We went to Koch Industries headquarters last week to spend about an hour with co-owner, chairman and CEO Charles Koch. Koch and his brother David, both billionaires, are also known as dedicated right-wing political fundraisers.
Ryssdal: Charles Koch, welcome to the program.
Koch: Thanks, thanks for having me.
Ryssdal: There you are, Boston, Massachusetts, 1961. Couple of graduate degrees from MIT, and you come back to Wichita, Kansas. Why?
Koch: Well my father had, uh … I was working for a consulting firm back there, which was then one of the leading consulting firms, Arthur D. Little, and I was learning a lot, and it was a great place to be when you’re single. All the girls schools there and they had jazz bars. I mean it was terrific. I loved it. Learning a lot, doing consulting for all sorts of big companies — process development, product development, management services. And so my father starts calling me, urging me to come back to Wichita, and I remember what it was like growing up under him. Like, starting at age six he had me work in virtually all my spare time, and I don’t mean doing easy stuff. Like, started out at age six digging dandelions at, you know, 100 degree temperature, and I’m thinking, “Why did my father hate me, and all my friend’s fathers love them?” Because they’re out swimming, and having a great time, and here I am digging that. And you, because you have to dig down. If you pull them up the roots will stay there, and they come right back.
Ryssdal: That’s right.
Koch: So I’m out there digging, and then I soon graduate to bailing hay, shoveling out stalls, milking cows, digging ditches, all this other stuff, and that continued until I started working other places. And –
Ryssdal: So you say he was tough, your old man was?
Koch: So he was tough, yeah. His philosophy was this. He said, “I don’t want my sons to be country club bums. So I’m going to make them work.” Now, I was a little difficult. I was independent, kind of a free spirit, so I would try to find ways around this, and years later I ask him, I said, “Pop, why were you so much tougher on me than my younger brothers?” He said, “Son, you plum wore me out. Which I resemble that, but thankfully he stayed with it because he taught me work ethic. And he was tough. Well, and one of his favorite sayings, being Dutch, is, “You can tell the Dutch, but you can’t tell ’em much.” So he had a strong will, but he also had great integrity, great humility, treated people with dignity and respect, and he had a tremendous thirst for knowledge. And so I absorbed some of that, not probably to his standard, over, over time.
Ryssdal: Here you are almost 80 years old, right? First of November?
Ryssdal: You’re working in the company your father founded, or, or built. His picture’s over there, big portrait?
Koch: That’s right, absolutely.
Ryssdal: There’s a bust of him out in the hallway, right?
Koch: Yeah, absolutely, and there’s the letter from him I referred to around the corner.
Ryssdal: Tell us about that letter, because that says a lot about your dad, and, and about you.
Koch: Yeah, well that was, that was terrific. On his death, I opened his safety deposit box, and I found that. He wrote that letter in 1936 when he was 36 and I was one. There were just two of us alive then, because I have an older brother who’s two years older than I am. And he said in that, in that letter that he had, given us each an insurance policy to pay for our education, and we could either use that to develop and, and learn to make a contribution, or we could squander it. And if we squandered it, it’d ruin our lives, and we would never experience what he called, “The glorious feeling of accomplishment.”
Ryssdal: Still a factor in your life then, your dad?
Koch: Well yeah, because he taught me the basic values that, that guide our company, guide everything I do.
Ryssdal: He takes a company and builds it from essentially nothing to 21 million dollars, in-
Koch: Well he didn’t really found the company. It was founded —
Ryssdal: No, but he built it.
Koch: And he was smart. He said when they tried to hire him to be head of operations and build the plant, it was-
Ryssdal: This, this company called Wood River, right?
Koch: Wood River Oil-
Koch: … And refining, to build a very small refinery. It was competitive then, but by today’s standards it was very small, outside of St. Louis in Wood River, Illinois. And he said, “OK, I’ll do it, but I want to have a stock interest.”
Koch: “I want to be a partner.” So he bought 23 percent interest in the plant for $230,000 dollars.
Ryssdal: He takes Wood River, builds it from a real small company to $21 million dollars when you come back in 1961.
Ryssdal: Right? You then take over after his death, and you build it from $20 something million to $100 billion today, right? Do I have the numbers basically right?
Koch: Well I’m not going to say what the, that’s what the press says.
Ryssdal: Fair enough, but generally accepted figure, how about that?
Koch: Yeah, OK.
Ryssdal: Right? Who’s accomplishment was more impressive, yours or your dad’s?
Koch: I think they were different. I mean, and what’s fortunate is whatever our capabilities or our aptitudes were, they were appropriate for the time and task. My father was an inventor. He was a great engineer, a much better engineer than I ever was, and one of my younger brothers, David, is a much better engineer than I am. But I discovered at an early age that I had an aptitude for math, and logic, and philosophy. And a matter of fact, I was (laughs). I’ll never forget, these are things that you would think you would forget. In the third grade they were putting math problems, I was going-
Ryssdal: Mm-hm (affirmative)
Koch: … to public school here. They were putting math problems on the board, and I said to myself, “Why are they doing that? That’s obvious,” ’cause that’s just the way my mind worked. Now nothing else was obvious. Everything else I had to really work at, but math came naturally to me. And so that’s the way I’ve been ever since, and that’s why I went to MIT. And although I studied engineering there, got three engineering degrees, my main interest was in math, and science, the philosophy of science, the scientific method. And that’s what we’ve applied here and has been critical to our building the company over the years. So I would say we were both fortunate, and we had the particular aptitudes to build on whatever opportunity was there for us.
Ryssdal: You have this company today, it’s 100,000 employees, plus or minus?
Ryssdal: 60 different companies.
Ryssdal: And here you’re sitting in Wichita, Kansas. What do you do every day, running this company? Because it’s not like you can possibly know everything that’s going on.
Koch: No, absolutely. I try to build on our management philosophy. I try to understand what the threats and opportunities are for us. Uh, I try to make sure that we’re driving innovation and creative destruction hard enough so we’re not blindsided, and that our attitude is to, in starting any initiative, any business, is to focus on how we can create value for others, rather than how we maximize profit, because you can make money focusing on, “How do I maximize profit?” To make a quick buck, but over time, if you’re not creating value for others, customers, society, isn’t going to let you be around.
So that’s my focus on these, on the philosophy principles, and then I get involved in the deals, in the opportunities. Not like I used to. I used to get involved in-
Koch: … every detail, but it, were of a size and I’m of an age that I like to apply whatever my aptitude and passion is, which is on the things, the aspects that I mentioned.
Ryssdal: The book is called “Good Profit,” in which you talk about entrepreneurship that is principled. How do you do that in this economy today? Because as you know, it’s rough out there.
Koch: Well, I mean it’s not easy, because the economy is so riddled with corporate welfare and anti-competitive regulations, anti-innovation regulations. Regulations that are destroying opportunities for the disadvantaged, which is creating this two-tiered system we’re headed for which has which is destroying opportunities for the disadvantaged and creating welfare for the wealthy. So to the best we can, what we do is focus on creating value for others, and how do we do that? We do it by trying to produce products and services that our customers will value more than their alternatives, and not just their alternatives today, but what the alternatives will be in the future. We try to more efficiently use resources than our competitors, and constantly improve in that, and we try to do the best job we can in creating a safe environment, and environmental excellence, and constantly improve at that.
Ryssdal: I need to back you up to that whole corporate welfare, and the state of society today, ’cause that’s in essence what you’re talking about with people who are advantaged and disadvantaged. It’s not possible that you don’t see that Koch Industries has benefited from some of those policies that the government has in place today?
Koch: Oh, terrific. I mean you can’t help, I mean you’re hurt by some, and benefit others. I mean look at all the ways, all the forms of corporate welfare. I mean there are cash subsidies, there are loan guarantees, there are import tariffs, there are regulations on your competitors-
Ryssdal: Right, and my point is that Koch Industries benefits from all of those.
Koch: Well, I mean some cases we benefit, some we’re hurt, but we’re opposed to all of them whether we benefit or whether we’re hurt by them.
Ryssdal: Full stop?
Koch: All of ’em. We oppose all of ’em.
Ryssdal: Does government do any good in the economy?
Koch: Yeah, the government in my definition, is the agency that has the legal monopoly of force. And you say, “Well God, that’s bad.” No, we need force to protect the US from attack, to protect people’s person and property, and in certain other things when force works better than voluntary cooperation and competition. And so that to me is the test, but the government has gone way over in using force, and we see that in the criminal justice system where we have 5% of the world population and 25% of the world’s prison population. Now obviously we’re using a lot more force than other countries we look down on, and so that’s why we’re working at that. Then using force, using regulations to keep the disadvantaged from starting a small business or even getting a job.
And one of the biggest of that is occupational life insurance, where hundreds of occupations throughout the economy, depending on the state, and the locale, and the city there are these various hurdles that people have to jump to-
Ryssdal: You’re, you’re talking about florists, and hairdressers, and-
Koch: I’m talking, yeah!
Ryssdal: … bartenders, and all that?
Koch: There, there are hundreds of these.
Ryssdal: Fine, fair enough, and we can talk about that later if you want. Let me ask you though, whether you understand that people look at you and Koch Industries and say, “Well of course he wants government out of the way, because he’s ginormous, and he can steam roll us and do whatever he wants.”
Koch: Well if that’s so, why are we about the only large company that’s taking this position? Most companies want free enterprise in general because that produces better goods and services and makes people’s lives better, but they don’t want it in their business. They want protection from competition, they want subsidies, they want the government to pick winners and losers, and they want to be picked as winners, and that’s what we’re opposing, and that’s what drives my whole efforts in policy, and in the political arena.
Ryssdal: So before we move on, I want to make sure I understand. If all government support for oil and gas industries, which is what this company was built on, or all-
Koch: Well not totally, but in part.
Ryssdal: Well, in part, OK.
Koch: That’s how it started.
Ryssdal: That, exactly. So support for oil and gas industries, support for lumber, and timber, and paper products, which this company now owns with Georgia Pacific. If that all went away tomorrow, you’d be all right?
Koch: Absolutely. We oppose all of it. Because going back to what I said, our basic philosophy is to succeed long term. It’s to dedicate yourself to creating value for others, to helping other people improve their lives, and that isn’t altruistic. That’s the way we believe we all do better. Because for business to survive over a long period, it needs to be contributing to society and people’s well-being. Otherwise, who’s going to want it? Otherwise you end up like Enron or some of these other companies.
Ryssdal: I wonder whether your definition of society’s well-being isn’t necessarily everybody’s definition of society’s well-being. You’ve got your view here, from this-
Ryssdal: … from this very successful large company that you run.
Koch: But that’s not where my view came from, from the company. The way I run the company came from my study of across all relevant disciplines, from all different perspective, over year, on how people can best live and work together to make their lives better.
Ryssdal: You have a management philosophy you lay out in this book called “Market Based Management.”
Ryssdal: Which you credit almost entirely for the success of this company and the growth, right?
Koch: Well I wouldn’t say entirely, but it’s been a key part.
Ryssdal: Fair enough. I wonder, as you look at those principles that you lay out in this book where risk tolerance falls on your spectrum of things you consider. Because you started in a very risky business, oil and gas.
Koch: By the time I came, our main business was crude oil gathering-
Ryssdal: Mm-hm (affirmative)
Koch: … in southern Oklahoma. Besides renting this equipment company, my main objective was to build that up, and we built that from being in southern Oklahoma to being the largest crude oil gatherer in the US and Canada by applying many of these principles. But that’s, I mean that’s a key, that’s a great question. My philosophy, one of the biggest enemies of future success is past success, because you become complacent, you become risk averse, and that’s one of the things we try to drive here, and this is fundamental to this philosophy, and that’s in this component change, and also in value creation. That we need to drive creative destruction, not just incremental innovations, but innovations that will change the whole nature of the business. And we’re working on two now. One is, or a whole series of them in biotechnology, and another in making smart products and processes. Because we see these technologies coming to the point that they’re going to transform industries, and we want to be the ones leading the transformation rather than be pushed aside because of.
Ryssdal: Is it fair to say that you run this place a little bit like a startup? You talk a lot about creative destruction, and being aggressive, and innovating, and not being afraid of failure. A little startup mentality?
Koch: Well yeah, I mean, and fear of failure.
Koch: That if we’re complacent … That, that the only way to succeed over time is not only create more values for your customers and in society than others today, but in the future. So we have to innovate and improve faster than not only existing competitors, but new entries. People with new ways of doing things. So we’re leading in innovation.
Ryssdal: Is it true you still live in the same house you built in 1973?
Koch: Yeah, same house. It’s great. It’s much bigger than I want it, but-
Koch: … my wife-
Ryssdal: You lost that argument?
Koch: My wife took charge. Matter of fact, when we had dug the foundation and we were having terrible problems, the whole thing-
Ryssdal: This is ’73. Our oil embargo, right?
Koch: Yeah. Oil embargo, all the prices markets turned upside down, we had price controls, I mean it was, I thought we were going to go broke. And I remember sitting there with my legs hanging over into the hole in the ground, saying, “Honey, we got the money to fill this thing back up, but I don’t think we’ve got the money to finish it,” ’cause, I thought we had a good shot of going broke with the way things were going. But we got through it, but that’s, as Lenin said, “You learn through struggle.” And so-
Ryssdal: Hold on, wait, was that Charles Koch just quoting Lenin? Did that just happen?
Koch: Oh yeah, I quote all sorts of people.
Ryssdal: Wow. That’s pretty good. You talk a lot in this book about 12% growth every year, and doubling your profits.
Koch: Not every year, over time.
Ryssdal: Sorry. 12% growth, you’re right. 12% growth over time.
Koch: Because that is a trap. If we see companies that-
Koch: … “Boy, we want regular growth,” the only way they can do that is cook the books, because nobody’s going to be able to do that.
Ryssdal: Fair enough, let me rephrase the question. You talk a lot in this book about doubling profits in this company every six years.
Koch: Average over time, yeah.
Ryssdal: Growing, growing, growing. Why do you have to grow? Why do you have to get bigger?
Koch: Well, because you either go forward or you go backward, and that goes, the same philosophy as why we put so much weight not just on incremental innovation, but on creative destruction. Changing the whole nature of industries, bringing in new products that will radically c- I mean for example, we’re investing tremendously in a number of, as I said, in a number of different aspects of biotechnology, and one is to make chemicals through biotechnology rather than through chemical processes. And in these, you consume CO2 rather than produce CO2 as a byproduct, and we believe from the laboratory, and some of these chemicals we can make, at half the cost, in a much more environmentally friendly way. And then we have a number of others. I won’t bore you with all of them, but …
Ryssdal: I wonder what you think of the current startup culture in American business today, with Silicon Valley and things going on in the sort of grass roots of this economy. Do you see yourself in there a little bit?
Koch: Well, we try to be, absolutely. I think innovations that will make people lives better like with Uber, that is great, but-
Ryssdal: Have you ever taken an Uber?
Ryssdal: Oh. You ought to try it. It works, sometimes it works not so well sometimes.
Koch: Yeah, well yeah, no, nothing’s perfect, but it seems to work better than regular taxi cabs because it’s gaining, and all the taxi cab owners are trying to fight them and shut them down, so that’s-
Ryssdal: Is that your measure of success then? If the established order is fighting you, you’re doing something right?
Koch: Well we would hope not, but that’s when you bring in a new innovation that threatens their business, that’s what they try to do. They try to get government to shut you down, and that’s one of the thing that’s, I think’s crippling the country and corrupting the business community. For example, because of these kind of initiatives, the US has slipped to 46th in the world in ease of starting a business. It used to be one of the easiest, and it’s because of this, of these innovations threatening people.
And also, I think is also an indication of that, is the median income in this country has dropped over the last eight years, and I’m not blaming any party. Both parties are guilty of this. Like I say, what I believe is that both parties are taking us down the road to serfdom, creating this two-tiered system and heading us toward a financial crisis but the Democrats are doing it at 100 miles an hour, and the Republicans are only doing it 70 miles an hour.
Ryssdal: OK, so what’s the difference? Arbitrage that for me, that 30 miles an hour difference. What’s in there that makes it different?
Koch: Well I think the Republicans are not, they’re almost as big as, on corporate welfare, that would be very close. Each one, like a congressman has a plant in his or her district who’s going to be obsolete, so they try to get subsidies or protections to keep it going. And so they’re both pretty much that way, but on some issues, on free trade and some of these things, the Republicans are somewhat better.
Ryssdal: It’s worth a note here that you have written not all that long ago, you know, 20, 30 years ago, “If this is our only hope,” you said this of the GOP, “If this is our only hope, we’re doomed.”
Koch: That’s right, and that’s why-
Ryssdal: Still believe that?
Koch: Yeah. That’s why, although our seminar group contributes quite a bit political, I-
Ryssdal: So these are the seminars you’re on twice a year for-
Koch: Twice a year, but my-
Ryssdal: … for largely Republican donors.
Koch: But my personal money, almost all of it goes into research, and education, criminal justice reform, opposing poverty creating regulations, supplementing the public education system so disadvantaged kids can learn the skills and values required for success that I had the benefit, because my parents taught me those. And I didn’t want to learn ’em, but they made me learn them, and we want to give every kid that opportunity.
Ryssdal: We should be clear here, though, that your personal money is not the same as the money that the Koch brothers, and I’m saying this with air quotes, spend on politics in America today?
Koch: Yeah, and that’s, see, the overwhelming majority of that is what people who attend our seminars want to give to. They have I’d say our typical seminar participant has a lot more faith in politicians getting us, reversing the trajectory of this country toward this two-tiered system-
Ryssdal: Than, than you do?
Koch: … than we do.
Ryssdal: OK, so-
Koch: So I give some, and it’s still a lot of money, but as a percentage of what I give, it’s a very small percent.
Ryssdal: Fair enough, but why do you spend so much money in politics if you fundamentally don’t believe that the mechanism is working? Because I will tell you, and as you know, you are, to those who disagree with you in politics today, you are pretty much Darth Vader.
Koch: Oh yeah.
Koch: That’s why I get all the death threats.
Ryssdal: No I know you do, I know you do, and that’s a serious issue, but you have become the symbol of the political right in this country, the secretive political right.
Koch: Right, and we’re trying not to … I mean, and this is one reason I don’t like politics, is-
Ryssdal: That’s such a remarkable thing to hear you say.
Koch: … it’s so dishonest. I mean it’s spin. This is why Hayek wrote the essay, “Why the worst get to the top in-“
Ryssdal: Friedrich Hayek, very famous economist.
Koch: … “politics.” I beg your pardon?
Ryssdal: Friedrich Hayek, a very famous economist who you quote in this book.
Koch: Yeah, Nobel Laureate.
Koch: Who was also a good friend. He was wonderful person.
Ryssdal: And he said?
Koch: And he, well, in his book “Road To Serfdom,” he wrote one of his essays in there, one of the chapters was, “Why the worst get to the top in politics,” because it’s spin. If the politician tells people the truth, “Here’s what you gotta do, you gotta work hard, you gotta make a contribution to society, we can’t have everybody trying to get what they can from the government and put the burden on other people. We’ve got to have people thinking, ‘How do I contribute, and then want a share of what the value I’m creating for others?’ so it’s win-win, it’s a system of mutual benefit, and that’s what we’re pushing for, and that’s what Hayek, back in the 40’s when he wrote that book, had the insight about.
Ryssdal: So if you feel that way, and if you’re spending, the Koch brothers writ large are spending so much money on politics, reports are $900 million dollars in the 2016-
Koch: No, but see, that’s totally wrong.
Ryssdal: OK, what’s the number?
Koch: OK, here’s the, and this is the budget, and it’s a projection of what the donors want to-
Ryssdal: Mm-hm (affirmative)
Koch: … give to. ‘Cause we say, “OK, here are all the things that can be done that may or may not make a difference,” and our latest budget is going to be lower because people aren’t contributing-
Ryssdal: How much lower sir?
Koch: … as much. Probably the total budget over the two years I would guess would be 750, and the amount in politics is 250.
Ryssdal: In millions of dollars?
Koch: In millions of dollars.
Ryssdal: All right.
Koch: And as I said, very small portion of that 250 comes from the so-called Koch Brothers, and even less from me than from my brother because everybody can choose what they want to give to. So it isn’t the Koch brothers doing it. It’s other people doing it.
Ryssdal: You realize that comes across as sort of disingenuous, right?
Koch: In what way? It’s the truth.
Ryssdal: You organize seminars, you fund grass roots organizations.
Ryssdal: You have money in politics throughout the system, and for you to sit there and say, “I’m sorry, this isn’t really us,” doesn’t ring true and will not ring true when people hear this interview.
Koch: OK, but here’s the thing. If this wasn’t what people wanted, other people wanted to give to, the money wouldn’t come because we’re not putting it up. That’s, I mean you can say, yeah, we’ve improved the capability, because we say, “OK, if you want to donate to these, we need to help make it more effective and to try to pick better candidates who will do a somewhat, maybe not go 70 miles an hour, and then hope there’s a few who will agree and actually try to change the trajectory of the country.”
Ryssdal: So what, how do you figure out your return on investment for the money that you and those who think like you invest in politics in America today? Because as you know, the electoral cycle this past couple of cycles has not been really kind to Republicans.
Koch: Well that’s not true. In the off years it has.
Ryssdal: Well s-
Ryssdal: … sure, sure, but last time there was a race for the White House Karl Rove is the guy who stood up and said, “What are we doing? We’re wasting all this money.”
Koch: Yeah, noted.
Ryssdal: So how-
Koch: … a lot of it is waste, and I’ll give even-
Koch: … a stronger example to make your case-
Ryssdal: I appreciate that, thank you.
Koch: … that it’s a waste, and, and that is there, there’s a tax bill that comes up every year, it has 55 different subsidies called “extenders.”
Ryssdal: Must make you crazy.
Koch: And so we contributed to a bunch of the congress people’s campaigns, and so we wrote a letter to every congress person, “Please vote this down. This is a whole series of subsidies to things like making moves in an area, just one boondoggle after the other.”
Ryssdal: Mm-hm (affirmative)
Koch: “Please vote against this.” After all the Republicans, close to 250, only 46 voted against it. OK, so this is an experiment, so we’re going to be looking harder at which Republicans we support, or Democrats, I’m happy to support d- We work with the white house on criminal justice reform.
Ryssdal: I know you did, and the president gave you a shout out in a speech a number of-
Ryssdal: … months ago.
Koch: And we work with Van Jones.
Ryssdal: Mm-hm (affirmative)
Koch: As Frederick Douglass says, “I will work with anybody to do good, and no one to do harm.” Now the question is, some of the people we’ve supported question whether they’re doing more good than harm, and so we’re gonna do much more thorough analysis and learn from this. I talked about experimental discovery-
Ryssdal: Yes sir.
Koch: … creative destruction. We’re going to be applying that in this arena as well.
Ryssdal: Do you actually sit and figure out, “Well, we spent two million dollars on this issue, this issue, and it didn’t go anywhere for us, we’ll do something else,” I mean are you that involved? You personally?
Koch: Well no, I don’t do all that, just like I don’t do all that-
Ryssdal: Mm-hm (affirmative)
Koch: … in the company, but we apply that methodology.
Ryssdal: How come you guys are so secretive?
Koch: How am I secretive?
Koch: … I’m here talking to you.
Ryssdal: You are here talking to me, and I-
Koch: And I-
Ryssdal: … and I appreciate it, and I’ll tell you what, you are everywhere lately, right? CBS Sunday Morning. You guys are in Popular Mechanics for crying out loud.
Ryssdal: So clearly there’s, whoever’s doing your PR is doing a great job, but over the past decade plus or minus since 2003 and starting the seminars, you have made an art of not letting yourself be known in the public arena. How come?
Koch: Well see, I always believe what the mother whale told the baby whale. She said, “Son, the time you get harpooned is when you come up to spout off.”
Koch: So I follow that, and I’ve followed it too long, because for a long time people didn’t know who we are, and I’ve been working in this arena for over 50 years, and for the first 40 we didn’t get into politics, so we didn’t have this. Then in 2003, because of what the Bush administration was doing, we said, “Gosh, we’ve got to get involved in politics.”
Ryssdal: So let’s be clear, that’s George W. Bush, a Republican president, who’s doing things you didn’t like. Growing government, and all of that.
Koch: Increasing destructive regulations which led to the great recession.
Ryssdal: Mm-hm (affirmative)
Koch: Uh, getting us in wars that were counter-productive, and so on. So I mean, because in his campaign he said a lot of things we could agree with, but then the actual practice was so different, and that’s what we find with politician after politician.
Ryssdal: Can you trust any of ’em?
Koch: Well yeah, I think there’s a few percent.
Ryssdal: (laughs) A few? Some small number?
Koch: Few percent, so that’s what I say. We’ve got to narrow our focus and not be supporting so many, and anyways. So, I mean it’s like in business. We learn, we make mistakes, it isn’t going the way we want so we’re gonna change.
Ryssdal: What’s your biggest mistake, the biggest mistake you ever made?
Koch: Well the biggest mistakes would be the ones that are heart rendering. We have hundreds of factories making dangerous materials, dangerous operations, big equipment, and so we have people injured, and have deaths. And when we do, I mean it is soul searching here. Why did that happen? How do we get the word out? And so what we do, we make videos now of the people who work with that person and what happened, how they could have prevented it, and so others in the company say, “OK, this is a statistic. Our statistics are better than other companies.” No. We don’t want anybody to be injured or hurt, that’s our goal.
And then another thing, OSHA has these metrics that are injuries, lost time injuries, all that. That’s all nice and we want to work, but what the main thing is to prevent catastrophes. Present life changing injuries, or most of all, deaths. So we have those metrics on near misses, so we gotta get everybody, we’ve got to change the culture in the way people think. The way you do that is to get stories out that reach all the people doing the dangerous work, and all the supervisors on what’s important, and the number one thing is safety. Number two and three are protecting the environment and compliance as you see in our principles.
Ryssdal: Mm-hm (affirmative)
Koch: And that’s, this stuff, I mean a lot of companies have principles, but in many cases they’re just posters on the wall or put in the desk. These are who we are as a company. These guide everything we do.
Ryssdal: What’s the best part of your job?
Koch: Best part of my job is fulfillment. When I see that, that we’re creating value, that we’re helping improve people’s lives, and we benefit from it, so it’s a system of mutual benefit. Our philosophy’s working. That’s what turns me on. That’s what keeps me going.
Ryssdal: Why are you still in Wichita, Kansas? I mean you could’ve, long ago, pitched Koch Industries up and moved them anywhere. Why?
Koch: We’re very successful here.
Ryssdal: Fair point.
Koch: I mean this is a great place to be. There aren’t a lot of distractions. There’s not an ocean, there are not mountains.
Ryssdal: I guess that’s a positive, sure.
Koch: Here people work. There’s a great work ethic here, and we recruit from colleges where they have kids that grew up the way I did having to work all the time. It may not have been because of, had the father I did, but because they lived on a farm, and if you don’t milk the cows you don’t have any milk. If you don’t sow the seeds and bring in the crop, you have no income, so you have to work, and so there’s not this sense of entitlement. There’s a work ethic, and a realization that if you want to get somewhere, you’ve got to create value. You’ve got to do something productive.
Ryssdal: So you’ve got two smart kids applying for a job at Koch Industries, one’s got a bachelor’s in engineering from Wichita State, and the other one’s got an MBA from Wharton. Which one do you hire?
Koch: Well our –
Ryssdal: All other things being equal.
Koch: Yeah, our history would be we hire ’em from Wichita State, but there are a lot of good kids at Wharton too. We wouldn’t rule ’em out.
Koch: We want to see what their values are. We hire first on values. Not on credentials, not how talented they are, because the worst thing to do is get somebody who’s very talented with bad values. That is so destructive, as Enron found out.
Ryssdal: Wow. That’s from a long time ago, Enron. I guess you remember that.
Koch: (laughs) Yeah, do I ever. We did business with them.
Ryssdal: I’m sure you did. When you decide to work with people from across the isle as we talked about a couple of times, whether it’s United Negro College Fund, or groups that support Hillary Clinton, or the president, or criminal justice, how do you make that, and this is kind of a loaded word, calculation? ‘Cause that’s sort of what you’re doing, right?
Koch: Well there is no calculation. Well, there’s this calculation. It’s whether this follows Friedrich Douglas’ philosophy, “I will work with anyone to do good, and no one to do harm.” If we believe somebody sincerely trying to change the criminal justice system to not be so destructive, to disadvantage people’s lives, then we’ll work with ’em. Now if they’re not really sincere and we don’t believe that, and a lot of them worry that we weren’t sincere. Well we’ve been working at criminal justice reform for a long time. Matter of fact, I started in it in the 70’s.
We only work to a certain extent on education and research until it looks like we can help build a coalition to get something done. ‘Cause we’re not interested in tilting at windmills. We’re interested in actually changing things for the better. And the same thing would go for these Republicans that don’t do it. OK, if we can work with ’em on an issue, then we’ll support ’em, and these groups that agree with us on an issue like criminal justice reform, we’re delighted. That’s what we’re looking for – how to build coalitions, and we hope two of the next ones that we’re gearing up on is this occupational licensing and other poverty creating regulations, and then supplementing the educational system so that every kid has the opportunity to learn the values and skills required for success. Success by making a real contribution in society.
Ryssdal: If your preferred candidate wins whatever race you’re in, and you have a chance to carry the day, what does this economy look like once Charles Koch is done with it? For example, you’re going to get rid of corporate welfare, tax breaks, regulations, loop holes, all this. What about aid for the poor and disadvantaged? What are you going to do with that?
Koch: Well I mean, I think there will be a lot less poverty and a lot less disadvantaged, but-
Ryssdal: Because you would stop aid programs?
Koch: No. Well, I mean-
Ryssdal: Like welfare, and supplemental nutrition-
Koch: Well yeah.
Ryssdal: … and things like that.
Koch: But here, let’s go back through welfare. When LBJ started the war on poverty in 1965, his goal was to get rid of the dole as, these are his words, “I want to get rid of the dole and turn tax eaters into tax payers.” OK, that’s our goal, but now we’ve spent over 20 trillion since then on the war on poverty, and the poverty levels are the same, so this isn’t working. So we need to reform it so it doesn’t create these obstacles to the disadvantaged becoming productive, contributing citizens, and just sit there on the dole. And I don’t believe for a minute people want that.
They say, “Oh, well people are lazy.” Yeah, because you block all opportunities. They smoke a joint, and they go to prison, and they can’t get a job, they’re ruined. Whereas we have a president who smoked a joint, and he becomes president. We have a candidate who says he smoke a joint, he’s running for president. Now what’s the equity, what’s the fairness in that? We need to get rid of those distinctions and those differences in opportunity, and then we need to teach these kids the values and skills required for success.
Now, there will still be some who can’t make it. So there needs to be a safety net. Now the question is, what’s the balance between force, which our current welfare system is based on, and voluntary cooperation and competition? I would argue we have too much force just like we have in the criminal justice system, and it needs to be a balance, and we need to use local knowledge. That is are all these so-called benefits, are they helping people or hurting them? They’re probably helping some, and they’re hurting others because they have a disincentive to work. And as I learned that unless you start working, if you’re frozen out of work, you will never learn the habits, the discipline, the values of cooperation and improvement unless you get a job, and that’s what statistic show. It’s, unless you get a job and keep it, you will not get out of poverty. If you do, you have a very good chance of working out of poverty.
So that’s, we want the emphasis more on education and opportunity than, than dole, just like Lyndon Johnson wanted. Now, exactly how to do it? We don’t have all the answers, but we think directionally we know that what’s been done, in a large part isn’t working, but there still needs to be a safety net.
Ryssdal: This is one of those questions that I know before I ask it, you’re not going to answer, but who do you like for the White House in 2016?
Koch: I don’t know. I would like somebody who’s going to change the trajectory of the country, rather than take us down this same road we’re on at 70 miles an hour or 85 versus 100. I mean that’s some benefit, but we need somebody who will come in and really deal with these fundamental problems that are keeping the country back from the potential. We, with all the technologies out there now, we have the potential to have the best lives for everybody than anybody ever dreamed of.
Ryssdal: But wait. Warts and all, and there are many of them in this society and economy, we are by any measure you can think of the richest, most powerful society in the history of the planet. Is that not good enough for you?
Koch: Well no uh, we’re not. We’re not the, the richest anymore. I mean other places do. Other places are freer and so on.
Ryssdal: But sir, no, come on. That just doesn’t stand up to reason.
Koch: Well, it’s true. We don’t have the highest income, we don’t, we no longer, highest median income which as I said, has gone down.
Ryssdal: Uh-huh (affirmative)
Koch: Uh, we don’t have the, the most economic freedom, we were before the Bush administration. We were third, now we’ve dropped, depending on which measure, to 16th.
Ryssdal: In what? Economic freedom?
Koch: In economic freedom, and that correlates very well with prosperity. So, I mean you look at this, I mean, doesn’t that bother you? That the median income and the income of the, of the, the least advantaged is going down? That, you’re OK with that? I’m not. That’s what I want to change.
Ryssdal: There’s a different question to ask too, and that is this: median income in this country is $53,000 dollars a year, plus or minus. What do you think the person making $53,000 a year in this country feels like, economy wise? How do you think their economy feels to them?
Koch: Well if you believe the, the polls, and you see you see what polls about, is the country going to be better for my children than me? The majority say it’s not, which up until a few years ago, that wasn’t the, the case. You look at the candidates they want. They do not want, I mean they’re for Bernie Sanders, Donald Trump Carson and so on, people who are non-politicians. People want a change. They do not want the direction the country’s going, and neither do I for the very reasons I’ve been describing.
Ryssdal: Can you foresee a day when you will not be involved in policy and politics in this country?
Koch: Oh yeah, I’m an old guy.
Ryssdal: Yeah, but here you are still running a hundred billion dollar company, and working nine hours a day, and going to the employee cafeteria when you don’t have to.
Koch: Well I work more than nine hours a day. Come on, don’t-
Koch: … don’t get me short shrift here.
Ryssdal: All right, so-
Koch: Come on, what, do you think I’m a slacker?
Ryssdal: Well, so that’s the question.
Ryssdal: Here you are almost 80 years old, you don’t have to do this anymore.
Koch: No, of course not, but I do it because I feel a moral obligation to use whatever abilities I have to try to make things better, both in our company, and in society. You don’t have to agree with me, and it doesn’t matter to me, because what counts to me is that I’m doing the best I can by my own standards. I’m, I mean I feel a little bit like probably Martin Luther did when he was on trial, and he said-
Ryssdal: The original Martin Luther?
Koch: Yeah. “Here I stand, I can do no other.” I mean If I didn’t, if I weren’t doing the things I’m doing, and I see what’s going on, I would be so frustrated I would probably explode our have a heart attack. But since I’m doing everything I know how, and is it all good, does it all work? No, as you pointed out, there are a lot of problems with it. We’ve got a lot to learn, we’ve got a lot of improvements to make, and that’s what I’m working on. But I feel I’m doing everything I can the best I can, and that’s all I can do. So when I’m on my death bed, that’s what I want to be able to say. I did the best I could, I made a lot of mistakes I screwed up a lot, but I did the best I could, and that’s all I can ask of myself. That’s all anybody can ask of his or her self.
Ryssdal: The idea that you’re OK with people disagreeing with you, which hopefully we all are. Do you think it’s possible for us to have an honest discourse when you have the means to so heavily influence the debate?
Koch: I don’t see I’m … I would like to more heavily, because I would like-
Ryssdal: No, come on.
Koch: No, no, absolutely. You look at the Republican debate. Do you see the things I’ve been talking about in the debate? You see people saying these things that I’m saying? No.
Ryssdal: No sir, I don’t.
Koch: So how am I influencing the debate? I mean when we’ve talked to the politicians-
Ryssdal: So you’re wasting your money.
Koch: Yeah. Well we haven’t put any money into the-
Ryssdal: Oh well, fine.
Koch: So, I mean we’ve learned that we need to see who has some chance of trying to make a difference, rather than just going with the flow and going right down the stream over the cliff.
Ryssdal: We started with your dad, let me end with your dad. Let’s say he comes back to life and walks into Wichita 2015, and comes to the Koch tower here on the campus. What does he say to you?
Koch: He’d say, “Holy mackerel!” (laughs) No, but it’s, I mean I’m the same way. As I, as I’ve said when I first came with the company, being mathematical, I said, “OK, here’s, if I can implement my ideas here, here’s how much I think we can grow,” and I plotted that out ’til my retirement, and two years ago we exceeded my lifetime goal by 70 fold. So I can’t believe it. So it’s way beyond my expectation. As I like to say, it’s better to be lucky than smart, so I did the best I could, and it worked out beyond anything I believed possible.
Ryssdal: Without presupposing that you’re going anywhere any time soon, what happens when you’re not around anymore? You’ve got a couple of kids, you want them to come in and run it like you did for your dad. What do you want to have happen?
Koch: No, my daughter is a writer and a publisher and she’s great at that. As a matter of fact, she’s very talented. She painted-
Ryssdal: Oh I like that.
Koch: … this painting-
Ryssdal: That’s really nice.
Koch: … at age 16.
Koch: So she’s very talented, and I write books, but I mean, her writing ability is orders of magnitude better than mine. So that’s her passion, and that’s what I want everybody to do, and that’s the way we raised our kids. Don’t try to be me, be yourself. Understand what abilities you have to make a contribution and you have a passion for, and they’ll make you happy in your life. Be yourself. And my son is here, and he’s great. I’m very proud of both our kids. They both have integrity, humility, and treat other people with dignity and respect, and that’s the way we raised them, and they’re beyond my expectations just like what we’ve done here. So I’m blessed.
I want in this company is to have a meritocracy, and division of labor by comparative advantage. That is, as I raised the kids, that is, everybody focus on where they have an aptitude and what they have a passion for, it will give them fulfillment. And so, if my son ends up being the best person to run the company, that’s great. If he’s not, he shouldn’t be, and-
Ryssdal: Have, have you told him that?
Koch: Oh yeah.
Ryssdal: All right.
Koch: No, and every, matter of fact, every promotion, every bonus he gets, I say, “OK, prove to me he’s not getting that because his name is Koch.”
Ryssdal: Are you as tough on your kids as your dad was on you?
Koch: Not quite.
Koch: But pretty much. Now for example, my son was a very good tennis player. He was nationally ranked when he was 12, and then he lost passion for it, so he started sluffing. So I called him in, and when he was, I don’t know, 16, and I said, “Son, either you give 100% on this or you need to get a job,” and he was like that. He says, “Oh, I’m burned out on tennis, I want to get a job.” Now I think he thought, he didn’t tell me this, that he would get a nice job in Wichita and go out and party with his buddies.
Ryssdal: I was going to say, did you have him digging fence posts? What did you do?
Koch: No. So the next day, the manager of, we owned feed lots, and we don’t anymore. Feed lot in western Kansas, drove up in his pickup, picked him up, took him out there, and he worked 7 days a week, 13 hours a day shoveling manure, and popping boils on animals, and he came back feeling better about himself than he ever had because he got along with everybody, he worked right with them and-
Ryssdal: He didn’t say, “Dad, I want to play tennis?” (laughs)
Koch: No no, no no.
Ryssdal: Oh man.
Koch: And from then on he worked rather than played tennis.
Ryssdal: You run an enormous company. You have a large public profile, for as much as you’ve tried not to. Does that help you or hurt you in running this business?
Koch: Well I’ll put it this way. It certainly helped me in selling books.
Koch: I mean because my first book, Science Of Success, it wasn’t nearly as good a book, I think because I drew on a lot more knowledge than just my own in writing this book, which is Our Republic Of Science philosophy. I actually applied it here rather than tried to do it all myself, and so we had a hard time getting a publisher, we could only get one. Now on this one we had many publishers want it-
Koch: … not because of me, but because of all the attention. They knew it would sell much better. I think the same thing is true. I mean there are boycotts on us and stuff. We can tell any- I think for every person who boycotts this, there are probably two or three that want to buy our products because they know what we stand for. That we want to create value for our customers, and they can count on us, and the companies that we’ve dealt with over the years will confirm that. That’s, are we perfect, do we do everything right? No, but our intent is to, is to create, first create value for them, and then we expect to share in that value.
Ryssdal: You talk a lot about customers in this book, and how, and, and in all your philosophy really, and your, your, um-
Ryssdal: Right, yeah. It’s all about the customer. You have to meet the customer’s expectations.
Koch: Well, exceed them.
Ryssdal: Well, OK, you’ve got to exceed them fair enough. So you know who your customers are in business, right? Whether it’s oil and gas, or lumber products, or, you know oil tower products, whatever it is.
Koch: Or stained master carpet, or-
Ryssdal: Take your pick. All that stuff. Who are your customers in politics?
Koch: Uh, well it depends. I mean if you’re just talking about politics, it would be the American people. That is what do American people value and I think it’s two things, is people want a more fair, just society, and people want to have better lives for themselves and their family. So what we’re looking for, politicians who at least to some extent we believe will try to do that, and then communicate that to the American people. And that goes, but that goes beyond politics.
Ryssdal: Well I was going to say, so who are your customers in policy then, right? That’s the follow on question.
Koch: Oh, then in policy it would be the politicians-
Koch: … and the bureaucrats.
Ryssdal: Right, right.
Koch: Who are making that. Then they would be our customers there, and we have to try to convince them that this policy is destructive for the American people rather than beneficial.
Ryssdal: Um, what do you do to relax? You golf, right? What else?
Koch: Well I’m not golfing a whole lot these days.
Ryssdal: Not with a bum foot.
Koch: But I, yeah. I golf, I average probably one and a half days a week through the year golfing, and that’s good. And I work out every day, work out for at least an hour, hour and a half a day.
Ryssdal: Are you one of those up at the crack of dawn people?
Koch: No no no. Well, I mean I get up at 6:00-
Koch: … but I don’t get up at 4:30 or 5:00. I get up at 6, and I work out in the afternoons and evenings, and um-
Ryssdal: And then how do you unwind? Do you go home and, and have a beer, and watch some TV?
Koch: No, I work. I work, after I work out, then I work, and I read. I read and while I’m working out I watch TV.
Ryssdal: What do you watch?
Koch: I watch, well, I like mystery shows, detective shows. I watched Stossel, I watch, uh-
Ryssdal: Oh, John Stossel? Yeah.
Koch: … I watch “Morning Joe,” I watch on MSNBC-
Ryssdal: Mm-hm (affirmative)
Koch: … I watch, um “The Five” some, if I’m-
Ryssdal: On Fox News?
Koch: Yeah, I watch that. I of course watch Megyn Kelly. She did an interview, so I-
Koch: … I, she does a good job. I watch programs like “Homeland,” I enjoy that.
Ryssdal: Yep, it’s a good one.
Koch: Or “The Americans.”
Koch: I liked, I liked-
Ryssdal: Damn communists.
Koch: … stuff like that. Yeah, I like that.
Koch: No, I like those kind of shows. I’ve been a history buff, and a buff on revolutions for years, and so I’m fascinated – Like, I like the movie “The Reds.” Do you remember that?
Ryssdal: Oh yeah. No, not “The Reds,” just “Reds,” right? Was that about-
Koch: Oh, “Reds,” yeah.
Ryssdal: Yeah yeah.
Koch: “Reds,” I thought that was fascinating.
Ryssdal: With uh, Warren Beatty, right?
Koch: Yeah, but I had the, all these characters in it, the revolutionaries. I had read about all of ’em.
Koch: So it was fascinating to me to see they were portrayed versus what I’d read about.
Ryssdal: Charles Koch, thanks very much for your time.
Koch: Thank you, enjoyed it.
Correction: An earlier version of this story misspelled the names of Karl Rove, Megyn Kelly and Frederick Douglass. The text has been corrected.
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