in what we did, either collecting the garbage or running the landfill as a way of doing that and not necessarily through contribution to their political campaigns. As a matter of fact, we've had to be very careful over the years to not let politicians put their vote getting signs on our dumpsters because it can be misconstrued by the opponents that we actually through our truck driver had them put on there. So it's a delicate little subject.
I can see the point. Let me ask to focus sort of late '70s. Company's been up and running for five plus years. What are the marketplace dynamics in which you're operating and how is it that waste industries is emerging as a successful growing company when lots of these other 14,000 are fading away? There's a consolidation process I suppose even as early as that or not quite yet?
Yeah, by the late '70s we had not acquired a lot of companies. Our primary means of growing was through bidding on contracts and simply knocking on doors. We had put a couple of sales people in place. But it was no, not the consolidation. As far as what were the dynamics, a lot of the little towns were beginning to believe that privatization of their solid waste function really was the way to go. We took on our first one and to provide residential collection in 1973. Still have that contract and it's in the town of Oxford.
I'm sorry, Oxford?
Oxford, North Carolina. But it gets back to, the market dynamics would be the economy of scale. When a town has just a very few houses, they wind up with fractional trucks and fractional people. We on the other hand were doing more than one town, so we gained the economy of scale that was being achieved by the larger cities. We could find out and understand the cost of the things by getting involved in the larger cities trying to get their work. But where it really paid off for us was in the really small towns. Small towns it was a headache anyway. So if they could get rid of the old truck they had and the people, and in many cases we offered the people the jobs and bought their old trucks. So that's where the collection thing was beginning to really take effect and do us some good.
When did your revenue growth really start to move up? Has it been fairly—?
Let me—at zero and by, as a ten-year-old company our revenues hit four million, 4.4.
1980.
Right. By 1990, we were at 32 million, and this year we're going to wind up at 171 million. So I would say that we kind of went backwards a little bit around '78 or '79 because we were closing the landfills, and that was going backwards at the same time we were going up. But I can't remember the year that we hit a million. I know that we made a profit in the third year. We actually made a profit, and it was some time in the fourth year that we had actually gotten back all of our investment and we were in a mode then that it was not a question of return on investment, it was return of investment. So we got back our money, and then we hit kind of a lull in '82. Greg Poole, who I told you about earlier, had other business activities. His father had passed away. He had some fairly significant estate matters to attend to. So he actually sold his interest—.
Back to the company.
Right. It was actually a recapitalization. It had all of the markings of a leveraged buyout, but we did not actually, well we did in a way. We bought some of his interest, stock back and the company redeemed some of it. The end result of it was Jim and I became the significant owners of the company. Greg stayed out until 1988. One of the things that he had thought was that he may get his situation cleared up. If he did, he would like an opportunity to come back. So we gave him the opportunity to buy back in the form of warrants, which he exercised in '88 and came back as not as significant a shareholder percentage-wise, but significant dollarwise.
The warrant structure was part of that recapitalization.
That's right.
Let me ask about this. I'm curious to know about how the early environmental movement so to speak that's just kind of beginning to be kind of recognized in the US in the '70s, how does that come to impinge if at all on your business over time, recycling, landfill environmental concerns those kinds of things? We talked a little bit about that earlier, but how did that begin to be part of the landscape where you were operating?
There's really never been a time in the history of our company that
public policy hasn't had a pretty dramatic impact on our business. Now,
it's not been the same thing over the whole time, but public policy and
public emotions and the political winds have always had a dramatic and
direct bearing on our growth as a company and development as a company.
We were not—in 1970, we were not an industry. We were a mom and pop
business. There were 14,000 or so of us. There were ten thousand
landfills. The inventory that comprised the infrastructure was really
not known. It was a kind of a by guess and by golly sort of numbers.
There was not an EPA. There was not a regulatory framework. But the
first Federal initiatives and studies and grants where they found out
what was in garbage and what are the bad health hazards that can emerge
from not doing a good job with your garbage did in fact stir the public
interest up. The public actually, once they were sensitized to it, found
it quite offensive to have a burning dump right outside of town. Now it
was very convenient, but those people who lived over there, it was kind
of an obnoxious mess. It had rats and smoke and stink. In the bigger
cities, which North Carolina doesn't really have any big cities, it was
an even more of an obnoxious mess. It was a health hazard. The stuff was
either being put into a, the place you put garbage is normally into a
swamp or into some ravine. We just did a really bad job of it. Once the
public got onto that, then they expected more and then that drove public
policy and legislation to do a better job and to develop and construct
sanitary landfills. Then the public said that we don't want the
landfills close to our house. We know we need them, but put them next to
somebody else. That's the not in my back yard syndrome. So the end
result of that was it became very, very difficult. We were closing
substandard sites, but no one wanted you to open up another one. So
there was a period of time that we went through this great fear of
having a lack of capacity. When that occurred, anyone that had landfill
capacity started charging rather serious amounts of money to use up the
quote air
When was the first time that Waste Industries started to recycle some part of the waste stream? Do you know what year that would've been?
'70-uh, we did a short time in '74, '75 and we lost our shirt. We were
baling cardboard. Seventy-four, '75—we bought a baler and put it in a
building over here on Wake Forest Road . We went around to the grocery
stores and put in a system whereby they could segregate the meat and the
lettuce leaves and all that stuff and put it into giant plastic bags.
Then when we would get those containers, we would dump them out. We
would take those giant plastic bags, and we would put them back into a
garbage can and all the cardboard would be left clean and nice. We'd
bale it up and sell it. Well, it was a great idea,
What was the character of those mandates?
What was it?
What was the character of those mandates?
Well, the Federal government said that we needed to recycle ten percent of the waste, and that was a Federal thing. It had to be, the part of the legislation said that a state would have a solid waste plan. Part of that solid waste plan would be a ramping up of the amount of either recycle, reused or—what was it—recycle, reuse—
Reduce.
Yeah, or reduce, but primarily recycle. They wanted it ramped up. Let the state start at ten and go up to fifteen, twenty, twenty-five. The state had to put in a promotional mechanism to achieve that and convince the people that that was a worthwhile goal. That goes on until this day. It was initiated basically at the Federal level as a part of the RRCA Act of '76, which later became a part of the state solid waste plans, which the state actually spent money on and promoted. Then cities and counties embraced that. Then they required that we embrace that. The end result was that we achieved in this state around twenty, twenty-five percent recycling now.
What's your sense of how far along in their maturity are all of these attendant industries related to the reprocessing of recovered materials from the solid waste stream?
I think they're in their infancy.
Still quite in their infancy.
Yeah it's so crude. The markets are chaotic in it right now. I can look
at it through our viewpoint. We wind up with either too much or too
little all of the time. We've got too much cardboard; we've got too
little cardboard. The way the thing works, we can't send a notice to
people and say, 'Well you know we want all of your cardboard this week.'
and then say next week, 'We don't want any.' You have to
A decade, two decades, three maybe down the line do you think for that industry to begin to mature in a real substantial way?
Let me come at it from another perspective. We in the business and the big manufacturers have to go out there and they spend ten, fifteen, twenty million dollars on a plant to use recycled commodities and everybody says, 'Hey, I don't want to do this anymore.' So the public whim stops, or they know us to be up and down. Our primary core business is collecting garbage. But we do this and all of a sudden, they've got a ten, twenty million-dollar investment that's dependent on us and the public. So they too have their reasons for not investing too much and getting too far out front. So we could all benefit ourselves and I do believe that it would be recyclables would be viewed as a primary raw material inside of ten years, inside of ten years.
Let me turn your focus back inside the company and have you talk about, were there central internal management issues that you had to tackle along the way? Any particularly noteworthy developments in the '70s, '80s, early '90s that presented you challenges as a manager?
No and actually we had discovered that we have a particular style of
management that's different from other companies. That's one of the
problems with being in the same company for a long,
I hadn't thought about it but I guess that's right.
You either get it. So we are now in three places a hundred miles apart so it has to be decentralized. I personally like it, and it's what you have to do in a service-related business that requires responsive service. So what we have is what has evolved. It was not to sit down and let's design a management system. It was not until we tried to put that on a piece of paper and define it for our public offering that we really said that there is a unique style of management. We are, we have a decentralized form organization structure. They wanted us to write that out, and we did.
Over the years, what have been your most important sources of what I'll call sort of intellectual stimulation of a business and company sort? What have been your idea inputs? Where have your sources of information come from?
Other people. Other people.
Folks in the trade association I imagine, friends, colleagues, social contacts.
Well, you do know it's a myth that you're in business for yourself?
You're your own boss. That's—nothing could be further from the truth. In
finance, I'm guided and impacted and led by my
Sure, sure. About the acquisition strategy you've pursued over time and how you've implemented that.
We have acquired a few companies, but in the history of the company, we have acquired, I think, thirty-seven companies. Of that, we've acquired thirteen in the last twelve months. So we've really stepped up that activity in the early part of '96. That was primarily to prove that there were one, enough companies that we could buy, and two, it was to layer that method of growing on top of our internal growth rate. That was one of the compelling reasons for doing a public offering.
How about the course you've navigated as against the wider trend within the industry towards consolidation, and I'm thinking of say BFI, Waste Management and so forth. Can you kind of paint your position in that wider landscape?
They both started before we did. They grew almost totally as a result of mergers and acquisitions. They have also grown with some internal growth. It's interesting that you should ask. BFI is currently being sold to a company called Allied, and Waste Management was acquired last year by a company called USA Waste. Those were number one and number two in the industry for as long as I can remember. So we are a little slower, and we still exist. We're in the top eight publicly traded companies now. Come second quarter of this year, neither one of them will be. Waste Management is already out. Now there's a company called Waste Management, but it's a case of a smaller company buying a larger company. It may be true that big fish don't eat little fish. It may be true that fast fish swallow slow fish.
Let me turn to what is page two of this letter that I wrote you with some questions for this conversation. Let me ask you a few questions out of what is designated there as section three, business in society. How about your sense of—these are turning to matters that are a little more philosophical—your sense of the proper corporate role in relation to the wider community. How have you tried to position the company in that regard?
Well in the context, we have four basic cornerstones in our overall corporate strategy. It comes down to building value, and we first try to build value for customers. We second try to build value for employees. We third build value for shareholders. A fourth part of that is to build value in the communities where we serve. As long as we do all of those things and keep the priorities right and keep the balance right, then it's good for the company. If you skew it too heavily toward one or the other of those groups or neglect any one of those groups, then I think philosophically a company will have problems.
How about your perspective on the broad business climate in North Carolina across these years, uniquely a good place to do business, or just a good place to do business that's done especially well?
It's better now than it was in 1970. But it wasn't bad in '70. Is it
unique? Probably not. I think that North Carolina is part of a bigger
thing called the Southeast. I think, it certainly as it applies to our
business. There are two things that we see growing faster in the
Southeast, not just North Carolina. One is the economic activity is
about a third faster than the national average in population growth is
about a third faster. The two primary drivers of garbage generation are
people and economic activity. So from our perspective and those are kind
of what we look at, it is certainly great in North Carolina. It's better
in some
How much is North Carolina hanging onto what maybe a full generation ago was a certain regional distinctiveness in business activity and character?
Are you talking the Triangle area or—.
Well perhaps, or your experience here. Is North Carolina still a Southern or a regional, does it have that kind of feel any longer? Has that given a way to a different kind of business style?
It does to us, but a lot has changed. We speak of global, and you're as close to someone else as you are to your computer through Internets and websites and all kinds of different forms of communication. It certainly is a smaller world. I don't think a thing in the world about going on a day trip to a business meeting a thousand miles away. When we first started in business, I didn't do that because one it was cost prohibitive, and secondly I couldn't afford it. In today's business world, taking a day trip to Dallas for a two-hour business meeting is not unheard of. Most of the background and backdrop for that can be done in faxes and communicating through email and whatever. So then you're only down to just those things that require the personal eye to eye contact. There are still many, many things that need to be done that way. Does North Carolina still have that local flavor? I think it does. From our perspective, we see the communities where we work, and they're still small towns can have just as many bad small town habits as it did twenty-five years ago. Kind of what was it Andy Griffith and Mayberry? Not quite that bad, but small towns can still be the ultimate in small townisms. But on the other hand they're a part of everybody recognizing we're part of a bigger more global thing. Communications are faster. Information is instant. It's all hooked together, and everything moves at a much faster pace. Have the good and bad of both.
Let me ask you for your reflections on a few issues of the wider North Carolina economy. What do you think are the most significant factors leading to the tremendous, broad economic expansion across say the last generation in North Carolina? The move beyond the traditional say textile, tobacco, and furniture sorts of manufacturing industries to what you see out there today? Why here in North Carolina? Why such success?
I know more about this particular area, the Research Triangle Park. One, you have state government and three major universities that are not really knocked around and beat up nearly as bad in economic downturns. So there's more stability to the economy. As a result, as private businesses have moved in, they've enjoyed the benefits of that good stable economic situation. What we have attracted is more in the way of intellectual endeavors. It's been mostly in computers and medical research, which were the first companies to really visit and embrace the Research Triangle concept and to build a closer relationship between the university system and various businesses that moved here. A number of businesses that are involved in just pure research. Then the thing kind of expanded beyond that because as these three universities grew, you had the community college thing and that is a way of taking applied technology and moving it out to folks that can really use it to fix your commode. That's important because you can have all this high tech stuff all you want to, but you also have these practical applications. So the community college system trained the people who did the work. That was very important. Then the greater North Carolina, I read in the paper I think this morning, some of the greatest assets we had was at the greater University of North Carolina, which we've seen Wilmington, Charlotte, East Carolina grow into major universities in their own right and Greensboro. So some of the schools that were nothing back in the days when State, NC State had three or four thousand students. Some of the lesser, they were not even on the map. They weren't even a full dot. They now have three and four thousand students in their student body. The whole state has expanded through education, getting into more intellectual things. That in fact has replaced to a large extent an agricultural society and one that had gone into furniture in the West and textiles in the Piedmont and fishing on the Coast. So we're a more diversified state. We still haven't completely gotten away from the impact of tobacco. Only time will tell how orderly that exit will be. But one thing's for sure; tobacco will place a lesser and lesser role.
What's your sense, some people are even in the midst of all of this tremendous growth, some people observers will ask the question, how well and equitably is all this new economic activity being distributed down the socio-economic ranks. What's your sense of that? How well North Carolina's doing, bringing all of its folks along on this ride? Do you have a sense of that, a perspective?
I think I'm correct, my dad ran a service station for another individual
when I was going to college. He made fifty dollars a week. I made
whatever I could picking up part-time work. It was reported
How has, what is your experience been like in the way of managing around the issue of say race and gender? Certainly in the last generation there have been tremendous changes in society for African Americans or other non-Caucasians and for women. Has that been something, have those issues been issues to which you've had to give much attention as a manager in your experience? Or have they largely generally sort of taken care of themselves?
I can tell you that I'm less sensitive about such issues than I think
most people. More of my neighbors were black than white. So I've
basically grown up and the people that I played with and worked with
were black. The people that I went to school with were all white even up
through, matter of fact NC State had admitted the first black when I was
in school there. Now we had made great strides with the women. We had
admitted fifty-two of them. So I went to a lily white, all male
university. It was the topic
Any last thoughts on issues I haven't raised that you think are important to this broad sort of survey that we're making here? I have one other question that actually has popped into my mind. Maybe while you're thinking on that, let me go ahead and ask. How about your sense of the state's spending priorities these days. Are you essentially more or less happy with how the state's spending your tax dollars or do you see the need for certain programs that aren't being brought forward? I'm thinking too—.
I'm not so sure that I could, you know the state spends money on things that it probably shouldn't. On the other hand this company spends money on things it shouldn't too. The difference is that, there's a huge difference in magnitude and size, and the state of North Carolina has become a very, very big enterprise. I really do believe that government has a difficult time of becoming decentralized with its citizen legislature. The end result is that I guess what I would have to say is that government runs the danger of getting so big that it loses all kinds of efficiencies.
[END OF TAPE 1, SIDE B]
[START OF TAPE 2, SIDE A]
3.22.99-LP.2 the second cassette in the March 22, 1999 interview with Mr. Lonnie Poole of Waste Industries in his office in Raleigh, North Carolina. We're just spending the last few minutes here on the last couple of issues.
We were talking about government and its spending priorities. By and large I don't think I can argue with it but I think if I got into some real micromanagement, that's kind of where I see things. I see things where the rubber meets the road. In small towns and programs that the government puts in, I guess my criticism would be that the government gets so big and so inefficient that it has difficulty being nimble enough and especially when governed by a volunteer, not volunteer, but citizen representatives that it just becomes highly inefficient. I guess I'm philosophically against big government, and I'm certainly all in favor of government making every attempt to get things done by the people for themselves as opposed to the government trying to be all things to all people.
Any big issues the company has a key interest in in front of I mean over in Raleigh these days or up in Washington? Any issue that's pending that would matter a lot to you specifically?
An issue that's been around since 1904 involves flow control of garbage.
What that does is it gives governmental entities the right to control
where garbage must go. That unto itself sounds good because government
in order to manage it must control it. Unfortunately, any time you can
control something like garbage, it's an awesome amount of power. In
fact, it serves as what should be a regulated utility. Unfortunately, in
the case of flow controls, governmental entities were granted the
authority and power to control the flow but without regulation,
especially without economic regulation. That particular matter has been
heard by the Supreme Court I believe six times. I think right now it is
dead even, three wins and three losses for the private sector and vice
versa. Currently it is an interference with interstate commerce to
control the flow of garbage. In other words, garbage can move back and
forth across state lines virtually unimpeded so long as it is in
compliance with other regulations that have to do with public health and
safety. To artificially to cause it to go one place or the other is
unconstitutional. I don't think it's gone away because it's such an
awesome amount of power, and it has so many dollars involved. I can't
see that municipal and county governments will let that dog rest very
long. So there will either be other forms of manipulation of the waste
stream, or there will be a resurrection of flow control. Once again
we'll go
One last big sort of conjectural what if. What if the labor landscape in North Carolina had been unlike it is and this were a unionized state? Could you have built this company?
Yes. I came from a union state, as a matter of fact, a closed shop state. California, the union involved were operating engineers.
So you're confident that by and large in this industry, you could've moved forward with the business.
It wouldn't have been as easy. That would've been yet another unleveling of the playing field. In North Carolina it is against the law for labor in cities and counties to unionize. So to have allowed that, especially in a closed-shop environment, would've been yet another thing that would've precluded privatization to have come as far as it has come today. Would it have precluded it entirely? I doubt it. Would it have impeded it? Possibly. Would we have survived as a company? We would have.
Last thoughts? Things I haven't brought up? I'm sure there are all sorts of things. Anything that's especially pressing?
I guess the largest decision that a company had to make, we made in
1997. The, our company is currently publicly traded. Meaning that we
registered with the Securities and Exchange Commission. Our equity, it
is fully marketable. For those of us within the company known as
insiders under the rules affectionately referred to as 144. That is yet
another step. We were faced with a situation that we either had to be a
part of the consolidation to continue and execute our growth strategy,
which meant acquiring other companies, or we had to become an acquiree
and become part of a company that had publicly traded currency. We
examined all of the alternatives to sell the company or to grow the
company and found that we needed to have the ability to raise capital
through public markets and to sell our equity. We made that decision and
did it in 1997. Are we really good at this? Not really. We'll get
better. Once you get to a certain point in a company's history as it
evolves, and I think we were ready to step up to the next milestone, and
that involved going public. It's a very, very big decision. But it came
down to actually three strategies. We had to have—we wanted to pursue a
growth strategy that is more aggressive and that takes capital. Two, we
had to have a succession strategy. That means that we could attract and
hire people, middle management who could have a piece of the action,
have stock ownership. You could do it, attract them through stock
options. Three, they are smart enough to figure out that they are not
tied necessarily to a family or a few owners who may decide to retire or
sell out. There's a little more security there. So succession becomes a
second strategy. A third strategy was an exit. Anytime you've got 1500
people, the likelihood of all of them wanting to do one thing, exercise
one exit strategy at the same time is unlikely. In order to allow people
to exit on their schedule it required you to have marketable currency.
We made that decision that we wanted to be a publicly traded company and
went through all that. It has its trying moments. It is considerably
different than being private. On the other hand, if I were asked is it
worth it at
Did the IPO come off largely as you expected and hoped?
Yeah. It did. It was a—the filing range if I remember correctly was 10.50 to 12.50. Actually during the period of time that we did our road show, the whole market rose so we did our boat rises with the tide. We actually went, did our public offering at 13.50. There were lots and lots of people looking for emerging growth companies at the time. We had about eight times more orders for shares than we had shares to offer. Yeah.
Who's your underwriter?
The underwriter was at Alex, Brown, which is later been acquired is now called BT, stands for Bankers Trust/Alex, Brown. The comanager was the Deutsche Bank, which traded as a company called DMG. Deutsche Bank has just announced its intent to acquire BT/Alex, Brown. We think we're in the consolidating industry. Golly, one of the biggest changes, and I forgot to mention it just now. The thought occurred to me and crossed my mind. One of the biggest changes as we saw the state go from an agricultural and textiles and all this stuff is that way, way back we allowed banks to branch. It was a very, very big deal. By branching, our banks learned how to cover broader geographic areas. As a result, we've watched NCNB, the best little bank in the neighborhood become Nations, and they've now acquired Bank America. NCNB banked us for the middle part of our history. Even a little bank that we're with now, BB and T is the biggest bank in North Carolina as far as high share of North Carolina market. Our initial bank was First Union National Bank. I've got to say one of the biggest changes has been in banking. Banking, I don't know where it ranks. Do you know where it ranks as an industry?
In North Carolina?
Yeah.
I don't know the answer for that on the roster. But it's got to be right up there.
Tremendous change.
Yeah.
Tremendous change. Banks are into a multiplicity of services. They're into brokerage; they're into insurance and estate planning; and the trust departments are huge. I just visited when we broke up today, this bank is actually Detroit, and they're down here because they're industry focussed, and we are in the top ten. So they are here wanting to do a part of our business. They've been over today to see BB and T. The banking world and the North Carolina banks in particular have just grown by leaps and bounds. That includes the other tier of banks. You've got First Citizens which is very much a local bank. Then you've got Wachovia, and I think when we first started banking, I think Wachovia was the biggest. Now you have Nations, which is Bank America, which is truly global. That's been a huge change.
I really want to thank you for taking all of this time. You've been very generous.
Okay.
And I really appreciate it. Thank you.
END OF INTERVIEW