Koch Industries (Koch Brothers) Actually Decreases Pollution and Recycles

So I have been following the Koch brothers/Koch Industries for a while. You often hear of many reports about how Koch Industries pollutes and is making the air and water dirty for everyone else to breathe. However, do Charles and David Koch breathe different air then the rest of us?

I have to admit even I thought Koch Industries made pollution a tad worse until I actually looked at some data. I found reports (this link has all years I will refer to) that showed they do indeed reduce their pollution, recycle, and are actually more green than most people think. The latest Koch EHS report from 2014 is here. 

Currently about 90% of Koch facilities are STAR certified. STAR certified is a voluntary program from OSHA that companies voluntary join in order to make their workplaces safer than even OSHA regulations. A better explanation of this program is explained here. Because STAR sites are safer (because of voluntary actions of the company) they are rechecked every 3-5 years instead of every year. OSHA reviews incident rates every year though. However, as we will see Koch through continuous improvement has reduced emissions and made their work environment safer.

From 1997-2006 Flint Hills Resources refinery in Rosemount, Minn (this facility is very large-as I have actually driven past it) decreased emissions of carbon monoxide, nitrogen oxide, and sulfur dioxide by 53%. Also in 2006 criteria air emissions were .07 pounds per barrel of refining capacity, which was 65% less than the industry average of the 50 largest refineries in the country. As of 2012 the Flint Hills Resources in Corpus Christi, Texas went 12 years without a lost-time incident. Even the Obama administration praised Flint Hills Texas facilities. In 2000, a senior EPA official praised Koch because their Koch Petroleum Group agreed to reduced emissions by 60,000 tons annually. 

Koch invests 90% of their earnings back into the company. Much of this is to improve or upgrade existing facilities. In 1999 Koch introduced a low sulfur product six years before federal standards would be mandated. The company spent $200 million at the Pine Bend refinery (which produces low sulfur fuels). At a Koch Mont Belvieu, Texas facility decreased plant flaring by 95% which decreased emissions from 40,000 pounds in 2000 to about 2,000 pounds by 2003. 

People forget Koch Industries has a division that actually purifies water (Koch Membrane-which David Koch is in charge of). Koch Membrane provides drinking water to municipalities which use cartridges to clean out the water and can clean millions of gallons of water every day. In fact Koch's reverse osmosis module removed 99% of total arsenic in order to provide clean water to agencies and municipalities. Is is ironic that critics claim Mr. Koch is polluting the earth when he runs a division that purifies water!

In 1997, Koch Petroleum's refining operations had 45% fewer criteria air emissions that the average amount peer refiners. By 2000, Koch Pipeline transported 650 million barrels of liquids (including crude oil, natural gas, and other chemicals) and only one quart of product even touched the water. Between 1995-2000 Koch operated pipelines were able to reduce their leaks by 92%. In order to run these pipelines Koch spent $33 million in order to build a control center that had a fiber optic cable, customized software, plus a power supply that isn't uninterrupted.  In December 2012 Koch Pipeline and Flint Hills Resources went 8 years without a lost time incident. Speaking of Flint Hills from 1997-2012 the company reduced its emissions by 76% and emissions were 38% lower than peer refiners for 2012. 

Koch Industries is also into recycling between 1999 and 2000 Koch Industries more than 326 tons of material which was a 19% increase.  From 2000-2003 the recycling amount per person increased 29%.

Koch operates in a pretty safe environment.  Koch's Matador Cattle company for many years has operated with no incidents. Koch Aviation which flies about 2,300 hours per year had a four year OSHA recordable injuries in the mid 2000's that was 80% lower than the industry average. John Zink worked more than 4 million hours and 850 consecutive days without an injury resulting in time away from work. John Zink at this time had 700 employees working 1.7 million years annually. In 2006 six Georgia Pacific facilities had more than 1 million hours in each facility without a lost day of work. A Koch Nitrogen facility in Oklahoma recorded 3 years with no lost time injuries. An Invista facility in the Netherlands went 15 years without a lost workday case and Invista site in Brazil went 32 years without a lost time injury! At the same plant from 2003-2011 which makes LYCRA fiber reduced the amount of water used and actually saved enough water to fill 80 million one litter bottles.

To my knowledge Koch no longer explores for oil/gas. The company does refine oil which is turning the crude oil into other byproducts that are used into everyday goods like plastics. Koch just purchased Molex which is a connectors company that makes connectors for iPhone and other electronic devices. The company makes plastics, fibers, refines oil/gas, minerals, fertilizer, sends oil and gas through pipelines, and even does ranching. It seems as if though Koch Industries voluntary invests 90% of their earnings back into the company to make company assets and employees safer. By reinvesting the earnings back into the company Koch increases productivity and reduces lost work time due to accidents. By reducing the amount of waste Koch is able to make more money and use fewer resources. How many people would have guessed that Koch Industries actually reduces pollution and makes the world a greener place?

FDA Make Another Boneheaded Move on Lemtrada: Meanwhile Patients Suffer

I recently was reading this article and started to get somewhat frustrated while reading it. Basically the FDA recently announced that last December a drug called Lemtrada which is used to treat people with multiple sclerosis (MS) was not approved because according to the FDA the studies were not adequate and well controlled.

The drug Lemtrada is used to currently treated people with leukemia. The drug is an intravenous drug and produced by a company called Genzyme. The drug has been approved in Canada, Australia, and even all members of the socialist European Union (according to this Wall-Street Journal article). One no brainer for the FDA is to have reciprocal approval with other countries-so if Canada or Switzerland approve a drug by their equal FDA than it should be okay for the United States.

When the trials were conducted they found a 50% decrease in symptoms (1,400 patients took this drug). The nice thing about the drug is that you only have to administer it essentially once a year as opposed to taking numerous pills and multiple weekly injections from other MS drugs.  We have to remember that these patients are real people with a real illness who I would imagine spend a fair deal of time worry if they will ever get better. The FDA said the issue with the trial was that it was not double blind (which is the gold standard for FDA trials). However, if you have a serious chronic illness and you actually do get the placebo (sugar pill) and get worse and worse who does that help? Doctors and patients correctly pointed out that Rebif which already FDA approved did not used double blind trials when it was going through approval.

The only thing Genzyme can do now (after it has already spent many years and hundreds of millions of dollars in running the drug trials) is to run a double blind study trial which would take at least 2 years and would cost another $100 million for a drug that nearly every other rational country has approved.

The FDA approval panel should have a rule that states "you must have a loved one, family member, or someone you deeply care about that suffers from the illness from the drug you are trying to decide on". If this where the case I would imagine different results if they actually stopped to think how many people are harmed by the FDA holding back drugs to people with chronic illnesses. Maybe the FDA needs a mental evaluation.

Charles Koch Wichita Business Journal Interview

                                          Photo Credit: Kellen Jenkins of WBJ 

So last Friday morning the Wichita Business Journal (the article is only unlocked for a week) in an effort to revamp their journal came out with a profile of Charles Koch. Koch is not known to give very many interviews. Although in the past few years he did one with Forbes and one with the Wichita Eagle. The story of how the interview came about is interesting (more on that later).

In the interview done in February 18, 2014. From the pictures Charles Koch looks very relaxed wearing an Oxford Polo Shirt (who would think a billionaire would wear Ralph Lauren-that isn't Ralph Lauren). Koch talked about a number of different things like why Koch Industries is still in Wichita (I was even surprised he quoted Hayek on that). On innovation when asked why Charles Koch who is 78 years old and still shows up up to work everyday. According to Koch "I may be old, but I'm not dead yet". Koch Industries is still trying to integrate Molex from their merger last year. I would imagine Molex employees are learning more about Market Based Management. Koch said that Molex has to "get an idea built and get it commercialized immediately". Molex makes connectors that go into computer and electrical products (wait I thought Koch Industries was an oil giant). What is really interesting was Koch discussing products that can learn themselves. He discussed about building a computer into a glass mirror that could learn to adjust the temperature or the amount of light to come through the mirror all with the press of a button. Koch Industries has also made some interesting investments like into American Greetings (a card company). Essentially, Koch provided capital to American Greetings in order to take the company back. Charles Koch points out that it is hard to give a loved one the same message from a digital card as a hand delivered card. Koch said he liked the new technology in the drilling business (however he doesn't want to get back into that industry).

Chase Koch is the son of Charles Koch and earned his BBA in Marketing from Texas A&M University and has been with the company since 2003. I talked about Chase Koch and possible estate planning here. Charles Koch even challenged if his son would be the best person for the job. I honestly believe that if Charles Koch didn't believe his son was ready he would not have him on board with the company. Koch Industries has a large bench to pool from in terms of talent in the future if needed.

When talking about his political views Koch is really trying to save the country by promoting limited government and free markets. He talks about cronyism and the barriers to entry (taxi medallions or required schooling for hairdressers). Koch does correctly point out that make it harder for poor people to advance "for disadvantaged people trying to get started, its unconscionable in my view". Honestly, it seems clear the Charles Koch does want to help poor people. Thomas Sowell once said that the difference between Democrats and Republicans is that Democrats want to give the poor money while they are poor and Republicans want to help poor people stop being poor. Koch talks about long-term interest instead of short-term interests. Since Koch is private they don't have to worry about analyst meetings or quarterly earnings. In this interview from 2007 Koch said "a public company has to cope with the extreme focus of the analysts and the equities market on quarterly earnings. Someone misses quarterly earnings projections by a penny, and their stock goes down 10 percent". Most people actually incorrectly believe that companies are just into the bottom line for the short term. However, if you constantly make bad decisions in the short run you won't be around for the long run. Koch points out that "people should only profit to the extent they make other peoples lives better. You should profit because you created a better restaurant and people enjoyed going to it. You didn't force them to go, you don't have a mandate that you have to go to my restaurant on Tuesdays or Wednesdays or you go to prison". Gee, for some reason I have this feeling if I don't purchase healthcare I get some time of penalty. When talking about political contributions and his interests it should be noted that Charles Koch, David Koch, and Koch Industries are subjected to death threats, cyberattacks (speaking of which a 24 year old Iowa man got busted for trying to launch a cyberattack on the Koch website). I saw someone from Young Turks explaining how it was nice that young people were realizing that Koch Industries was a bad an evil corporation and even liberals should feel a little proud when the company gets hacked.

It was interesting to see the Charles Koch Foundation is working with Michael Rowe from  "Dirty Jobs" in order to explain to people they don't need to get a liberal arts degree and that some people who have certain talents can make very good money my satisfying needs and wants of people.

A nice feature of the article is when former Koch employees reflected on there time at Koch. Nearly all of them said it shaped how they thought and had a positive effect on who they become as business people. Former employee Patrick Ahern said that in one year he learned so much he would have paid to work at Koch Industries.

According to reports Koch Industries decided at the last minute not to allow video during the interview (probably for security reasons). It is pretty clear that Charles Koch and his brother David Koch unfortunately have to have armed guards 24/7 to protect them because people fundamentally don't agree with their ideology. The ironic thing is that these people who complain are most likely using a Koch Industries product. If they use the toilet they most likely used Georgia Pacific toilet paper. If they dried their hands they used a paper towel from Georgia Pacific. After the purchase of Molex, if anyone has a iPhone it was created partly by Koch Industries. The list goes on and on of products that Koch creates that every day people use (probably without even realizing it). What is even more interesting is that Koch to my knowledge doesn't explore for gas like actual companies (Chevron, ExxonMobil, and the rest).

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?

David Koch $600 Million and Counting To Charity: Arts, Medicine, and Theater

So it seems like David Koch has been pretty generous with his money lately. A while back I talked about how generous David Koch was with his money which can be found here.  This year Koch was very generous again donating $100 million (over 10 years at $10 million per year) to New York Presbyterian Hospital (I guess Mr. Koch does care about helping people). A list of large gifts Mr. Koch has given since 2007 can be found here.

In 2012 Koch donated $137 million to charity ($35 million to a museum, $20 million for a day care center at MIT, and $10 million to a food allergy institute at Mount Sinai.

Notice that David Koch has been generous with his own money even though he doesn't have to give anything back. He has already given back to society by helping create a company that now employs 100,000 people helping them put food on the table, help pay for tuition, and helping people pay for vacations. Also people criticize David and his brother Charles of increasing pollution when in fact Koch Industries has been decreasing pollution by making their plants more efficient using fewer resources and David Koch himself is in charge of a Koch subsidiary that purifies water in order to make it drinkable to people around the world.

State Of The Union: My RA: The Myths, Lies, and Illusions

So the other night President Barack Obama spoke on many different issues (first starting off which how a teacher worked extra hours) and then moved on to income inequality and talked about how this was the year of action. However, what caught my attention was a program he wanted to push forth called myRA. Note that this would actually the program would actually be passed by Congress before actually becoming part of the ever expanding tax code. How myRA works by guaranteeing "a decent return with no risk of losing what you put in". Let's step back a second to understand how false/hypocritical this statement is. Investment management companies and firms are highly regulated by the SEC. If any investment firm had this as advertisement they would be investigated by the SEC and charged with misleading advertising and possibly shut down (however when a government that is already going broke states it there is no issue).

The WSJ lays out how this would actually how myRA would work. The account would just allow for one investment (most corporations and companies that have 401k plans have options-under federal ERISA rules plans have to offer at least 3 investment choices- so choice is obviously not part of the plan). The principal is "protected" however to my knowledge inflation could erode this away as the bond is not adjusted for inflation. What the government is offering is a Treasury bond that will offer a variable interest rate (fluctuates with present day interest rates). The annual return from 2003-2012 is not great of only 3.61% (however the President did mention how the stock market had done well yet this new program wouldn't let people participate in it). Vanguard ran calculations and said if you put away $50 every other week for 11 years you would have $15,000 which does not solve any type of retirement crisis. The cherry on top of this regulatory sundae is that once the balance reached $15,000 participants would then be required to roll over the funds to an IRA at a private sector financial services company (think Fidelity or TD Ameritrade) and then could select a variety of options. I could only wonder who would be lobbying for this to actually become legislation.

According to the American Benefits Council there are over 650,000 401k plans. There are roughly 88 million participants in these plans.  In my experience some people don't trust 401k plans for a few reasons 1) They don't trust a 401k plan 2) They would rather spend the money or 3) They don't understand a 401k which leads them not to invest in it. 

If the President actually did some research he would find that most companies do in fact offer 401k. In a survey done 98% of companies surveyed companies already offer a plan with an employer match. In addition to this companies are also simplifying the investment options, providing more investment education, and increasing the employer match. There are many regulations that surround company benefits including 401k plans. For instance any employee that works more than 1,000 hours in a 12 month period of eligible for a 401k.  Essentially 401k plans can't be non-discriminatory (they have to be offered to at least 70% of the people who are eligible). This has to do with non-discriminatory laws that govern company plan benefits. People also forget that when a company matches an employees contribution that is essentially free money. Companies also have to hire plan trustees, custodians, and sometimes investment advisors who are themselves highly regulated by the SEC which does cost money. 

The obvious course of action is to stop providing programs such as Social Security that let people on to believe they are okay in retirement. If Social Security wasn't around would people be more or less prudent with their saves. The current taxation on Social Security is actually over 15% (if you include the employee and employer portion). Not only is Social Security taxed when you paid in but also the benefits are taxed as well. Martin Feldstein from Harvard has done some work in this area and actually found that Social Security reduces private savings by roughly 60%. Social Security is a whole different issue that I won't blog about here but the default program let's people sleep at night when in actuality they could manage their own money or hire a financial advisor to help them.

In summary, the President is proposing a retirement plan for people with little to no means when nearly 50% of people already live paycheck to paycheck. According to the report 44% of Americans are living with less than $6,000 in savings for a family of four. Now there are people who through their own misfortune or bad luck can't work and therefore can't save but that is a very small fraction of the overall population. I would be okay with even cutting these people a check and letting them at least decide how they use their resources instead of having a bureaucracy decide for them.

Many people choose not to pay attention in class during K-12 education, choose not study hard, choose to go out and party, get a job and choose not to put in the extra hours needed to get a promotion, choose to have children before they are financially ready, choose to spend money on things they possibly might not need (do you ever wonder how many people at the Cheesecake Factory really can afford it?). The right approach would be to get rid of the ridiculous burdensome laws that govern 401k plans (custodian, fiduciary, bookkeeping, etc.) in order to allow more companies (manly small businesses to offer them). The President seems to be separated from reality as he has never had to answer to customers, shareholders, or had any serious type of accountability. 

Koch Industries "New Koch" Fortune Profile

                                                        Source: Fortune Magazine

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.

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. 

Case Against Estate Tax

For years people have talked about trying to repeal the estate (death tax). By the time someone dies the money that is subject to estate taxed has been taxed multiple times. The money is first taxed when it is earned (federal, state, and sometimes even city tax). If that money is invested and if someone sells their investment they are taxed again (at a rate of either capital gains or ordinary income). Once they sell the investment if that same money is used to purchase something you have to pay sales tax. Then when the person dies they are taxed after already being taxed multiple times.  The estate tax started in 1916 and the exemption was $50,000 which would be around $1 million adjusted for inflation today. The exemption these days is over $5 million per person. Let's not forget if you give over $14,000 a year to someone you are not only required to let the government know (Form 709) but you also may have to pay tax on that. However, the estate tax by itself raised very little revenue. In fact the estate tax raises less than ½ of 1% of all revenue. The United States also has the third highest marginal estate tax rate in the world. People with lots of money can easily find ways to get around the estate tax by either giving it away, setting up certain types of trusts, or spending it. What is really interesting is people like Warren Buffett and Bill Gates who are both in favor of higher taxes are giving all their money away to charity (I guess they really trust how the government would spend their money).

You hear statistics like the estate tax only affects 2 in 1,000 estates. The problem can mislead someone into thinking only 2 in 1,000 estates have over $5 million. The major problem with this is that many people with over $5 million are figuring out ways to not have to pay estate taxes. People can set up various types of trusts, give the money to charity during their lifetime, or spend it which would not subject them to the estate tax. The rich didn't rich by being stupid as Dr. Walter E. Williams would say.

Basically if have any right or control over property it will end up in your estate. The estate tax makes zero economic sense because it inducing not to invest and accumulate wealth since it will be taxed. This is why so many wealthy people give assets and money to either family members, charity, or their children. Let's not forget the wealthy people who do set hire accountants, financial planners, and lawyers have an implicit tax of hiring t However,  if you give over a certain amount to family members then you have to pay gift taxes and if you give money away to someone too young you might have generation skipping taxes (see how the taxes start adding up quickly).

Other popular arguments you hear are that the estate tax is used to break up the concentration of power. This too is nonsense considering usually the kids of the people who worked hard to earn the money generally don’t have the same work ethic or values as the people who actually earned the money. Most often times the wealth lasts for three generations. In actuality not having an estate tax or gift tax would actually break up the concentration of wealth because if people could free give their money to whoever they wanted, money would move to many more and different people. 

David Koch Not A Republican: On Syria, Same Sex Marriage, Taxes, and Middle East

In a recent story David Kock talked to Yahoo News here and said that he didn't believe we should get involved with Syria. Many journalists tie to David Koch to the Republican party however staying out of harms way is not a Republican viewpoint. Koch goes on to say that the United States going into Syria would be like "putting your head in a hornet's nest".

What is interesting is David Koch is actually in favor of same sex marriage, (David Koch use to have three dates a day according to this article) withdrawing from the Middle East, and even said he may consider favoring tax increases here.

It is interesting that people claim David Koch is a Republican yet he has liberal social views and even stated he may consider raising taxes to help the deficit. David Koch truly remains interesting person (no matter what side of the political spectrum you are on).

Estate Planning Koch and Chase Koch (Son of Charles Koch): Past, Present, and Future

Update: I recently wrote a profile on Elizabeth Koch about her views on money, sex, and relationships which can be found here and the implications of Koch Industries stock in the future.

Fred Koch came back from an African Safari and was "furious" according to son Charles Koch about wanting to purchase two trucker companies according to this Wichita Eagle article. Fred Koch was trying save money for estate taxes and only told Charles to buy one trucking company. However, Charles Koch was in growth mode trying to grow Koch Industries bought both.

Fred Koch set up some very useful estate planning for his sons. He wanted his sons to inherit the stock at a low tax rate so they wouldn't have to force them to sell the company to pay estate taxes. Between 1966 and 1967 Fred Koch set up trusts for each of his sons according to this document. Fred Koch would pass away in 1967 as he was on a hunting trip. Fred did give son Fredrick a lesser share than the rest of the Koch brothers (it is believed Fredrick stole some petty cash). A large part of Koch Industries was owned by the four trusts created. The trusts had each Koch brother as co-trustee of their own trusts in addition to the First National Bank of Wichita. The income generated from the trusts would be paid to charity over a 20 year period and at the ended in 1986. David Koch said in this profile "So for 20 years, I had to give away all that income...and I sort of got into it". This got David Koch into the habit of donating to charity in general. Charles and Elizabeth Koch have also been charitable as well. Between the late 1980's and early 1990's they donated an average of $2 million each year just to Kansas area charities according to this 1994 Wichita Eagle article. Charles Koch has said that the only way the company would go public is if shares were literally offered over his dead body according to this article.

Charles and Liz Koch had two children. Elizabeth graduated from Princeton University with a degree in English literature in 1999 and then went to Syracuse for a Masters in Fine Arts (MFA) degree in 2011. She is now 37 and lives in New York and is in the publishing business. Chase Koch graduated from Texas A&M University in College Station, Texas. These days Chase is now 36 and started out in business development and also worked as a vice president of international business for Koch Fertilizer Company. These days he is vice president of Agronomics Services for Koch Industries.

Growing up every Sunday Chase and his sister Elizabeth would have to spend an hour learning about economics from their father Charles Koch. Chase was actually an outstanding tennis player in high school and was even profiled in Sports Illustrated under "Faces In The Crowd" which points out outstanding athletes in the country here. Chase Koch was actually probably one of the best tennis players in the country. Chase went to high school at Wichita Collegiate School in Kansas. Chase also had a great tennis coach as well. Coach Dave Hawkley of Wichita Collegiate School was also excellent helping win 92 state championships in tennis. Chase Koch shared his memories of his coach here. The Charles G. Koch Foundation greatly supported the Wichita Collegiate School between 1986-1997 giving more than $3.3 million.

Chase Koch as a teenager was put to work according to this article. When Chase was only 13 he was did manual labor at a cattle feedlot in western Kansas. Chase in fact lived on the couch with the feedlot manager and was working over 80 hours a week (7 days per week) at a young age. This is no different than Charles, David or Bill Koch who have all talked about doing at a young age. David in his Newsmax profile discussed how he worked on the ranch driving bulldozers, operating hay bailers, in addition to fixing farm equipment and digging ditches as I mentioned in this article.

On November 1, 2010 Chase Koch married Annie Breitenbach (here is her high school picture). Annie graduated from the University of Kansas and now works as an RN in Wichita, Kansas. In 2010, the newly weds purchased 70 acres of land and a house for $3 million in Wichita, Kansas according to this article. They now have a son named Charles Gerard Koch who was baptized in June 2012.

Chase Koch like his parents is also charitably inclined. In 2010, Women's Focus had this story discussing how Koch Industries was getting involved with the Kansas Food Bank (Chase helped out the food bank as a representative of Koch Fertilizer. Koch Industries gave the Kansas Food bank 230,000 pounds of food. I guess Koch Industries does actually want to make sure less fortunate people go hungry.

According to this December 2012 Forbes article Charles Koch claims he has been doing estate planning for "many many years". In addition to this, he says that Koch Industries now has more depth in their leadership than ever before. My bet would be that David Robertson would first take over the company if something ever were to happen to Charles Koch and then possibly Chase could take it over down the road. It should be noted that Charles Koch took over Koch Industries when he was only 31. A fun fact is Charles earned two masters degrees in engineering before he was 24 according to this article.

Charles Koch is a interesting, smart, and a controversial person. He has grown a company from $225 million in revenues to $115 billion. Many people like to bring up the fact that he inherited Koch Industries. However, what they don't realize is that Charles and David put in long hours and worked nearly every day of the week to grow it. There were only one of three outcomes: the company could have gone bankrupt, stayed the same, or grown. The future of Koch Industries should be interesting. Charles Koch said in this article that he wants to work on deals that "move the needle". Charles and David Koch are each worth around $34 billion. This could mean that in the next decade they could easily be worth over $100 billion each. The question will be in the future what will happen to Koch Industries in the future?