Koch Industries "New Koch" Fortune Profile

                                                        Source: Fortune Magazine

Recently, Fortune did a pretty decent profile of Koch Industries (however they didn't directly talk to Charles or David Koch). The article appeared in the December 14, 2013 issues of Fortune (I linked to the article however there is a paywall).

The article really shreds the notion that Koch Industries is just an oil company. In the past 10 years Koch has invested more than $50 billion buying companies and reinvesting earnings back into the company (Koch typically reinvests 90% of their earnings back into the company-which has led to their significant growth in such a short period of time).  Currently, the company spends about $100 million per year to fund research for its development groups . Koch really is a diversified company in so many different industries it is really hard to put a label on it (I would argue Koch is more like Berkshire Hathaway than Chevron). The company recently invested $240 million into American Greetings (a card company).

The company just recently spent $7.2 billion on Molex Industries (which makes electronic components-even for iPhones). In addition to this Koch also invested $1.1 billion (Big River Steel) into a steel mill. Molex has about 35,000 people that will probably get integrated into the Koch culture. The company literally sells 100,000 different products. Steve Feilmeier chief financial officer of Koch Industries said in this article that Koch is "going to direct all of the earnings of this company back into the company so they can reinvest in new products" and adds that Koch Industries takes a long-term view on things.

According to the Fortune article Koch operates more like a large private equity fund. The company starts off small investing having a minority stake and then gradually increase their ownership and sometimes buyout companies or subsidies of other companies if they feel the entity will contribute to the long-term growth of Koch. Fortune spent months interviewing people and looking through company financials. Even Fortune commented that Koch was a "highly disciplined organization". You can't run a billion dollar company disorganized. The company does look at the long-term (since the company is private it doesn't have to satisfy shareholder's or analysts on Wall-Street). Even I was surprised to learn that Koch will not invest in something unless it doesn't already know something about that business. Many times companies just purchase other entities that they believe will have a high return yet find out later they know little about the business they bought and don't see the pitfalls until after the fact. Charles Koch himself said here that if he ran a public company he would probably be fired.  It is important to note that Koch 50 years ago only had revenue of $200 million in revenue which is now $115 billion in 2013. In the article it is mentioned that when presenting to Charles Koch you essentially better be prepared to get asked difficult questions. A vice president for Koch's internal venture capital fund was grilled by Koch in a meeting when making a proposal and Charles "is known to pierce weak arguments with a single question". 

Working at Koch Industries probably is no picnic. According to some Glassdoor reviews of employees who have worked at Koch often they say there is no work-life balance (meaning they work all the time) which isn't a bad thing if people are increasing their standard of living and making the world a better place. Working for Charles Koch is no picnic either. According to a former employee at Koch the review process is intense. Charles Koch has been known to ask tough questions, can see quickly if numbers are fudged, and if assumptions made in an analysis are incorrect. You really can't get wealth by letting people slipping nonsense through you. The pattern at Koch Industries in terms of analyzing a deal is they will only engage in deals where a business is in trouble. They are more likely to invest in a business if the business is in decline and Koch believes the company can be turned around and brought back. The company is very long term oriented and has a 10-20 year time horizon on deals which I would argue many companies would never consider. When Koch investigates a deal they will run all types of hypothetical analysis to see if their investment would make sense under different scenarios (economy gets worse, interest rates increase, etc). Koch for instance purchased assets from Farmland fertilizer company even though it wasn't really in that business but because the economics were good and they were able to buy assets for pennies on the dollar. 

The company continues to embrace Market Based Management (MBM) which seems to have worked out pretty well for them considering their enormous growth. The principles of MBM are even printed on Starbucks coffee cups inside the break room. It is good for a company to truly embrace their principles instead of just having it as window dressing.

The article gave the impression that David Koch is just a figurehead at Koch Industries, however, as I blogged about here David Koch while in his 70's still works from 9 A.M.-7 P.M. This article way back from 1980 explains how he would sometimes spend the weekend at the office studying pollution control designs. Charles Koch responded to the article with a letter that explained how his brother grew Koch Chemical Technology by leaps and bounds.

There is no question Koch Industries will often criticized for their politics, trying to pollute the world, or Koch fund something (Koch-funded means a dollar from anything related in any way, shape, or from Koch Industries, a subsidiary of Koch Industries, or an entity that may be loosely tied to Koch Industries (doesn't have to be direct received more than $1 in funding). Koch Industries is truly a modern industry that makes products that every day people use (paper towels, cups, carpet, even clean drinking water). By providing services and products that millions of people buy Charles and David Koch are doing a community service. 

Case Against Estate Tax

For years people have talked about trying to repeal the estate (death tax). By the time someone dies the money that is subject to estate taxed has been taxed multiple times. The money is first taxed when it is earned (federal, state, and sometimes even city tax). If that money is invested and if someone sells their investment they are taxed again (at a rate of either capital gains or ordinary income). Once they sell the investment if that same money is used to purchase something you have to pay sales tax. Then when the person dies they are taxed after already being taxed multiple times.  The estate tax started in 1916 and the exemption was $50,000 which would be around $1 million adjusted for inflation today. The exemption these days is over $5 million per person. Let's not forget if you give over $14,000 a year to someone you are not only required to let the government know (Form 709) but you also may have to pay tax on that. However, the estate tax by itself raised very little revenue. In fact the estate tax raises less than ½ of 1% of all revenue. The United States also has the third highest marginal estate tax rate in the world. People with lots of money can easily find ways to get around the estate tax by either giving it away, setting up certain types of trusts, or spending it. What is really interesting is people like Warren Buffett and Bill Gates who are both in favor of higher taxes are giving all their money away to charity (I guess they really trust how the government would spend their money).

You hear statistics like the estate tax only affects 2 in 1,000 estates. The problem can mislead someone into thinking only 2 in 1,000 estates have over $5 million. The major problem with this is that many people with over $5 million are figuring out ways to not have to pay estate taxes. People can set up various types of trusts, give the money to charity during their lifetime, or spend it which would not subject them to the estate tax. The rich didn't rich by being stupid as Dr. Walter E. Williams would say.

Basically if have any right or control over property it will end up in your estate. The estate tax makes zero economic sense because it inducing not to invest and accumulate wealth since it will be taxed. This is why so many wealthy people give assets and money to either family members, charity, or their children. Let's not forget the wealthy people who do set hire accountants, financial planners, and lawyers have an implicit tax of hiring t However,  if you give over a certain amount to family members then you have to pay gift taxes and if you give money away to someone too young you might have generation skipping taxes (see how the taxes start adding up quickly).

Other popular arguments you hear are that the estate tax is used to break up the concentration of power. This too is nonsense considering usually the kids of the people who worked hard to earn the money generally don’t have the same work ethic or values as the people who actually earned the money. Most often times the wealth lasts for three generations. In actuality not having an estate tax or gift tax would actually break up the concentration of wealth because if people could free give their money to whoever they wanted, money would move to many more and different people. 

David Koch Not A Republican: On Syria, Same Sex Marriage, Taxes, and Middle East

In a recent story David Kock talked to Yahoo News here and said that he didn't believe we should get involved with Syria. Many journalists tie to David Koch to the Republican party however staying out of harms way is not a Republican viewpoint. Koch goes on to say that the United States going into Syria would be like "putting your head in a hornet's nest".

What is interesting is David Koch is actually in favor of same sex marriage, (David Koch use to have three dates a day according to this article) withdrawing from the Middle East, and even said he may consider favoring tax increases here.

It is interesting that people claim David Koch is a Republican yet he has liberal social views and even stated he may consider raising taxes to help the deficit. David Koch truly remains interesting person (no matter what side of the political spectrum you are on).

Estate Planning Koch and Chase Koch (Son of Charles Koch): Past, Present, and Future

Update: I recently wrote a profile on Elizabeth Koch about her views on money, sex, and relationships which can be found here and the implications of Koch Industries stock in the future.

Fred Koch came back from an African Safari and was "furious" according to son Charles Koch about wanting to purchase two trucker companies according to this Wichita Eagle article. Fred Koch was trying save money for estate taxes and only told Charles to buy one trucking company. However, Charles Koch was in growth mode trying to grow Koch Industries bought both.

Fred Koch set up some very useful estate planning for his sons. He wanted his sons to inherit the stock at a low tax rate so they wouldn't have to force them to sell the company to pay estate taxes. Between 1966 and 1967 Fred Koch set up trusts for each of his sons according to this document. Fred Koch would pass away in 1967 as he was on a hunting trip. Fred did give son Fredrick a lesser share than the rest of the Koch brothers (it is believed Fredrick stole some petty cash). A large part of Koch Industries was owned by the four trusts created. The trusts had each Koch brother as co-trustee of their own trusts in addition to the First National Bank of Wichita. The income generated from the trusts would be paid to charity over a 20 year period and at the ended in 1986. David Koch said in this profile "So for 20 years, I had to give away all that income...and I sort of got into it". This got David Koch into the habit of donating to charity in general. Charles and Elizabeth Koch have also been charitable as well. Between the late 1980's and early 1990's they donated an average of $2 million each year just to Kansas area charities according to this 1994 Wichita Eagle article. Charles Koch has said that the only way the company would go public is if shares were literally offered over his dead body according to this article.

Charles and Liz Koch had two children. Elizabeth graduated from Princeton University with a degree in English literature in 1999 and then went to Syracuse for a Masters in Fine Arts (MFA) degree in 2011. She is now 37 and lives in New York and is in the publishing business. Chase Koch graduated from Texas A&M University in College Station, Texas. These days Chase is now 36 and started out in business development and also worked as a vice president of international business for Koch Fertilizer Company. These days he is vice president of Agronomics Services for Koch Industries.

Growing up every Sunday Chase and his sister Elizabeth would have to spend an hour learning about economics from their father Charles Koch. Chase was actually an outstanding tennis player in high school and was even profiled in Sports Illustrated under "Faces In The Crowd" which points out outstanding athletes in the country here. Chase Koch was actually probably one of the best tennis players in the country. Chase went to high school at Wichita Collegiate School in Kansas. Chase also had a great tennis coach as well. Coach Dave Hawkley of Wichita Collegiate School was also excellent helping win 92 state championships in tennis. Chase Koch shared his memories of his coach here. The Charles G. Koch Foundation greatly supported the Wichita Collegiate School between 1986-1997 giving more than $3.3 million.

Chase Koch as a teenager was put to work according to this article. When Chase was only 13 he was did manual labor at a cattle feedlot in western Kansas. Chase in fact lived on the couch with the feedlot manager and was working over 80 hours a week (7 days per week) at a young age. This is no different than Charles, David or Bill Koch who have all talked about doing at a young age. David in his Newsmax profile discussed how he worked on the ranch driving bulldozers, operating hay bailers, in addition to fixing farm equipment and digging ditches as I mentioned in this article.

On November 1, 2010 Chase Koch married Annie Breitenbach (here is her high school picture). Annie graduated from the University of Kansas and now works as an RN in Wichita, Kansas. In 2010, the newly weds purchased 70 acres of land and a house for $3 million in Wichita, Kansas according to this article. They now have a son named Charles Gerard Koch who was baptized in June 2012.

Chase Koch like his parents is also charitably inclined. In 2010, Women's Focus had this story discussing how Koch Industries was getting involved with the Kansas Food Bank (Chase helped out the food bank as a representative of Koch Fertilizer. Koch Industries gave the Kansas Food bank 230,000 pounds of food. I guess Koch Industries does actually want to make sure less fortunate people go hungry.

According to this December 2012 Forbes article Charles Koch claims he has been doing estate planning for "many many years". In addition to this, he says that Koch Industries now has more depth in their leadership than ever before. My bet would be that David Robertson would first take over the company if something ever were to happen to Charles Koch and then possibly Chase could take it over down the road. It should be noted that Charles Koch took over Koch Industries when he was only 31. A fun fact is Charles earned two masters degrees in engineering before he was 24 according to this article.

Charles Koch is a interesting, smart, and a controversial person. He has grown a company from $225 million in revenues to $115 billion. Many people like to bring up the fact that he inherited Koch Industries. However, what they don't realize is that Charles and David put in long hours and worked nearly every day of the week to grow it. There were only one of three outcomes: the company could have gone bankrupt, stayed the same, or grown. The future of Koch Industries should be interesting. Charles Koch said in this article that he wants to work on deals that "move the needle". Charles and David Koch are each worth around $34 billion. This could mean that in the next decade they could easily be worth over $100 billion each. The question will be in the future what will happen to Koch Industries in the future?

U.S. Post Office, Unions, and Realtor Interest Groups Give More To Politicians Than Koch Industries

What is quite amazing is when I hear that the Koch brothers and Koch brothers are influencing politics. The Koch brothers could spend $100 billion on political races however at the end of the day people will vote their own way. Votes can't be "bought".

When examining the actual data from 1989-2012 from opensecrets.org it seems as if Koch Industries is no where near the top in terms of political contributions. Anyone who watched MSNBC, read the New York Times, or listened to Ed Shultz on the radio would think otherwise. In fact Koch Industries only gave $17 million in a 23 year period. This Palm Beach Post article talks about how David Koch gives more to charity than to politics on a scale of 4-1.

I don't even hear Fox News covering the fact that unions are donating large amounts of money to politicians. Democrats and Republicans are in the same business they just have different friends.

U.S. Post Office $174 Billion Lost Since 1800

The United States Post Office (USPS) is one my favorite agencies to talk about. In an analysis I did I examined how much the USPS actually lost since 1800. I was able to get a hold of this USPS data which shows the annual expenses and revenues since 1800. When you add up the losses (not adjusted for inflation) they amount to $33 billion. I used the WestEgg inflation calculator and figured out a factor to use for every year to figure out what the yearly loss or gain would be in 2012 dollars. When you inflation adjust the cumulative amount since 1800 it comes out to be $174 billion. This figure is really understated because the U.S. Post Office doesn’t pay taxes if it buys trucks, tires, or other equipment.

In my analysis it was interesting to find that the number of post offices actually peaked in 1901 at (76,945). These days (2012) there are around 26,755 post offices. The peak year for the pieces of mail was greatest in 2006 with 213 billion pieces. What is interesting is that throughout the 1990’s the amount of mail increased even as the internet was coming around. However it wasn’t until 2002 until the number of mail pieces actually decreased. The pieces of mail will only continue to decline in the future as more people use e-mail, texting, and cell phones which are all forms of communications that are in competition with snail mail. 

If any rational person heard a government organization had lost $174 billion since being created what would they do? Most rational people would say can we improve it an economist or business person would say can we eliminate it. Meanwhile in the private sector FedEx in the past 3 years has earned over $4.6 billion in profits. UPS in this same time period has made over $9 billion.  Most rational people would ask if we really need the service. In the case of the post office it is a no brainer given we have companies like UPS, FedEx, DHL, and many more logistics companies. What is even more bizarre is that if mail was privatized it would actually increase government revenue since the added profits private companies would be making would be taxed. Also the 546,000 employees that currently work at the U.S. Post Office could apply for jobs in these private logistic companies. Private companies would hold these employees to a higher standard. For instance back in 2011 we all remember the U.S. post office employee who was caught defecating in a yard who then was placed on administrative leave (this employee would be fired immediately in the private sector).

Why not let the private sector take over an area the government can't seem to handle?

Charles Koch Institute $200,000 For Economic Freedom Ad and ThinkProgress Fails Econ 101

As you may know I am interested in covering Charles Koch and Koch Industries. I did a historical net worth of the Koch brothers from 1984-2013 here. If you would like to read all my Koch entries go here. So in this recent Wichita Eagle interview (as of right now in writing this post the Koch interview is number one on the most read stories for the Wichita Eagle). Charles Koch talks about how he wants to spread the ideas of freedom and liberty to everyone (even the poor people).  The Charles Koch Foundation will spend $200,000 on media ads to promote education on economic freedom. If there is ever a time in history to explain to people free markets and economic freedom now is the time. Koch says that “we want to do a better job of raising up the disadvantaged and the poorest in our country, rather than saying ‘Oh, we’re just fine now”. Charles Koch also talks about how licensing laws hurt poor people because often times they have limited access to capital. Koch points to driving a taxicab (which requires expensive medallions which can be tens of thousands of dollars if not hundreds of thousands). In addition to regulations that keep people out of certain industries the minimum wage also prevents people at the bottom from getting job since the minimum wage requires business owners to pay labor higher prices. The minimum wage prevents people from getting their first job which hinders not only getting a future job but doesn’t teach young people the skills they need for the “real world”.

The YouTube ad video explains that Americans earning just $34,000 are in the top 1% of income worldwide. If you do any historical analysis on this amount it put Americans making this amount in the top .1% from not only a worldwide perspective but a historical perspective as well. What would John D. Rockefeller pad for an iPhone? This ThinkProgress article points out that Charles Koch is already in the 1% and many Americans are not. ThinkProgress confuses  income and net worth. The article mentions the $34,000 which represents income (yearly) and then goes on to say that “Meanwhile, Charles and Davis Koch are the ones comfortable in the 1% with a net worth of about 1 million times that figure”. Net worth and annual income are two completely different numbers. My income could be $10,000 and my net worth can be $1 million. Net worth represents years of saved income and invested income while income represents what a person earns in one year. 

ThinkProgress then goes on to argue that Charles Koch is wrong in wanting to get rid of the minimum wage since apparently raising the minimum wage to $9 per hour would add $48 billion in economic growth. Studies like these never take into account incentives. Yes, if I took everyone making minimum wage and used a "multipler" it by a higher wage and then factored in a Keynesian multiplier I would arrive at $48 billion, however in the real world firms and small businesses would simply fire workers, reduce hours worked by hourly employees, and or find ways around the minimum wage (which isn’t taken into account). Why stop at $9 per hour. $20, $30, or even $50/hour sound pretty good yet I don’t hear anyone arguing for that as the minimum wage. The problem is people are paid for their value not what we think someone ought to be paid. Productive people are paid more. If someone can only produce $5 of value per hour why do we mandate a business should be forced to pay them $7 per hour. Why don’t we force producers of milk to sell their products at $2/gallon? 

Berkshire Hathaway and U.S. Government Pollute More Than Koch Industries

One thing that constantly bothers me is when people claim how much Koch Industries pollutes. People forget Koch Industries is one of the largest energy companies in the world. One study that people on the left always love pointing to is a University of Massachusetts Index called Greenhouse Polluters 100 Index. What is fascinating is that U.S. government is #4 on the list and Warren Buffett's Berkshire Hathaway is #5.  If you add the percentage from both the U.S. government and Berkshire Hathaway is it over 2.2% of all greenhouse gas emissions. Koch Industries comes in at #27 and only has 0.36%. Now if people were complaining on principle wouldn't liberals be just as made about the pollution generated by the U.S. government and Berkshire Hathway as they are about Koch Industries? Berkshire Hathaway is mainly in the insurance business (they also own Dairy Queen and Star Furniture) and still generate more pollution than the "oil conglomerate" Koch Industries.

Actually Koch Industries has been reducing their pollution over time. This is from the May 2013 Koch Industries Discovery magazine.

"Since 1997, Flint Hills Resources’ refineries have reduced average per-barrel criteria air emissions by 76 percent. In 2004, FHR earned a Clean Air Award from the U.S. Environmental Protection Agency for reduced flaring and emissions.  In 2000, FHR refineries averaged almost  two hours of flaring per day. In 2012,  flaring at Pine Bend Refinery totaled just six-and-a-half hours for the entire year. As for other Koch companies, at Georgia-Pacific, sulfur dioxide emissions have been reduced by almost half since 2000. Total suspended solids in wastewater have been cut by 38 percent since 2005."

Even if you don't believe this is true Koch Industries since January 2009 has won close to 750 awards for safety and environmental excellence. What is even more amazing is that Koch Industries Pipeline earlier this year announced they went 8 million working hours (11 years) incident free.

Charles Koch: Playing Scrabble, Pilates, and Wall-Street Deals

Source: Koch Industries

In a recent Wall-Street Journal article Charles Koch and Koch Industries talked about how the company these days don’t mind minority stakes in companies instead of purchasing whole companies (the last large merger for Koch was when they purchased Georgia Pacific in 2005. The company bought preferred stock in American Greetings Corporation in order to help the company go private. Koch Industries probably saw a good return (the media would interpret this story as “Koch Industries Controls How People Say I Love You”). Koch also paid $1.5 billion for just a 44% stake in Guardian Industries (glass maker).  In another WSJ article Mr. Hagerty discusses just how Koch got into the glass business. Koch actually was examining Guardian Industries for 7-8 years. Koch Industries actually looks at roughly 100 deals at any given time. Guardian didn’t want to go public after their owner died and Koch was interested in the company so Koch installed one of their executives to become CEO.  Guardian creates energy efficient glass (energy conservation sounds green to me) and supplies the glass screens that are used in cell phones.

In another article written by James Hagerty of the Wall-Street Journal Koch Industries says they don’t attempt hostile takeovers of companies. Koch Industries does get a lot of calls from people who need capital who don’t know anyone on Wall-Street. Koch Industries doesn’t get into businesses just because the margins are good. This might be due to their view about creating long term value for customers. Koch Industries actually exited the gas station business years ago when they learned running a convenience store really wasn't that convenient.  Charles Koch points out that being private is better because this way the company doesn’t have to always try to explain their actions to outside investors. There is some truth to this as public companies are frequently covered by analysts who can make a stock move a large amount on just a small bit of information. As Charles Koch said in this interview back in 2007 if a company “misses quarterly earnings projections by a penny, and their stock goes down 10 percent”.  In fact Charles Koch admits in this interview that if Koch Industries had been a public company he would have been fired long ago.

In this WSJ article (again by Hagerty) Charles Koch talks about the possibility of playing scrabble. What is interesting is that Charles Koch at the age of 77 still goes to work and keeps himself productive. According to Koch he wants to work every day and exercise his mind. He gets up early at 6:30 A.M. and is working by 7:30 A.M. (he no longer drives himself to work). Koch does do a lot of reading and in this article back from 1994 he was reading 3 hours a day. Koch also spends time working out on the elliptical, lifting weights, and even does Pilates. What I found interesting was Koch use to run 30 miles a week (about 4 miles a day). He says he was pushing himself too hard and his knees gave out (he actually had both of his knees replace according to this profile done by The Wichita Eagle last year). The interesting part of the interview is when Koch asks what he should be doing with his time. The interviewer suggests that Koch play scrabble and Koch responds by saying “That’d be something!”. I personally would suggest Mr. Koch write an autobiography in order to explain how he became successful and so historians don’t write their own history about Charles Koch and Koch Industries. 

Bonus: Notice Charles Koch on his bookshelf have books from Dr. Walter E. Williams and Thomas Sowell

John Stossel: Is America Number One? (Video) and Transcript

Here is video from a special John Stossel did in the late 1990's. This program could air today and would still be relevant. The transcript for the show is here.

1913-2013 Pages In Federal Tax Reporter

Here is a graph of how the federal tax reporter has just exploded over the past 100 years. CCH (a tax research firms publishes how many pages are in the federal tax reporter. In 1913 there were only 400 pages in the federal tax reporter and now there are now close to 74,000 pages. What is interesting is that some people claim during the era of George Bush we had deregulation however the data doesn't support that has we had quite a large increase in the number of pages of regulation. I wonder what the cost of all the pages are?

20 Things You Didn't Know About The Koch Brothers or Koch Industries

1. Koch Industries has grown from $225 million to $115 billion (2013)
2. Charles Koch does yoga (he works an hour and half every day)
3. David Koch still works 10 hour days (despite being 73 years old)
4. David Koch in his playboy days was dating multiple women at a time and had three dates per day
4. All four Koch brothers have had prostate cancer
5. David Koch once owned a Ferrari
6. Bill Koch checked himself into rehab (1994 Vanity Fair article)
7. David Koch use to have a New Years's Eve party that Newsweek said was one of the best parties to crash
8. Charles Koch often reads books on tape when traveling to work
9. Bill Koch was married while also having misstresses
10. There are actually four Koch Brothers
11. The Koch brothers have a total of 7 degrees from M.I.T (Bill 3 including a PhD in chemical engineering, David 2, Charles 2)
12. David Koch has given $435 million away to the arts, sciences, and theater
13. 30% of Koch Industry workers are unionized
14. Even when Charles Koch was worth $1 billion he didn't have servants at his home 
15. Charles Koch gets haircuts from his wife
16. Charles Koch didn't get married until he was 37
17. The Koch brothers as part of their trusts were required to give away a large part to charity for 20 years
18. J. Howard Marshall II (married Anna Nicole Smith) was a shareholder of Koch Industries
19. Charles Koch still wakes up at 6:30 A.M.
20. Once Charles Koch had a meeting in 1968 that started at 4 P.M. on a Sunday afternoon and didn't end until midnight

Decline of America Through Debt: $109 Trillion Unfunded Liabilities and Debt (Medicare, Social Security, Medicaid, Etc)

In thinking about the economic condition of the United States I sometimes worry that maybe our best days are behind us as a nation. History has shown that empires can last hundreds of years before they collapse. When examining the data of the unfunded liabilities of the United States it is hard to see how the United States will continue to have a high standard of living.

In August 5^th, 2011 the United States lost its AAA credit rating. A credit rating measures how likely a country or company is able to pay back their debts. Although, the current credit rating is AA+ it is clear unless the government gets it act together we will be heading down the wrong path.

Currently the national debt for the United States is over $16 trillion dollars. This doesn't include the annual deficits we have been having which in 2012 was $1.1 trillion (I like how people are excited if the deficit is less than predicted even though it is a trillion dollars). The deficit was $1.3 trillion in 2011. The United States also currently has a very low interest rate on the debt at around 3%. However if interest rates increase to a more normal rate of 6%-7% than the interest payments required would increase from about $432 billion to $864 billion. However, our GDP (or how much we produce) is only $15 trillion. One might look at this and say “Gee we could pay back the debt in one year if we really wanted to”. However there are some problems with this. According to the 2012 U.S. federal budget the United States spent $3 trillion in just one year. What isn’t included in this estimation are unfunded liabilities for government programs.

The 2013 Social Security Trustees report shows that by 2033 Social Security won’t be able to pay out full benefits and will only be able to pay out 77% of benefits. Social Security has an unfunded liability of about $9.6 trillion. Medicare has an unfunded liability of about $39 trillion. Medicaid has an unfunded liability of $20 trillion.  Let’s not forget the newly created Obamacare which will is estimated to create a $17 trillion unfunded liability.

This is all at the federal level we haven’t even gotten down to the state level, city, or county level. Joshua Rauh in this EconTalk podcast estimates the unfunded liability from state pensions is $4 trillion. Actually believe it or not New York city has the highest unfunded liability with $122 billion. Then you have cities like Chicago have an unfunded liability of $42 billion. 

So let's add it all up: 

Current U.S. debt: $16 trillion

States unfunded liability $4 trillion

Medicare unfunded liabilities: $39 trillion

Medicaid unfunded liabilities: $20 trillion

Obamacare unfunded liabilities: $17 trillion

Social Security unfunded liabilities: $9.6 trillion

Student loan debt: $1.1 trillion

Increase in interest rates: $864 billion

2013 projected deficit: $642 billion (will see if this comes true)

$109 trillion (or roughly 7 times our current GDP)

As Dr. Walter E. Williams points out the government spends $3.7 trillion per year. Now if you wanted to "soak the rich" and make them pay for the spending you could tax everyone making over $250,000 at a 100% tax rate and you could only run the government for 190 days. Taking the profits of all the Fortune 500 companies would run the government another 40 days and confiscating the wealth of the billionaires in the United States will allow the government run into the fall season. Clearly, we have a spending problem and not a revenue problem.  

John Goodman on Priceless Healthcare: The Problems With Healthcare

A while ago I finish John Goodman’s great book Priceless:Curing The Health Care Crisis. If you learn one thing about this book it is how to make healthcare more free market oriented. People forget the free market does not exist in healthcare like it does in technology, the grocery store, and other markets. People also forget that doctors and hospitals work for insurance companies. Goodman made some excellent points in the book. I wanted to share not only what I learned but my comments as well. 

Part of the problem with health insurance is that very few people are paying for their own healthcare. In fact, 90% of the costs is paid by someone else (government, insurance, company). It is interesting how doctors nor most health professionals can't tell you the price of tests, drugs, or other services. In fact Medicare has 7,500 different billing codes. According to Goodman there are actually Medicare 6 billion prices at any given time. Medicare by the way will go broke as the unfunded liability is around  There is actually something called the International Classification of Diseases which is now on its 10th edition (starting in 2014) and will feature over 68,000 codes. Some of the codes are bizarre including people who get sucked into a jet engine and contact with dolphins. The codes seem to dumb down critical thinking and decision making. The way I understand these codes is doctors have to explain to the insurance company why a patient saw them. The "code" is suppose to explain what the purpose of the visit was and then is used to determine how much doctors get reimbursed. There is plenty of fraud and abuse in these codes. There will be bill padding, up charging, kickbacks, along with other shenanigans.

How confused would people be if we had food insurance and went to McDonald's and had no idea what a burger actually cost? We should make healthcare single payer in terms of having the individual pay of course. I will talk later about how we can actually do this using a free market system.

Health insurance is a very bizarre market. Employers offer what is known as group health insurance. Due to HIPPA rules in group insurance everyone has to be offered insurance (regardless of their health condition, age, or sex). Health insurance is tied to unemployment which is strange. Part of the reason why so many people are uninsured is their health insurance isn't portable. Could you imagine how many uninsured drivers we would have if your car insurance was tied to employment? Actually if you think about it you actually need car insurance to utilize your health insurance. Despite what some people say the insurance market is highly regulated by each individual state and if an insurance company wants to raise rates they first must get approval from the state to do so. The average profit margin of the insurance companies like Aenta, WellPoint, and Humana is only 3.5%. Compare this to the rich profit margins of broadcasting which has a profit margin of roughly 69% or software companies with an average profit margin of 18%.  They are also told how much they can spend on "administrative costs" which is known as a medical loss ratio which requires 85% of their premium income on medical care and less than 20% on administrative costs. However, no one can seem to define what administrative costs precisely are. Could you imagine if bureaucrats were able to tell Wendy's how much they could spend on food?

Speaking of insurance President Barack Obama promised people that if they liked there plan they could keep it. However, employers may just drop employees as employers can always just just pay the $2,000 fine/employee if the employee amount is greater than 50 employees. The Congressional Budget Office predicts that 9 million will actually lose their healthcare insurance. In terms of cost Avik Roy at Forbes does an excellent job of summarizing the costs of both California (64% to over 160% increase) and the Ohio Department of Insurance which recently said they were going to be increasing premiums 88%. People fail to realize that since insurers will be forced to insure people with above-average risks they will recoup that money by charging healthy people higher premiums.

The average wait time for the emergency room (ER) has been increasing in recent years. In 2009 (the last year for which data is available) the mean wait time was 58 minutes (which is a 25% increase from 2003). Some patients wait and die in the ER. In 2008, this happened to Michael Herrara of Dallas, Texas who waited 19 hours at Parkland Hospital Retail and died waiting for care. Compare this to retail clinics (for-profit) which are often open around the clock, post prices online, and often have little to no wait time. This may explain why retail clinics have had a four fold increase with an estimated 6 million people using a retail clinic in 2009. What is even more surprising is that 91% of patients are satisfied with retail clinics. The only free market hospital in the country is the Oklahoma City Surgery Center which posts prices and one of the only free market doctors (Dr. Michael Ciampi) posts prices online, Even the Cancer Treatment for America posts success rates online.

When looking to other countries it seems the United States actually does have a decent quality healthcare system despite what critics like Michael Moore say. The problem with world rankings is that they take into account things that have nothing to do with healthcare. For instance the fact that Americans kill each other more, have more fatal car crashes, and other events distract from the quality of medical care. Another example is when the United States calculates things like infant mortality we count all births instead of other countries which use more liberal measures and only count the infant dead depending on various factors which would artificially make their infant mortality statistics look better.

Canada which touts its "free" healthcare isn't so free. Canada also outlaws private insurance. Of course Canadians are paying for healthcare in the form of longer wait times. The wait times in Canada are horrendous. 10% of patients wait more than 8 hours in the emergency room. 25% of Canadians wait more than 4 months to see a specialist. No wonder why close to 30% of Canadians find the length of wait time for a specialist unacceptable. Canada is also behind on medical technology as well. According to Goodman, the United States has 1,000 PET (positron emission tomography) units while Canada has only 24 units. This technology is used to diagnose cancer. What is astounding is that even the people uninsured in the United States get more access to medical treatment than other countries. In the United States even the uninsured get more preventive care in Canada (prostate exam, mammogram, etc). Also doctors in the United States typically spend more time with patients than nearly any other country.

British National Health Service found after 30 years access to healthcare was better than when the program started. Speaking of Britain in a survey that came out a few months ago 40% of people who work for the National Health Service wouldn't even recommend it to their family or friends!

The United States is also facing an increasing in shortage the number of drugs available. Data from the University of Utah shows there was a shortage of 74 drugs in 2005 and by 2010 increased to was 211 drugs. Some of these drugs are used to treat serious and life-threatening conditions. There are a few reasons why these drugs are in such short supply.  A program known as the 340B program requires drug companies to give 23% rebates on brand named drugs and a 13% rebate for generic drugs to providers that treat a large number of people without means, clinics treating Medicaid patients, and hospitals and clinics in the Public Health Service, etc. Another reason why there is a shortage is because the FDA after 2010 began heavily regulating drug manufacturing plants. As can be seen on page 11 of this House Oversight Committee report the number of FDA warning letters to manufacturers increased 155% from 2010-2011 and 250% from 2009-2011.

Speaking of costs what I learned in reading Goodman's book was that even "preventive care does not actually lower costs. This study done in Health Affairs showed that preventive care actually increases costs. The study showed 20% of preventive options actually lowered costs while 80% of preventive options actually increased costs. Something else I learned was the price of lab tests are 50-80% lower in hospitals compared and also available within one day. Wal-Mart has multiple drugs that can be purchased for only $4 for a one month supply (Wal-Mart has saved people $3 billion on prescription drugs as of March 2013)

What will even make things worse is a bureaucratic led Preventive Services Task Force which will decide who should or shouldn't get a mammogram, prostate exam, or colonoscopy. I am not a doctor but I do know everyone is different in terms of how they respond to drugs, treatments, and the side effects they receive. A cookie cutter top down approach is a pretty ignorant way to run healthcare.

As someone who is interested in technology even I thought electronic medical records (EMRs) would have done a world of good. These records started around in 2004. Recently one of my doctors learned the EMR system for one hospital but now is no longer seeing patients at a different hospital because he doesn't want to learn their EMR system. He told me he spent 12 hours just learning the EMR system for one hospital. President Obama years ago wanted to "invest" take $50 billion of taxpayer money over 5 years to look into EMRs and the results haven't been too great. This Washington Post editorial finds that after the Children's Hospital of Philadelphia added electronic prescriptions resulted in a threefold increase. The EMRs also add about half an hour more because part of the program is the person using them having to keep okaying hundreds of messages the EMR system might have. Even the New York Times published this article that showed that EMRs did not help doctors help increase productivity or quality benefits. 

Medicare and Medicaid are two more future train wrecks waiting to happen. The Medicare unfunded liability $89 trillion. Not to mention Medicare fraud is about $60 billion a year. Between both Medicare (for people over 65) and Medicaid (people with few resources) the waste is about $100 billion per year. Medicare is expected to go broke between 2016-2024. A survey from the American Medical Association (AMA) shows that about 20% of doctors are already reducing the number of Medicare patients they see. According to Goodman about a 1/3 of doctors don't take Medicaid patients. What is tragic is that children on Medicaid wait 22 days longer than children on private insurance. According to Goodman an experiment in Florida showed that when Medicaid enrollees could choose between private managed care plans the cost was lower and patient satisfaction was much higher than traditional Medicaid.People like to say how efficient and cost saving Medicare is. However, the facts tell a different story. Robert Brook at the Heritage Institute shows that actually private insurance spends less on administrative costs than Medicare (which is quite amazing given how much private insurance companies can spend is heavily regulated). 

Charles Koch Wall-Street Journal Interview on Koch Industries Purchasing Newspapers

It seems as if Charles Koch has confirmed that he is looking into purchasing a newspaper company.  In a Wall-Street Journal article released today. As I mentioned in this post I don’t believe Koch Industries is going to purchase newspaper companies to “control media”. Koch Industries will most likely buy the newspaper companies for what the companies are worth and try to make them profitable over the long term. Koch in a statement said that “there is a need for focus on real news, not news with an agenda or news that is really editorializing”. Koch Industries hired an adviser to look at possible media investments.  Charles Koch stated Koch Industries will not be paying a high price either. According to Koch “[Koch Industries] wouldn’t be interested in putting huge amounts of money in [newspapers] on the bet [Koch] can have a miraculous turnaround”. Koch admits there is a lot to learn about the media business.  Of course Koch Industries will only take on things that make economic sense.

It is interesting that there is so much opposition to having a company purchase a newspaper company.  Apparently, according to this story 50% of Los Angeles Times journalists will quit if the Koch brothers purchased the newspaper. Interesting if these people quit their job where else will they work? The print industry is a dying industry. Technology has reduced the price of data, information, and journalism. Even bloggers like me have been providing news to people (for almost nothing).  Some 500,000 people have signed a petition and protests have occurred in 12 cities to “Save Our News” from the Koch brothers.  I love how the protesters usually have never worked for the private sector and if they did it was “an awful experience”.

I personally don’t believe Charles or David Koch are trying to influence the editorial views of any newspaper they may purchase. If anything Koch Industries is trying to make an investment and assets at a low cost and trying to create value by putting those assets to a higher valued use.

David Koch, Jane Mayer, “A Word From Our Sponsor”, and PBS

This past week Jane Mayer released this article about David Koch. The article tries to portray David Koch has somehow having vast influence and power over the board of WNET. I read some article saying that Ms. Mayer was some type of authority on the Koch brothers. I took somewhat offensive to this as I have written 57 blog posts on the Koch family. To date I am probably the only blogger I have seen that actually has positive things to say about the Koch brothers.  Included in this was a historical net worth of the Koch brothers (1984-present) here, a three part series on the family (part 1, part 2, part 3), and a profile on wild brother Bill Koch here.

Koch in 2000 did have oil spills which lead to a $30 million fine according to this court document. Of course Koch Industries didn’t want to the oil spills as the loss of revenue from the oil spill along with the loss in value of the company (lower future sales because of the spill) would easily exceed $30 million.

Ms. Mayer makes some errors in her article. She refers to Koch Industries as a “huge energy-and-chemical conglomerate”. This is simply not true as Koch Industries as diversified even more over the years according to this article from the Wichita Eagle. Also she claims that the Koch brothers are trying to move the country to the right when David Koch has personally said he is in favor of legalize same sex marriage and I would suspect is more liberal on social issues than people believe (he did run on the Libertarian ticket). Another odd sentence Ms. Mayer states “When Koch joined the boards of WGBH and WNET, it seemed to mark an ideological inroad, enabling him to exert influence over a network with prominent news operation”. What concrete evidence does Mayer have that Koch was able to exert all this influence? According to a source Koch might have donated a seven figure to WNET (of course this is pure speculation). For sake of argument let’s say that Koch was going to make such a donation to WNET. Why would anyone with common sense donate to an organization that was about to release a film that basically denounces the donor?

When I first watched Park Avenue last year I was considering throwing the remote at the television. In the “Park Avenue” film it is stated that Mr. David Koch would leave his Park Avenue residence every weekend loading up his trucks and would never tip. However, for Christmas he would give a $50 check. I find this a little hard to believe because as clearly stated in the NewsMax article David Koch tips 15% which I covered here. This is of course after David Koch has given roughly $600 million to charities (arts, theatre, and medical research) as I mentioned here. The article also laments how public funding for PBS has decreased over the years. It is amazing that PBS is still publicly funded when people like David Koch and James Tisch give eight figure sum donations. I would be willing to bet the rent money PBS would not go out of business if the federal government stopped funding it. People realizing that the organization was not publicly funded would voluntarily contribute to help and support the organization. PBS is also not known to be fair or balanced. Richard Epstein had to school PBS reporter Paul Solman on why income inequality isn’t such as bad thing.

The article then tries to falsely convince readers that David Koch somehow had enormous power over the board of WNET when he was just one of 35 members. The article then goes on to talk about Citizen Koch and how producers of the film Tia Lessin and Carl Deal tried to pitch the idea to Independent Television Service (ITVS) (which is actually a group of independent filmmakers) said that the title of Citizen Koch would be a problem. Also ITVS stated that the documentary was not balanced and suggested certain changes be made. ITVS was funding Citizen Koch. At the end of the day ITVS (which to my knowledge David Koch is not associated with nor funds) did not fund Citizen Koch because the filmmakers Lessin and Deal didn’t want to conform to the changes. This is like if you are an artist and someone asks you to make changes to your painting and you refuse to do so. If you don’t make the changes you don’t get your funding.

Even the review magazine Variety said Citizen Koch had “too many plot strands”. IMDB reviews currently give it 5.6/10 which is pretty awful. The article tries to somehow link David Koch to Citizen Koch getting squashed which is pretty ridiculous. The implications of the article are that David Koch had so much power he was able to get Citizen Koch squashed even though it was ITVS who decided to pull funding for the documentary. David Koch was on the WNET board of trustees and was only one of 35 trustees. By definition this means that David Koch only held less than a 3% vote.

Assume David Koch has one vote. According to the WNET board of trustee website there are 35 board of trustees which would mean that David Koch only has less than 3% of the vote. David Koch decided to resign from WNET’s board of directors on May 16, 2013. 

Dr. Ben Powell on the Case For Sweatshops

Dr. Ben Powell who is now at the Texas Tech Free Market Institute in Lubbock, Texas.  He makes the excellent case that sweat shops are maybe not as bad as people believe. In economics you always have to compare jobs to alternatives. I love how he schools people in the Q&A (economically illiterate) on how economics/businesses really work. 

Medical Students and Medical Schools 1903 vs. 2013

Medical Students in 1903: 26,147
Medical Students in 2013: 75,000
Population in 1903: 80.6 million 
Population in Present Day: > 315 million



Medical Colleges in United States in 1903: 154
Medical Colleges in United States in 2013: 141

Source for Graphs

New York Times Doesn't Understand Why Cancer Drug Prices Are Over $100,000

I recently read this New York Times article and was quite irritated. The story is about the high cost of cancer drugs. Even the American Society of Hematology said we need to lower the price of drugs in order to save lives.

The New York Times fails to understand why the drug prices are so high. First, the FDA makes it very costly to get a drug to market to help people. Phase I, II, and III trials have to be done. Even after the drug is approved the drug has Phase IV where the drug company monitors adverse reaction. As I mentioned in this post the number of patients required for cancer trials has drastically increased over the years which has made the cost of doing clinical test extraordinary. According to Tufts Center for Study of Drug Development the cost of developing just one drug has increased from $100 million in 1975 to $1.3 billion (both in 2000 inflated adjusted dollars). Meanwhile the number of patients required for clinical trials has increased over 160% (between just the 1970’s and 1990’s). Avik Roy from Forbes pointed out that 90% of the costs occur in the final phase (Phase III) of the clinical trials. A drug once it gets into Phase I has about less than a 16% chance of getting approved (note that drug companies test thousands of different compounds before the drug even goes into Phase I trials). So drug companies are spending $1.3 billion and have an 84% chance of their drug not getting approved. This is why they have to charge more for the drugs that do actually get approved. 

Dr. Brian Druker of the Knight Cancer Institute at Oregon Health and Science essentially does not like the profits drug companies are making and asks the question “if you are making $3 billion can you get by with $2 billion”. The profits drug companies make are used to research and develop other drugs. The reason why drug companies have profits are because they invested billions of dollars to develop drugs. Drug companies can’t sit idle with just a few good patents they have to constantly be innovating and developing newer drugs. Actually the FDA makes this worse because the general patent on a drug once it is approved is 10 years. I would be okay with shortening this patent life to say 5 years if the FDA allowed drugs to be marketed once they passed Phase I clinical trials. Phase I looks to see whether the drug is safe (which is what doctors and patients care about most). Researchers, individuals, and doctors can on their own figure out if the drug is effective (given everyone has a different body, different cells, and different DNA). If you shortened the patent life to 5 years and allowed drugs on to the market after Phase I clinical trials you would see a sharp decrease in the price of drugs. In an odd way the FDA does make drug companies riskier. If the FDA were to increase the number of drugs approved, and also shorten the patent life then drug companies would have a more diversified portfolio since they would have more products on the market (and not have to rely on just one or two drugs).

Doctors and the New York Times forget many horrible conditions have at least some form of treatment that is much cheaper than the $100,000 drugs. Many drug companies offer assistance programs to patients who can’t afford their drugs. True the alternative may not be as good as these new drugs but until the drugs go off patent they will be high. Somehow people want to live in world were we have first class health for a low price. I suggest the New York Times take an economics class at George Mason University.  

David Koch on Shen Yun and Giving to New York American Ballet Theater

So in a recent video interview with NTDTV David Koch called the work of Shen Yun "inspirational and put him in a good mood". David Koch donated $100 million to the New York State Theater (which they renamed after him). David Koch has been attending the theater for 45 years (he is now 72). Koch has always said he loves the athleticism of the ballerinas, good music, and attractive women. Speaking of women David Koch was quoted saying "When you have spent as many years as I did begging girls for favors you'd have bad knees too". David Koch has had his knees artificially replaced, his prostate removed, in addition to having 10 surgeries at the New York Hospital of Special Surgery (he also donated $25 million to them). 

Speaking of dancing the only dancing David Koch did was at discotheques according to this Bloomberg story. Koch for years was giving $500,000 to the New York American Ballet Theater. He was so generous he gave $2.5 million for the Nutcracker production. Even Koch's daughter was taking lessons at the School of American Ballet in New York.

I am not really sure why so many people think David Koch is such a bad person. He is a prostate cancer survivor, father, generous donor to the arts, sciences, and cancer research. Although, people may disagree with his policies does David Koch really seem that evil?

President Obama $3 Million IRA/401k Limit

Since I work in the financial industry when President Obama recently announced that he would cap the amount you could have in an IRA/401k plan to $3 million. The $3 million dollar amount was calculated by saying if you received a $205,000 annuity from the time you retire until you die how much money would be needed. However, there are a few problems with this calculation. First, as interest rates change the annuity required would also change. Second, as people live longer the amount required may substantially increase as people require more funds to live. This boneheaded proposal would only bring in $9 billion over 10 years which is not much given the budget is over $3 trillion. According to data from, Employee Benefit Research Institute as of 2011 only 0.03% of IRA accounts were greater than $3 million. By the end of 2012 .0041% of 401k accounts held more than $3 million.  

What is really insane is that this would hurt just regular people who save on an annual basis. Assume someone started an IRA with just $1. Then assume they invested $10,000 in their IRA every year for 45 years. Assuming they earned just 8% per year they would end up with $3.8 million. What also is forgotten is that required minimum distributions force people with an IRA/401k to take out distributions every year after a person reaches 70 1/2. The person is then taxed on that income at ordinary rates. So once Mitt Romney turns 70 ½ he will have a huge tax bill (he will pay ordinary income on all of that income as well-no capital gains).

Honestly, I don’t even know how this would be implemented. If someone had $2,999,999 million dollars and they get a $2 dividend check will you be denied $1? This truly is a confiscation of wealth. If people work hard and voluntary save their own hard earned money why should the government limit how much they can save?  

Koch Brothers: Annual Retreat and Why They Are Decent People

This upcoming week (April 28-29, 2013) Charles and David Koch will be holding their annual retreat in an undisclosed location in Palm Springs, California. Personally I wish I was going.  This will be the 10^th anniversary of holding such retreats. Normally the retreat is held in January however Charles Koch announced he wanted to push it back until April in order to review the election data. I like reading reports about how this is the Koch brothers “secret” retreat. For one the Koch brothers are private citizens and can do as they please. If people want to get together and talk about how to give everyone more liberty, freedom, and in the long run make everyone wealthier I see no problem with that.

ThinkProgress linked the agenda for the 2011 meeting here. I must say I would actually pay to go to this meeting. Speakers include Charles Koch, Peter Schiff, EconTalk host Russ Roberts, AQR Capital Management Cliff Asness. Really this event is more of a free market rally than a secretive meeting. The schedule looks like Monday and Tuesday were filled with free market thinkers that go from 7:30 A.M. to 9:30 P.M.

On the agenda this year is to discuss how to get more Latino voters involved as well as women. Also younger people are also going to be targeted.  At least Charles and David Koch are trying to understand why Republicans lost and figuring out how to fix it. The message of personal responsibility, free markets, and individual liberty shouldn’t be too hard to sell. However, when people get transfer payments from the government in the forms of subsidies, welfare, corporate welfare, or other sources it makes them dependent on government.  

The criticism of the Koch brothers is usually nonsensical. It usually goes something like this…”The Koch brothers pollute, are greedy, and buy politicians government”. Let me take this point by point. If the Koch brothers really did pollute why have they a) been receiving environmental safety awards  (most of these awards were granted by government agencies and not outside parties, b) the pollution data from even the EPA has shown a decrease in pollution for multiple decades. In fact carbon monoxide has decreased 61% (from 1980 to 2009). Sulfur dioxide between the same period decreased 65%. Lead decreased 97% as well. The evidence is against people who claim pollution has rapidly increased. Also do people realize Charles and David Koch breathe the same air as the rest of us? Now let me move on to the next point of greed. Charles and David Koch most likely work more than 60 hours per week based on everything I have seen. As I mentioned in this post David Koch works 10 hour days (it should be pointed out he is also in his 70’s). As I mention in this post Charles Koch was known to work all the time and once had a meeting that started at 4 P.M. and didn’t end until after midnight. Everyone was happy once Charles got married because it meant they had to work less on the weekends. I know people have an image of the Koch brothers as Scrooge McDuck swimming in money. However, they are men that run a multi-billionaire company. For the Koch brothers to say they are for free markets really means even the Koch brothers want more competition (which would actually reduce their profits). However, the reason why I believe the Koch brothers are in favor of free markets is because they understand what creates prosperity and an improved condition for human life. The last time I checked too more countries were trying to orient themselves towards free markets. My post on Market Based Management explains this more.  To answer the last point, no one can purchase a politician. You can give infinite amounts of money to politicians and they can buy the best ads, hire the best consultants, and still lose. People forget Republican Bob Doll in the 1990’s spent an extraordinary sum of money and still lost. At the end of the day millions of people are voting for who they prefer. However, as we saw in this last election cycle politicians are in the business of granting favors. If the 2012 election were held in the 1990’s there would be less of a chance we would have had the same outcome. The rising dependency of government explains the outcome we received.

Personally I hope the Koch brothers each publish an autobiography to explain to people what their lives were really like instead of history writing its own story. The Koch brothers are decent human beings who created  and grew a company, have given hundreds of millions of dollars to the arts, sciences, and cancer research, and have tried to sold their fellow man/woman on why free market capitalism is truly the best path to prosperity.