Recently Charles Koch released his brand new book "Believe in People: Bottom Up Solutions For a Top Down World". The book is the third book from Charles Koch. Previously Charles Koch published Good Profit back in 2015 and Market Based Management back in 2007. Charles spent 5 years working on the book (the book is co-written with Brian Hooks). I first found out that Charles was writing this book back in April 2016 when he was interviewed by Bill Bennett.
The first part of the book is part autobiographical which is a little repeat of what has been said in Good Profit however there are nuggets even for people like me who have covered the Koch family and Koch Industries for over a decade. The second part of the book focuses on Social Entrepreneurs who are trying to improve society by empowering people at all levels (from drug dealers who reach back out to the community, to individuals who use to be drug addicts who use fitness to fight their addictions. Not only are the stories personal and inspiring but provide the reader with real and tangible results. Charles Koch is results oriented and he shows through data how Social Entrepreneurs improve can improve the world by identifying people that are close to the problem and understand the problem to find solutions. The last part of the book focuses on corporate welfare.
When Charles was only 6 years old he was put to work (performing manual labor around the farm) and then graduated to more difficult tasks. It is important to note that older brother Frederick Koch went through a similar process but had a breakdown. Charles Koch growing up was quite a rebel. He would go to bars with a fake ID, he got kicked out of school for drinking, and get into bar fights. He admits that he had a tenancy to short cut work and wanted instant gratification. Charles started out at MIT studying chemical engineering but then quit because it involved too much memorization then moved to geology but stopped because it again involved too much memorization of rocks and ended up at with a general engineering degree from MIT since he took a "scattershot academic approach". Charles even was looking to get a PhD in chemical engineering but when Charles talked to a professor the professor told him if he wanted to get into business to get out of school. Koch admits he wasn't even a good engineer as he once was driving a water truck when the truck was low on oil he accidently filled up the truck with too much oil which backfired. When he was 28 years old Charles began reading in his spare time to read to understand the world. Along the way Charles met his wife Liz Koch at a party (however she was dating someone else at the time). However, once Liz was single Charles (in a typical engineer manner) immediately called her for a date. Charles had a tendency to go to cocktail parties and given all his reading on economics, philosophy, psychology and etc. would try to slaughter people on his ideas in debates (when these people probably didn't spend more than a couple minutes thinking about it). When Charles raised his children pushed his kids to put forth their best effort into their areas of interest. For daughter Elizabeth (who I wrote a separate blog post here). When Elizabeth started running track Charles would provide additional coaching (example 5 A.M. runs on family vacation/sprints in a blizzard on Christmas Eve). He pushed his children to give 100% at whatever they did. When his son Chase was throwing tennis matches (he was ranked in the top 100 in the country) Chase got a job at Koch Industries spending six weeks sleeping on a couch, working 13 hours a day, 7 days a week while shoveling manure and treating sick animals (so much for a cushy job).
In the book, Charles does shed light into one of the darkest times of his life and for Koch Industries. He writes about the lawsuit between himself his brother David along will Bill Koch and other Koch Industries shareholders. The lawsuit went on for over 20 years. Charles mentions that before the trial he was in a deep depression and could barely function. Charles would take the stand of the trial on May 26, 1998. Even though the trial ended June 19, 1998 and Koch Industries was found not guilty on the charges brought by Bill Koch and the other shareholders the 11 week trial took a toll on his energy levels on personal health. In his first interview after the trial Charles commented "What doesn't kill me makes me stronger". Charles writes in his book that his depression still continued for another six months. However, he was able to bounce back by working hard, working out, and the support from his family. Also it is important to note that Charles was diagnosed with prostate cancer in September of 1999 spent two weeks undergoing treatment for prostate cancer. After he was diagnosed he was tested every 6 months. Although Charles had prostate cancer he didn't miss a beat and still went to work.
When Charles initially took over Koch Industries he realized how screwed things up were. One of the leaders at Koch was an accountant who fretted over the cost of pencils while another leader was a hard drinking salesman who would settle for whatever big oil companies wanted. Once Koch changed this once he came on board. He introduced the "Challenge Process" at Koch industries to challenge anything (ideas, recommendations, ways of thinking) from all different levels). The company has a "Discovery Board" that meets every two months that contains 30 individuals. Charles admits he never comes away unscathed or without developing a better solution. The book provides the example of at a Georgia Pacific plant that only allowed senior mangers to hit the "stop" button in cases of an emergency. However, the individuals who were running the machines (not the senior managers) had better knowledge. Another example is a master technician at Georgia Pacific who spent 40 years with the company and noticed the company was making costly mistakes when the company was shipping pallets of toilet paper onto shipping trucks. The technician created a device to adjust the sensors on the vehicles that were moving the pallets of paper to reduce the number of mistakes and saving the company money in the process. Koch Industries has a philosophy that any employee can earn more than their manager if they are creating more value).
Koch Industries has grown from $12 million of revenue in 1961 to $120 billion (recently) of revenue with 130,000 employees. This would represent a one million percent increase in revenue. When Charles joined the company he plotted out the growth of the company over his lifetime. In 2019, Koch Industries exceeded his lifetime expectation by 80 fold. Just to put some numbers around if Koch has revenues of $120 billion this would say that a 80 fold decrease would be only $1.5 billion of revenue which would then say the the annual growth rate would be a little under 9% per year (since 1961). The company has increased their revenue by a rate of almost 13% per year since 1961. Usually companies can increase their revenue by double digits for a decade or so but over close to a sixty year period is unheard of. Also if the company grew at the rate Charles predicted the dividends to him and other shareholders would be radically different. I estimated in this blog post that the amount of dividends Koch Industries throw off a year is roughly $378 million per year each for Charles Koch and the family of David Koch (Julia Koch and children). The original growth rate plan would have say that the dividends that Charles would have received would only be a little under $5 million per year! Lastly, the net worth of Charles Koch is roughly $45 billion as I write this. At the original rate of growth Koch would only be worth $560 million (and honestly probably not many people would have heard of him). Interestingly an article from the Washington Post from 1979 estimated that Koch was worth "in excess of $500 million" at the time which would be roughly the same net worth he would have today if he started out on his original growth plan (which would essentially say there would have been no growth from 1980-present day). There is no question that Charles Koch and his philosophy have grown Koch Industries beyond even his wildest dreams.
The second part of the book highlights Social Entrepreneurs like Scott Strode who had issues with alcohol and cocaine and realized if he didn't get clean and sober the consequences would be devastating. By using the gym and working out Scott has lead over 40,000 people (as I write this) to kick their addiction of drugs and alcohol. Scott himself has been sober for 20 years. What is amazing is that less than 20% of individuals relapse after the first three months of entering the program (compared to traditional programs that have a relapse rate of 40%). Perhaps health insurance companies/companies should be looking at this to reduce their cost of insurance. Now if this program was applied nationwide think of how many individuals, families, and communities would be positively impacted. The sobering statistic that 70,000 Americans died from drugs and the rate of suicides and alcoholism has been increasing for more than two decades. To quote Victor Frankl (a favorite of Charles Koch) "people have enough to live by but nothing to live for; they have the means but no meaning".
Everyone is able to make a contribution to the world if they identify their talents and capabilities and it may take trial and error to discover this. Everyone has the capability to contribute Look to the people who have the experience who have seen the problems (gang members, drug addicts, etc.) instead of "experts" who claim to have all the answers yet haven't gone through the experience themselves. Koch admits correctly that he doesn't have all the answers to the problems and no one should claim they do. People are often treated as problems to be solved, instead of being empowered to help address America's biggest challenges. If it was possible to eradicate slavery in America then how much easier would it be to overcome the problems of today. Charles focuses on partnership rather than partisanship. Recently during the During COVID Stand Together helped aided 122,000 families, verification took 10 minutes, and money was transferred within 48 hours to bank accounts and raised more than $61 million. If anyone compares this program to the PPP loans that the government doled out it is obvious that this private bottom up solution was much more effective than a government top down solution that required lots of paperwork, waiting, and not everyone was able to receive a loan.
Overall I enjoyed reading the book and felt it was more personable than any book Charles Koch has written before. The book reads as a combination of a biography of Koch Industries mixed in with free market ideas with a touch of self help. The book is very inspiring and is rich with personal stories/vignettes of people from all walks of walk which provide a good application of the examples related in the book. The book as I mentioned before also sheds light on Charles Koch and his depression along with some additional insights not seen before (even for a Koch addict like myself).
