It
seems as if Bill Koch can’t stay out of the news. He recently did this lengthy
interview with CommonWealth news which led to this
story. One thing I did notice was that Koch used the phrase “fat
contracts”. In fact he used that phrase ten times. It makes more sense if you
read the story first before the interview. I have did a lengthy profile of Bill
Koch here,
talked about his battle with brothers Charles and David here,
even his school days here.
I also did a three part series on all the Koch brothers: here, here, and here.
Bill
Koch for years has opposed a wind farm known as Cape Wind. Koch himself put in
$5 million to stop the project. On the other side of the debate is Jim Gordon
who spent $65 million to try to bring wind power to Cape Wind. Gordon is worth
around $150 million while Bill Koch is worth around $4 billion. Koch invited
Gordon over to this place for dinner and Gordon was able to pitch the idea of
wind farming. One quote that Koch has for Gordon is “He’s done a masterful job
and he’s sold a great line of BS”. Another problem that Koch had with the
project was the amount of “visual pollution” he would see from the wind mills.
I can attest to this as I have driven through west Texas and seen hundreds of
windmills only to learn later that it only supplied 1% of all the energy
needed. Koch was honest with Gordon and said that the project wouldn’t work
without the help of a government subsidy. What is interesting is that Bill Koch
then published this op-ed
in the Wall-Street Journal on May 22, 2006. In the op-ed Koch discusses the
economics of the project and explains the subsides would actually increase the
cost of energy to Cape Code residents by having by seeing a $1,300 increase
because of subsidies. Koch calculated the return on the project to be 3% (with
government subsidies) and negative (without the subsidies). When Gordon told
Koch that the environmentalists were coming after him Koch responded by saying
he had the IRS after him, a $50 billion a year company after him, and the
Turkish mafia after him so bring it on. Bill Koch also understands that no one
should relying on the government for contracts saying “Don’t rely on the
federal government, except with taxes. They’ll tax you to death but relying on
government to help you make a lot of money is a fool-hardy thing unless you’re
a politician and take graft”. Koch himself got into a tax lawsuit with Governor
Michael Dukakis (that he won) when Dukakis was trying to retroactively tax him
when Koch used subchapter S laws to reduce his tax bill. This caused Koch to
move out of Massachusetts in the late 1980’s and move to Florida (which doesn’t
have a state income tax).
Bill
Koch is a businessman. In the past 15 years he says he has sold zero green
energy. He makes the interesting yet true point of how people in California
want green energy yet people don’t want to pay for it (given people want
something for the lowest price possible). In order to answer environment fears
Koch suggests that we just plant a bunch of trees that will take CO2 and
convert it into oxygen. People often say other people are not qualified
to offer their views on global warming because they are not scientists.
However, Bill Koch is a scientist by nature. He has a PhD from MIT in chemical
engineering. When shown a presentation of how global warming was going to
impact the earth Koch raised some questions about what their models took into
account. Koch also discusses the Wood’s Hole theory of global warming which I
won’t even try to explain. In addition to this he also talks about Gaia which
just basically says the earth is always in a mode of self adjusting (similar to
homeostasis in the human body). The economics of trying to do something about
“climate change” (interesting how it use to be global warming” show that
sequestering CO2 would cost $60/ton of CO2 while planting a tree would cost 10
cents/ton of CO2.
Koch
wraps up the interview talking about his own western town in Colorado. I wasn’t
aware of this by Koch’s wife has 43 immediate family members. Koch also wants
to use the town for entertaining customers and suppliers. The main purpose of
the town is for his family though. Koch does have a lot going on with running
Oxbow Energy, fighting wind mills, having lawsuits over fake wine, building his
own city, and having six kids. He says he wants to allocate his time to where
he gets an economic and emotional return.
As
I have mentioned before on my blog. Bill Koch is interesting, fascinating, and
quite a character. I find it amazing that age 72 is is able to recall the
economics details of all these deals that he has done in the past. Koch seems
to have a photographic memory as he was able
to recite a poem to
Mitt Romney (even though he probably hadn't looked at it in over 50 years.
Although, he has a PhD in chemical engineering it is rare to find someone with
a PhD in anything who is also a decent business person, who is also a
character, and interesting.
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