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.
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.
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.
