1984-2014 Charles and David Koch Historical Net Worth & Bill Koch Loses $200 Million in Net Worth

Forbes came out with their ranking of billionaires today. Charles and David Koch are each worth $40 billion. I have followed the net worth of the Koch's for some time now (30 years worth of data. What is interesting though is that the compound annual growth rate of Charles and David Koch's net worth is close to 17%/year which is much better than the market.

If Koch were a publicly traded stock it would be outperforming the S&P 500! However, the standard deviation is 44% which is vastly much higher than the stock market which has a standard deviation of a large fraction of that. Koch prefers to remain private because they don't like to have to be meet quarterly numbers or care what Wall-Street analysts think and instead rely on the long-term view. Koch does invest 90% of their earnings back into the company (which I estimate to be about $5.5 billion/year). Most corporations pay a dividend and buy back shares (in order to provide a return to shareholders). Bill Koch once remarked (when he was a shareholder) that Koch Industries was so low he couldn't afford to purchase a nice house. Speaking of Bill Koch his net worth actually went down from $4 billion to $3.8 billion. Yes, a Koch brother did lose $200 million in one year! What is even more interesting is that Oxbow Energy (founded by Bill Koch claims returns of 30%/year while Charles Koch declared a 12% annual return in their 2014 January Discovery newsletter.  Interesting how 3 out of 4 brothers from one family are billionaires. What happened to Frederick Koch?

Forbes 400: Charles and David Koch & Historical Net Worth 1984-2013

(This graph shows net worth over time with net worth of each of the Koch brothers) 

Recently, Forbes came out with the richest people in America.  As some of you may know I have covered Charles Koch Relentless Goals here. If you want to see all the Koch articles I have done over the years you can go here.  Charles Koch and David Koch were on the list again this year (from looking at the top 10 of this list seem to be the only ones that believe in free markets). Their net worth increased to $34 billion from $31 billion last year (only a 9% increase while the overall stock market did a little better).  What is interesting is that what may explain why the Koch brothers are so rich is that they do take on more risk. The technical term is standard deviation which just simply means how much things deviate from the normal. When I looked at the standard deviation of their net worth it was 44%. The long run standard deviation on stocks is less than half of this. The compound annual return of the Koch brothers is 16.2% which decreased from last year. If things continue on this pace the Koch brothers would be worth $100 billion (each) by 2020. Of course by this time Charles would be 85 and David would be 80. Personally, I enjoy following the Koch brothers as I believe they are true American heroes building a successful company with 60,000 employees creating products that every day products people use from nylon, beef, paper products, and even drinking water. Truly, this is a company that is diversified and not simply in oil as many claim. The only way the Koch brothers got rich was as Dr. Walter E. Williams would say “serving their fellow man/woman”. Consumers were not forced into buying all these products Koch makes. People voluntarily decided “well Koch makes a better product at a lower price than the rest of the competition let me give them my money”. Koch practice something called market based management (MBM) which I discussed on this post. MBM really does seem to work for Koch Industries and I wonder if other companies have used it.  

Forbes 400 Charles and David Koch Net Worth and Historical Net Worth 1984-Present

Today Forbes released their annual 400 list. Charles and David Koch of course were on that coming in at 4th with $31 billion each (was $25 billion in March). Brother William Koch stood at the same $4 billion level. This graph shows how much they are worth individually. In my original post I pointed out that the Koch brothers have taken on more risk which has explains why they have gotten wealthy so quickly. David and Charles Koch are the type of guys that work seven days a week and I am guessing run on little sleep. When Charles Koch started at Koch Industries he was working 7 days per week and David most likely is working at least 12 hours in the mid 1990's in this post.  Instead of people criticizing Charles and David Koch they should thank them for not only creating jobs, donating hundreds of millions to charity, and helping others understand how prosperity is created. Somehow I have a feeling market-based management at Koch Industries is working (which I talked about here) and increasing the standard of living for all Koch employees.