Koch and Empire Grew Together (1994 Wichita Eagle Article)

Source: Wichita Eagle 

This past week I stumbled upon a really good article from June 26-27, 1994 about Charles Koch and Koch Industries. The article has some articles I referenced in my three part series (part 1, part 2, part 3) on the Koch brothers. However, the first article was more of a profile of Charles Koch. Bob Cox did a profile of Charles and his family in 1998 for the Wichita Eagle did a profile. The Wichita Eagle recently did a profile in 2012 by Roy Wenzl .

One thing I learned from the 1994 article was how much Charles Koch loves to read. According to the article at least in the 1990’s he spent at least 2 hours every day reading. He reads scholarly books on economics, history, philosophy, and psychology. He even read the Old Testament of the Bible just because he was curious. This is interesting because when Charles was younger he was more interested in parties and playing rugby and actually was expelled in high school for drinking. Koch thought about being a mathematician  scientist, or economist (thank goodness he didn't pick those). An interesting fact is he graduated M.I.T with 2 graduate degrees (chemical engineering and nuclear engineering) by the time he was 24. After all this he considered going to Harvard Business School. William Koch did take some business courses at MIT according to this.

Once Charles started working at Koch Industries he was working 7 days a week. He tended to look at problems as an engineer instead of understanding the importance of people. Everything I have read indicates that he is a workaholic which actually isn't bad as a side effect is becoming a billionaire. Charles didn't seem to understand that people had a life outside work, however Charles' life was work. One meeting in August of 1968 started at 4 P.M. and lasted until midnight. Executives were expected to work on Saturday.

Koch has an interesting management style. Up until this point I have never read anything about how he managed people. Even Charles Koch himself acknowledges that he doesn't try to be a tough boss however he may be insensitive from time to time.People say that while Koch is demanding he is also very fair and doesn't like people who lie. He has a great analytical mind (makes sense he is an engineer), sharp, and seems to know what questions to ask. Koch will actually let employees make the decision at the end of the day (this is part of market based management). One interesting quote from Koch about work is that "True self-respect only comes from real accomplishment, because you can't kid yourself for very long". Another good quote Koch has that could be applied to management is "If you have a proposition or thesis or theory, you're obligated to search just as hard for facts that disprove it as you do for facts that support it".

The relationship between Charles and Liz Koch is interesting too. Apparently the folk tale is that Charles was so busy he had to propose to Liz over the phone. Apparently when they first met Charles was not with the times as he was reading books in economics, philosophy, psychology, and history. There was a charm about Charles that was attractive to Liz however. After 5 years of dating Charles and Liz were married in 1972. What is interesting is that in the 1990's when this story was done the family had no servants or help despite being worth $1-$2 billion (according to my Koch historical net worth page)

Koch also doesn’t like to waste any time. He really uses every minute to add value or learn something. He only lives 15 minutes away from work and listens to books on tape (Dr. Walter E. Williams of George Mason University also does this listening to tapes from Academic Plant). In a 3 week trip to Orient that Koch had planned he didn't spend one minute relaxing. When the Koch family went on a trip to the Summer Olympics in Spain Charles wanted to see 4-5 events a day which wore every one out (kids swore it would be the last trip they would go on). Even on a Sunday afternoon Koch will be watching football games with his work papers out doing both things at the same time.

Charles isn't much of a partier (nor does he need to be running a multi-billion dollar company). David is more outgoing like mother Mary Koch use to hold (don't know if he still does) a New Year's Eve party that held 800 people as of 1993 in Aspen, CO. Even Newsweek said it was a great party to crash. Charles doesn't like to party but he does enjoy good wine.

What is really interesting is how in 1966 Koch Industries had $177 million revenue and in 2012 the company had $110 billion in revenue. This is an annual growth rate in revenue of 15% which is pretty amazing. One reason might be of Market Based Management. Personally I don’t think Charles Koch works for money as so many of the left claim. His house seems quite modest for his net worth. He does have homes in California and Aspen however even though they are only worth a few million dollars each it is very small compared to his net worth of around $31 billion. They didn’t even have servants in the 1990’s despite being worth in the billions. The Koch family does have expensive cars and charter company planes for trips however they are not socialites who party all the time and have fun. They say he is greedy and trying to control democracy by buying politicians. To me Charles Koch preaches about free markets and liberty. Liberals forget that means personal liberty which is for social liberty (legalize drugs, same-sex marriage, etc). People forget this and just label Charles and David Koch as Republicans but they really do have certain libertarian ideas.

Personally I am glad I found this classic article from 1994. It revealed to me that Charles Koch doesn't like wasting time, challenges himself on a daily basis, works his tail off, and really seems like a decent human being. Now if we can just get others to realize his enormous accomplishments we all might be better off. I personally do hope all the Koch brothers publish their own autobiographies so they can tell their own stories in stead of having other people tell it for them. 

The Giving Pledge: Reducing Income Inequality

I feel as if many people misunderstand how the top 1% are important to philanthropy. To be honest some of the largest donors are in the top .001% category. People claim how greedy we are. However, the data shows that the United States is in fact the most generous nation in the world. Let’s look at the data to reveal just how generous we are. According to “Giving US: The Numbers”, in 2010 total contributions to charity were $290 billion. $211 billion of this total amount was made by individuals. Family foundations contributed $19.5 billion while corporate donations were over $15 billion. Clearly, these are some large amounts.

This brings me to my next point of income inequality. True, there is income inequality however inequality exists in so many different aspects of our live. Brad Pitt and George Clooney have an inequality of women they can get or date compared to the average guy. Obese people have inequality in the terms of the calories they consume. Bill Gates has a net worth has a net worth that is over 104,000 times that of the average American. This is something that professor Don Boudreaux at George Mason has pointed out. Sure Bill Gates has a net worth that is 104,000 times the average American however does Gates enjoy 104,000 times more calories or 104,000 times more homes as the average American or 104,000 times happier than the average person . I think the average person tends to believe that Bill Gates life is 104,000 times better than their own given how much money he has. However, I would argue Bill Gates has a rougher life than most. If you look at his work schedule, how often he travels, and people always asking him for money and the stress that creates I think people would still want their old life back. Everyone wants more money, however if you got to the point of having Bill Gates kind of money it would become more of a burden. Also people like to imagine having as much wealth as someone else but never can imagine the work that has to be put in to earn that money. This is what I call invisible inputs yet visible outputs. People see the outputs of wealth or income yet easily forget how much hard work was put in to get to that point.

Bill Gates has amassed so much wealth he is giving most of it away to charity. In fact the second richest person Warren Buffett is giving all of his money to another rich person Bill Gates! Really what is happening is Warren Buffett pledged nearly all his net worth to the Bill and Melinda Gates Foundation. If anything this will reduce income and net worth inequality. Buffett and Gates are signed the “Giving Pledge” which is a pledge to donate at least 50% of one’s net worth to charity. As of 2010, 69 billionaires were signed up to give away and at least $125 billion has been promised by the first 40 donors. Of course this figure should grow since the billionaires will no doubt get richer which will increase the amount that goes to charity. I have a feeling more billionaires will join which will also increase the amount. It would be interesting to see if anyone backs out if the economy were to collapse.

What is interesting however is that Buffett and Gates want other people to not only pledge to give their money away but also pay higher taxes. My own theory on this is that they want anyone else to never become as rich as them. If you favor the estate tax, higher taxes, and for people giving all their money to charity it makes it harder to amassed large sums of wealth which make Buffett and Gates look even better in historical terms. Buffet and Gates are extremely competitive people and it seems as if they want to enhance their legacy from beyond the grave.