Chase Koch (son of Charles Koch) and His Wife Annie Breitenbach Koch Divorce

For many years I have covered this Koch family on this blog. Within the past few years it appears that Chase Koch and his wife Annie have been divorced. Someone had made a comment in one of my recent posts about them being divorced. I looked into it and found very scant evidence at first with only one credible article from Inside Philanthropy from September 2020 referring to Annie as the "ex-wife". However, I know recently Chase Koch has been interviewed for many different things and it is noticeable that he is not wearing his wedding ring in the videos for a couple of years. Recently I did notice Chase looked visibly tired when being interviewed with severe dark bags under his eyes both in this June 2021 interview, a Koch industries promotional video in June 2021, at the 2021 TPI Aspen Forum from September 2021.

I can't ascertain the timeline of the divorce. An article from the Wichita Business Journal discusses Annie and Chase talking about the school that they started together in October 2019. In a video with Youth Entrepreneurs in August 2020 Chase is noticeably not wearing a wedding ring. My best guess would be that Chase and his wife Annie separated between late 2019 to early 2020. It is worth pointing out that Liz Koch (mother of Chase Koch) was divorced before she met Charles Koch. 

Chase Koch and Annie Breitenbach were married November 1, 2010. The wedding was covered in a Koch Industries Discovery magazine that all employees receive. Annie at the time was roughly 25 years old and Chase was 33 years old at the time. Annie attended the University of Kansas and had become an RN and worked in the Wichita area. The couple the same year they were married purchased 70 acres of land and a house for $3 million according to this article. The couple have three children together including their first child Charles Gerard Koch who was baptized in June 2012. Annie Koch is media shy and the only video I have seen of her from 2013 when she was the host of a breakfast interview between Chase and his mother Liz Koch. Annie listed all Chase's household duties of being a diaper changer, trash man, and in charge of dog do removal services. She then mentions his professional career and duties and at the end says "Wow babe no wonder you barely make it home for dinner on time". 

There currently can be only speculation as to what happened that led to the divorce. One potential issue that could have put a strain on the marriage was Chase Koch and the hours he worked. Chase would have a very busy day and according to Kochland and his day "started around 6:30 and proceeded-"wall to wall" until 6 or 7 at night" and Chase admitted in this video that he wasn't spending enough of time with his family. Part of the issue was Chase was not delegating and President of Koch Industries Dave Robertson explained to Chase that he was in charge of his own calendar and had to say no to things. Chase felt as if he had to be involved with every little detail and to the point that was almost micromanaging (Charles would admit to micromanaging himself as well). Chase was Executive Vice President of Koch Ag and Energy Solutions from 2014 to 2017. After 2017 Chase became President of Koch Disruptive Technologies which is an subsidiary of Koch Industries that looks at promising technology companies that Koch Industries can invest in to grow and enhance their own business. You can almost think of this division as a venture capital firm within Koch Industries.  

It was reported within the past few years that Charles Koch continues to work weekends (despite being in his 80's) and is a workaholic. People forget that being a workaholic is a type of addiction just like drugs or alcohol that perhaps could be inherited. At one point Liz Koch pointed out that Chase worked to hard and resembled the tendencies of his father (Charles Koch). Charles Koch himself was a workaholic. According to this article in the 1997 from Fortune magazine Charles would put in 12 hours a day at the office and then go home and work some more. Charles would have executives meeting on Saturday mornings and sometimes meetings would last until Saturday evening. and would ask folks to come in on a Saturday or Sunday to the Wichita office. One Sunday in August 1968 Charles Koch called a meeting that started at 4 P.M. and went until midnight! Charles would admit in this interview that Saturday and Sunday are more fun to work anywhere and he would drive employees crazy day or night leaving them voice messages. 

It is important to remember that Chase Koch is a shareholder of Koch Industries stock (he has been on the board of Koch Industries since 2013). My understanding is that various trusts hold the actual Koch Industries Inc. stock and with Kansas being a separate property state as long as Chase can show the assets were his to begin with and weren't commingled with other assets there shouldn't be any issues of him retaining Koch Industries stock. Usually assets in trusts are protected both from creditors and divorce. Of course he will have to provide some type of support for his wife Annie and three children. Also I would think given the many legal battles the Koch family faced in the 1990's and early 2000's that Annie Koch would have signed some type of prenuptial agreement as well. Former Koch shareholder J. Howard Marshall (yes the one married to Anna Nicole Smith) had a prenuptial agreement that would pay Anna Nicole $100,000 for each month they were married and $5 million if they had a child together. It would be interesting to know if Chase Koch had some type of prenuptial agreement with Annie. Also the other issue will be the custody of the children as well in terms of going between Chase and Annie (which won't be easy emotionally).

Another issue is given the couple created the Chase and Annie Foundation (which I covered here) it will be interesting to see if they still work together on this project. Annie herself is involved with the Wonder School (a non traditional school that teaches more of the Socrates method). Currently Annie is the oldest person at the Wonder School and on her about me page is currently reading "Untamed", enjoys running, reading, and kombucha, and has been a vegan since 2016. The initial cost of the school was $1.5 million and the school would pay Wichita State $90,000 per year to use a building on the campus of Wichita State. 

It will be interesting to see how this divorce between Chase and Annie Koch affects the future. Like I said I really haven't seen any news articles directly discussing the issue. Personally I am curious what the cause of the divorce was. Also given Chase has three children and is busy at work is if he will get married again at all. The statistics on divorce are interesting with about 50% of people getting remarried within 5 years of their divorce. It will also be interesting if ultimately the divorce will hurt the career of Chase at Koch Industries too. More importantly it would be interesting down the road given Chase has third children and his aunt Julia Koch has three children as well (to my knowledge Elizabeth Koch doesn't have any children) creating 6 new potential shareholders of Koch Industries. 

Chase Koch Foundation and How Chase Koch Spends His Charity Dollars

Well it has been many years since I have blogged about Chase Koch (son of Charles and Liz Koch). It appears within the past few years (March 15, 2019) has established the Chase and Annie Koch Foundation Inc. Annie is the wife of Chase Koch and I actually blogged about her here. 

The 2018 Chase Koch Foundation tax return (990-PF) shows a $5 million contribution made. This contribution appears it was solely made by Chase Koch himself. The 2019 return for the Chase Koch foundation shows $15 million of contributions. Of the $15 million gift $1 million came from the "KC 2009 Gift Trust" and $14 million "KC 2009 Family Trust". These were trusts that were established back in 2009 from my guess would be Charles Koch (his initials backwards). 

Chase Koch has mentioned before that he is a shareholder of Koch Industries (he is on record saying this on video-see at the 30:14 mark. It is hard if not impossible to figure out how much ownership he has. His father Charles Koch back in 2012 told Daniel Fisher of Forbes magazine that he has been estate planning for "many, many years". 

Uncle David Koch mentioned in a 1999 article that he regularly gave away 50% of his income every year. This is an interesting dynamic if Koch Industries reinvests 90% of their profits back into the business leaving only 10% of the profit available to be distributed to Koch Industries owners and in actuality only around 7% of the profits (based on historical data has been distributed in the form of dividends) and then between federal and city taxes for New York city and New York state is 50% and assuming 50% was given to charity would say that David Koch was living on less than 2% of Koch's profits for his living needs! 

In terms of what charities Chase Koch has supported it appears the largest charity he contributed to in 2019 was the Phoenix Multisport ($1.1 million just to this). Chase Koch has talked about the positive impacts of Phoenix and how the charity has been able to transform lives as a result. Phoenix Multisport is a community that allows individuals who battle addiction to use physical fitness as an outlet for coping with their addiction. You can think of the Phoenix as a sober gym. From their 2020 report the Phoenix has 54% of members who lived in poverty, 61% who were involved with the criminal justice system, and 15% who identified being part of the LBTGQ+  community. The results of the Phoenix have been amazing though. Roughly 87% of individuals report being sober after 3 months (this is impressive compared to the statistic that 40-60% of individuals relapse after 30 days of leaving a rehab program and the percentage of relapse increases to 85% within 1 year. There is no question that this program seems to have a positive impact by improving the lives of not only many people but their families and communities. 

Another large beneficiary ($350,000) of the Chase Koch Foundation is Wonder Inc. Wonder Inc is a private school that is primarily funded by Chase and Annie Koch that will offer K-12 education on the Wichita State University campus. The school is trying to break the mold of traditional educational by allowing children to be more curious (as opposed to a teaching from a top down approach and "put into practice by solving complex real-world problems using critical thinking, creation, collaboration, and innovation". Annie Koch on the Wonder website lists herself as a "mother since 2012, vegan since 2016" and enjoys "reading, running, and Kombucha (tea)" and she is currently reading "Untamed" 

What is crazy is even though the Chase Koch Foundation is a charity it still pays an excise tax (1%) on investment income. Although this was a de minims amount the Chase Koch foundation paid $433 of tax in 2019. Chase's father Charles Koch (who has his own foundation) in 2020 paid over $1 million in excise taxes). Charles Koch appears to have done estate planning at least in 1997 and 2009. As far back as 2016 the Charles Koch Foundation received gifts from the Charles G. Koch 1997 Trust ($30 million), the KC 2009 Family Trust $27.5 million, and the KE 2009 Family Trust $27.5 million, and smaller gifts from the KC 2009 Gift Trust $7.5 million, and the KE 2009 Gift Trust $9.5 million. My guess would be the names of the trusts represent the initials (KC for Charles Koch and KE for Elizabeth Koch). These trusts have continued to provided funding for the Charles Koch foundation over the years. It is hard even as a billionaire to give away money fast enough to overcome estate taxes. However, Charles Koch years ago stated that he planned to give the main bulk of his estate to Stand Together. 

What is interesting is how the Koch family has set up all these private foundations over the years to give money to various charities. To me it becomes too complicated as you have many different organizations that ultimately are trying to achieve a similar objective. One option is to convert the private foundations into a donor advised fund. The benefit of doing this is tax returns don't have to be filled. Also the donations from the donor advised fund can be contributed to various charities without anyone knowing the source. The 990-PF tax return allows the whole world to see who you are giving to and how much. 

I would predict that over time Chase Koch will be given more ownership of Koch Industries given it seems that currently he is the only one of the Koch family working for the company. David Koch has children however they are too young. Fred Koch himself was charitably inclined as back in 1966 and 1967 set up trusts that would pay income for 20 years to charity and then the remainder after the 20 years would be given to his sons. There is no doubt that Charles and Liz Koch will continue to give away substantial sums of money away and Chase Koch will have access to give away a multiple of what his parents were able to give away if Koch Industries shares transfer to him over time. 

Koch Net Worth 1984 to 2021 and 2021 Koch Industries Shareholders Dividend Update

It has been a while since I have updated the net worth statement for Koch Industries. The last update I did was back in 2018 and how things have changed since then. David Koch passed away in August 2019 and his shares went to Julia Koch and family. I blogged extensively on the passing of David Koch here and here. Also I reported how recently Julia Koch had been added to the board of directors of Koch Industries as well. 

Looking at the 2021 Koch website they report $115 billion in revenues (although they claim it comes from Forbes since they don't report revenue numbers but this number must be somewhat accurate. Taking $115 billion of revenue x a 13% profit margin (which was calculated here) would say after tax earning are $11.3 billion (assuming a 24% tax rate which again calculated here) . Koch reinvests 90% of their earnings back into the company which would say $10.2 billion of earnings are reinvested back into Koch Industries every year. The company based off historical information pays out 7% of their earnings as dividends (leaving about 3% for short term liquidity needs). This would say that Koch pays out close to $800 million of dividends to all their shareholders. 

Charles Koch and his family (Chase Koch has mentioned he is a shareholder of Koch Industries here) would earn about $334 million (since they own about 42% interest in Koch Industries). Julia Koch and her family would earn about $334 million. Last but not least the Marshall family would earn $127 million. It is important to remember that Koch Industries is a C-Corporation (I uncovered that here) so the dividends are taxed first at the corporation level (21% under current tax law) and then taxed again individually. For federal income tax purposes Koch shareholders would pay 24% (20% + 3.8% Obamacare tax). In addition to this they would pay state income tax as well. Charles Koch lives in Wichita Kansas so the top income tax rate for that state is 5.7%. This would say that close to 30% of his dividends are taxed. Said another Charles Koch and family would earn $233 million from dividends after taxes were paid. Julia Koch lives in both Florida and New York. My hunch would be that her residence for tax purposes is Florida (which currently doesn't have a state income tax). However, if she truly were a resident of New York City the tax there would be 32% for just living there and throw on federal income taxes of 24% would result in roughly a 56%. To translate this into dollars it would say that Julia Koch and her family would receive $146 million after taxes which would be what she would use for her annual living needs. 

The average compound growth in net worth of Koch Industries has been about 14%/year (again this is a rapid growth rate when looking at when Charles Koch took over the company back in 1967). Some smaller companies are able to achieve this for a decade or two at most and then at some point stall out because as you get larger it is harder to continue to grow. The largest jump in net worth was between 2005 to 2006. This was when Koch Industries purchased Georgia Pacific. I had reported on Georgia Pacific as a case study. Koch Industries grew from $60 billion of revenue (before the Georgia Pacific merger) to $80 billion (after the merger). At the time Koch paid a larger premium (39% premium above the market value of the company). David Koch at the time told the New York Times that Koch Industries could streamline the manufacturing and production processes of Georgia Pacific and reduce the costs by investing in technology. The purchase of Georgia Pacific accelerated the size and number of employees for Koch Industries. This in turn increased the net worth of the Koch shareholders. 

As I have mentioned before Koch Industries pays out 7% of it's earnings as dividends however as a yield for Koch Industries stock the shareholders really do earn a small yield compared to their net worth. For example, if you take the $334 million Charles Koch and his family earn it would say and divide this by his recent net worth of $46 billion would say that the yield on Koch Industries stock is only .7%. If you compare this to yield of the S&P 500 (1.5%) it would say that Koch Industries shareholders could double their current dividend by selling the company and investing into the S&P 500. However, the long term dividends of Koch Industries as I calculated before have grown an astounding 21% per year (this is over a 50+ year period since Charles Koch took over too). Running some math Charles Koch was worth $500 million back in 1985 which exceeded his lifetime goal by a factor of 70) when he first took over the company after his father passed away. 

Without a doubt there is no question that Koch Industries has grown quite exponentially over many many decades. When Charles Koch took over the company after his father passed away in 1967 Koch Industries only paid out $300,000 a year and now that amount in 2021 is roughly $800 million a year. Charles Koch back in 1984 had a reported net worth of only $375 million and now has a net worth of $40 billion. Central to this growth in my view has been two key characteristics. The first is the company philosophy of what is called market based management (MBM). This philosophy is very different than any other company. The philosophy focuses on employees speaking up to share ideas, for all employees to act as if they are business owners, and to think critically about problems they are facing in the business they are in. The other key characteristic is Koch Industries for a long time has reinvested 90% of its earnings back into the business (to my knowledge no other company does this). Given that Koch Industries is private gives them the flexibility to do this. This type of policy would be considered crazy in any public company of board of directors. At any rate no one can deny that Koch Industries is like no other company. 

Julia Koch Joins Koch Industries Board of Directors

Recently I learned that Julia Koch was added to the board of directors of Koch Industries. Honestly, this is not that shocking after David Koch passed and since David Koch had been an executive a Koch Industries since at least 1980 and given his experience with the company it would be logical for her to join after David would pass. Remember Elaine Marshall is also on the Koch Industries board of directors (she has been on the board of directors since 2006) after E. Pierce Marshall passed (son of Howard Marshall II). It would make sense from an estate planning perspective to give Julia Koch shares of Koch Industries and by doing that allow her to be on the board of directors since she is a major shareholder. In terms of estate planning usually when someone passes most of their assets will pass to the spouse (due to an unlimited martial deduction that allows an infinite amount of assets (including Koch Industries stock) to pass to Julia without incurring any estate taxes. However, when Julia Koch passes (which won't be for many decades since she is only currently 58 years old-an interesting fact is that David Koch was 56 when he married Julia-who at the time was only 34) there could be a large estate tax bill that will be paid (assuming no planning has been done which I doubt). The same logic would apply when Charles Koch passes (most likely his wife Liz Koch will receive his shares of Koch Industries stock). 

According to Bloomberg Koch Industries lists the board of directors as Charles Koch, Martin Slack, Richard Fink, Dave Robertson, Elaine Marshall, Steve Feilmeier (former CFO of Koch). In addition to this on March 07, 2013 Jim Hannan, Chase Koch (who is also a Koch Industries shareholder), and Brad Razook were added to the board of directors of Koch Industries. With the addition of Julia Koch this would say Koch Industries has at least 10 people on the board of directors. 

The question is what role will Julia Koch play the board of directors? She hasn't been involved in the company business however still retains a large ownership of the stock. Will she just delegate the corporate decisions to other in the business or have a voice at board of director meetings? As I mentioned previously Koch Industries would generate a fair amount of dividends to help Julia Koch provide for her lifestyle. My last estimate shows that Julia Koch would pull in a little less than $400 million per year just in dividends (which should be sufficient to provide for her spending needs/wants). David Koch in a 1999 MIT Spectrum article mentioned that he/Julia gave away 50% of his income. Even if Julia gave away half her income she would be left with $200 million (before taxes of course) to live off of. She could purchases different homes, remodeling, (she apparently was working with a interior designer to remodel her $40 million New York townhome), and traveling. David Koch once made the comment that one time Julia was given the task of renovating a home for years and he told Julia there was no budget and David commented "she still managed to go over the budget". However, will Julia want more of Koch's earnings paid out as dividends if she wants to increase her lifestyle and possibly lead her to selling her Koch shares to other Koch shareholders?  

Speaking of the Koch finances after David Koch passed when I look at the 2019 David Koch Foundation tax return it shows only $10 million for the assets of the foundation (or said another way Koch Industries shares didn't fund the foundation). I wonder why they even have this set up given for this small amount of money (relative to the overall net worth). What is interesting is the return shows about $7.3 million of a retirement distribution (David Koch may have had his Koch 401k plan/pension plan/other retirements go directly to his foundation upon his death to avoid income taxation). 

The Koch family a number of years established a family office. In general a family office is created to management to handle the day to day financial operations of a wealthy family. For example a family office primarily will handle the investments of the family, tax planning, estate planning, and even be delegated the duty of philanthropic work, making travel arrangements (if the family wants to take trips), paying bills, and other administrative duties. According to this source the Koch family office is named 1888 Management (based in Denver, Colorado) and manages $2 billion of assets. According to this family office source the Koch family office is focused on taking a directs investments and take a sizable stake in certain companies. For example 1888 Management purchased a stake in a telecommunications company X5 OpCo LLC. 

An old article mentions there are seven family officers of the 1888 Management Richard Dinkel (who is currently now the CFO of Koch Industries, Steve Feilmeier (who was the former CFO of Koch Industries), Daniel May (he overseas the investments for the family office, David Koch (this has probably changed to Julia Koch, Anna B. Koch (wife of Chase Koch-son of Charles Koch), and Elizabeth B. Koch (which is the wife of Charles Koch-the daughter is also named Elizabeth Koch but her middle name is Robinson). Usually the family office will mix family members with people that work for the corporation have the family background and vision for where the family wants to go while at the same time putting into place a sense of corporate governance so family members can't run wild. 

I previously covered allegations against Julia Koch made by security detail of the family (however this seems to have stayed quiet and maybe perhaps some type of settlement was reached). Within the past month Julia has been spotted eating out near her Florida home. During the pandemic in June 2020 she retreated to her Hamptons residence from Florida. Her children are growing up too. The oldest David Koch Jr. is attending Duke University and appears to be majoring in political science and government and expected to graduate in 2021. Mary Julia Koch is a history major at Harvard University and is expected to graduate in 2023 (she is also the editor in chief of the Harvard Independent). The youngest John Koch is attending a Manhattan prep school (Mary Julia attended The Spence School). The question is will the children get involved with Koch Industries business over time? Chase Koch has worked within Koch Industries for many years and understands the ropes of the business. He is currently the only next generation Koch involved in the family business. Remember back in the 1980's Charles, David, and Bill Koch were involved in the business (Frederick Koch was not involved but that is still a 75% participation rate). However, over time though as there are more shareholders who each have different needs (some shareholders want more dividends paid out to support their lifestyle-like Bill Koch did back in the 1980s which lead to a corporate coup/people like Charles Koch who regularly reinvests 90% of the earnings of Koch back into the company to grow it-which over time actually leads to an increase in dividends. It is worth pointing out that when Fred Koch passed in 1967 the dividends of Koch Industries were only $300,000. The hard work and growth of Koch Industries of the company reinvesting 90% of their earnings back into the company also helped grow the company size and dividends too. This growth even exceeded even the wildest dreams of Charles Koch who recently said back in 2015 that he looked back in 2013 at his goal for growing the company and it exceeded his own expectations by 70 times. I estimated that his net worth back in 2013 was $35 billion which would say that Charles Koch expected to retire with only $500 million! 

This outstanding growth rate has benefitted all the other shareholders who don't even work for Koch Industries. The Marshall family for example I estimated pull in $140 million of dividends with their 16% interest in Koch Industries and again they don't even work for the company. However, at some point Elaine Marshall will pass and her shares may go to her family members and there will be a new generation of owners. The question will be will there be a revisit of a company battle of the shareholders over control/direction and the dividends of the company. The more shareholders you have the more diverse group of wants you have and the harder it is to keep everyone happy. Usually when a shareholder of a private company wants out the company will offer them a price to buy out their shares so they can walk away and do what they want. Frederick and Bill Koch did this back in the 1980's and got close to a billion dollars. I however pointed out they would have been better off holding on to their Koch Industries shares in the long run (again given the impressive growth of the company). Time will tell however what happens with Julia Koch her role on the board of directors for Koch Industries and how involved she gets (or doesn't get) and whether or not she continues to keep a low profile. My own personal view is that she will keep a low profile. She has managed to keep a low profile (other than going to galas) for over three decades and out of all the Koch family members I have never read about or seen an interview with her.  As Charles Koch one time mentioned "I always followed the mama whale's advice to the baby whale: Son the time you get harpooned is when you come up to spout off". 

400th Post What I Have Learned From Blogging Over The Years

I honestly can't believe this is my 400th blog post. Originally I started to write a blog to keep track of things I was noticing in the world. My first blog post was back in October 30, 2009. My original intention was to keep a diary of my thoughts. At the time I wanted to focus on "finance, economics, current events". Originally I did blog on a garden variety of things-from hair loss, to organ donation, to Tiger Woods. However, probably what this blog is most known for is following Koch Industries and the Koch family over many years. This blog was the first and only blog to have a historical net worth estimate for Charles and David Koch. Also it is on this blog that I calculated the annual dividends (along with net profit) of Charles Koch and David Koch. I haven't tracked my time on the issue but I would say I have spent a few hundred hours studying/following the Koch family.

Back in the early 2010's I was in graduate school and often found free time on my hands to write blog posts and during those years I spend dozens of hours looking up old articles on the Koch family. The graduate school I was at had a subscription to NewsBank database which was a great resource to find articles on the Koch family.  Although, I have seen it sourced in many Koch books such as Kochland and Sons of Wichita one piece I wish I could obtain is the Koch vs. Koch trial transcript. I have been able to find summaries online however the actual transcript would be really interesting to look through. 

What is interesting is I somewhat stumbled upon the Koch family. Back in the early 2010's (while I was in grad school) I became interested in learning more about Walter Williams. I remember watching a video that was a toast to him (here is the video from 2003). At one point Charles Koch speaks saying that him and Walter Williams had been friends since about 1983-1984 (it should be noted when Walter recently passed away Charles contacted Walter's daughter (Devon) to express his condolences). The first post I have had on something Koch related was back on June 23, 2011 when I wrote about the Koch philosophy of management. 

What I am probably most proud of is my ability to research rare items on the Koch family and write wonderful blog posts that are fun, entertaining, and share information that you can't find anywhere else on the internet. I often think of how sloppy some writers are. What I mean by sloppy is they don't get into the nitty gritty details and often use flowery language with not much facts/data. It also irritates me when writers can't get to their point or have a take away or action item. There are a few writers like James Stewart or Bryan Burrough who are able to weave incredible stories with facts and data. If you look back at my blog posts I try to include as much data as possible (perhaps sometimes too much) with appropriate hyperlinks so if people are curious they can check out the resources on their own (you don't have to just take my word for it). 

The most popular post on the blog has been my post on Elizabeth Koch (what is interesting is this all started from a footnote in "Sons of Wichita" and then became a project of mine. People often don't realize a few of the blog posts I have written occurred over many days/sometimes months (often saved as a draft and then I will come back to it for additional ideas or editing). Most posts I try to knock out in a few writing sessions. However some posts I did have writer's block of how to organize or what I felt was the most interesting. To posts that come to mind are the ABKO deal between Koch Industries and Chrysler and the other was the Pine Bend Refinery that Koch owned. Both posts were written over a couple of months of back and fourth. The ABKO deal and Pine Bend refinery are two of my favorite posts though. Also I would challenge anyone to find posts that are more detailed and have more analysis then those two posts. My general process has been to get all the data and do some type of brain dump and then structure the information in an organized fashion. The fun part is what I call the editing of trying to move facts to their respective positions and tidy things up. 

One of the things I was able to break on my blog is that Koch Industries is a C Corporation (and not a S Corporation as S Corporation as Austan Goolsbee tweeted that Koch Industries didn't pay any corporate taxes (the tweet was then deleted). In actuality Austan (who unfortunately is a professor at the University of Chicago) confused the Koch brothers and was confusing Bill Koch with Charles and David Koch. 

My most productive year was in 2011-2012 (at the time I was in graduate school and had a lot of free time on my hands). During this time I read through hundreds of pages from the Koch vs. Koch trial (part 1, part 2, part 3) and tried to boil down all these into the important pieces. Probably the most interesting part was learning the work schedule of Charles Koch. At one point Koch executives were working a full day and part of the Saturday night. In fact there was a meeting on a Sunday in August 1968 that went from 4 P.M. to midnight! Brother David Koch was no slouch either. As I remarked here David woke up at 7:30 A.M. and had his breakfast and would work until 7 P.M. and then go home to his wife, kids, and personal chef. Back in his younger days David (who was a bachelor for many many decades) would spend weekends at the office studying pollution control designs (for fun he would ski). Probably one of my favorite interviews is the one MIT Spectrum did with David Koch back in 1999. In the interview David admits he gives away about half of his income to charity. For fun he enjoys reading biographies, historical fiction, and military fiction (back in the 1980's he mentioned that he read about 24 news/opinion journals (and that didn't even include technical trade journals). Also he takes some of his friends on exotic trips to the Amazon jungle on his private jet. According to David traveling "takes you out of the rut you get locked into as a businessman". I truly believe both Charles and David Koch are interesting individuals who undeniably built an amazing business with an extraordinary long term growth rate. 

One of the largest contributions this blog has made was estimating what Koch Industries earn and the dividends they pay out to shareholders. Koch Industries routinely invests 90% of their earnings back into the company. Well simple math would show that if I knew the revenues I could back calculate how much profit there was. What I probably am most proud of is my research that has put a ballpark estimate on the dividends and profits of Koch Industries. My estimates show that Koch Industries generates roughly $17 billion of earnings (before tax) which would translate into $900 million of dividends available to all Koch shareholders which would say the Koch brothers each pull in close to $400 million of dividend income (dividends have grown at a compound growth of 21%/year-over 50 years!). I also compared Charles Koch as a businessman to John D. Rockefeller here (John Rockefeller retired at 57 and Charles Koch is currently 85 years old and still working at Koch Industries). Speaking of dividends I also wrote how Bill Koch and Frederick Koch (brothers to Charles and David Koch) left billions on the table for their shareholder dispute with their brothers and would both have had more of a net worth and dividends if they never sold their Koch shares. 

Speaking of Bill Koch I also covered the Oxbow Carbon corporate coup that almost lead to the fire sale of Oxbow Carbon (ultimately a judge ruled that Bill Koch would not be forced to sell his company-however the story is still quite interesting). The whole corporate coup was filled with corporate governance issues (such as Bill Koch using the company as as a piggy bank (for his private jet), valuation issues of what Oxbow was really worth, and key executives at Oxbow employees going behind the back of Bill Koch to try to negotiate deals without him knowing. 

It really has been amazing to see the growth of this blog over the years. I have close to almost 250,000 visitors which I never in my wildest dreams never would have believed. What has been really fun is putting my ideas, thoughts, and research out there to share with the rest of the world (yes I do have a worldwide audience). My goal is for someone to stumble upon a blog post and think "Wow this person really does their research when looking into things". I am sure in the coming years there will be more news from Koch Industries and what the succession plan of the company looks like. This experience of blogging has taught me that I truly took the road less traveled. 

Texas Celebrates Renewable Blackout Day and Millions of People Literally Left In the Cold

Recently (President's Day) there has been a cold winter storm that has braced Texas for a winter not seen in many decades. This winter storm has left millions of Texans without power without water and literally left them cold and in the dark. As a result as I watch the local news this morning many individuals are passing away (from carbon monoxide poisonings-leave their cars on in their garage to stay warm). The price for electricity on the market increased on February 12th (ahead of the storm) from roughly $25/megawatt hour to $2,000/mega watt hour in preparation of the cold weather. Prices skyrocketed to $9,000/megawatt hour in times of scarcity. The demand for natural gas skyrocketed from $3/million British thermal units (BTUs) to $600/million BTUs. 

In the Houston area it is estimated that more than 1.4 million people don't have power. (it is estimated that 4 million people in Texas are without power). Now let's assume that those 4 million people each had roughly about 8 hours without any type of power (this is conservative since someone people started losing power beginning last night and in the early hours of the morning today). This would say that ~32 million hours would equal human suffering 3652 years! Remember we are just referring to a lose of power of one day too! 

In order to figure out where we currently are we first have to look back in history. Back in 1999 then Texas Governor George W. Bush signed legislation that to enforce a renewable electricity be mandated in Texas. Back in the late 1990's the goal was 2,000 megawatts (MW) be from renewable energy (by 2009). Also during this time according to the Wall-Street Journal only 2% of energy in Texas came from renewables increased to 16% in 2016. According to the Energy Information Administration (EIA) Texas now utilizes 20% renewable energy to serve it's energy needs. A week before the freeze set in wind accounted for 42% of the power. Natural gas power plants power more than 50% of the Texas electricity. Let's remember that 1 megawatt can power 400-900 homes for a whole year. To make matters worse Texas governor Rick Perry then increased the 2,000 MW figure to 10,000 MW (by 2025). In fact if you look at the Powering Texas website they are quite proud of the fact that Texas surpassed the 2015 goal in 2005 and the 2025 goal in 2009. 

Electric Reliability Council of Texas (ERCOT) shows (as I write this in the afternoon on February 16, 2021 the current capacity for energy is about 47,000 megawatts (MW). For some perspective during the summertime the peak demand of energy is close to 75,000 megawatts (during the summer months). About half the wind capacity for Texas (10,500 megawatts) was taken offline. In total about 30,000 megawatts of energy were taken offline. The question is why an energy grid that is use to a multiple energy is operating at 62% of it's capacity. Some could argue that Texas did not winterize their natural gas and coal power sources. However, I would point out any money that was forced to be spent on renewable energy could have been in investing in winterization of the reliable sources of energy. 

Although fossil fuels are unpopular they produce a vast amount of energy at a relatively affordable price and most importantly are reliable. If Texas had not relied on as much of a wind exposure and utilized more natural gas, coal power, and nuclear power (good luck going through that regulation/permitting process) there may be have been fewer people without power and for a shorter duration. Let's be clear, nuclear and coal are the most reliable forms of energy. One nuclear reactor produces 1 GW (gigawatt) of energy. One nuclear reactor plant would the same amount of energy as 412 wind turbines or 3 million solar panels. To translate this 1 GW of energy could provide enough energy to power between 300,000-750,000 homes. Currently, as I write this about 1.4 million homes in the Houston are without power. 

People incorrectly assume that well because the sun is shining and because the wind is usually blowing solar and wind energy. However, the issue is you have to add the cost of fossil fuels to their cost (as wind and solar are unreliable and needs reliable sources of energy as backup power). Also in terms of efficiency there is an upper bound on how efficient wind energy can even be. The Betz limit states that the maximum amount of power is close to 60% (currently this amount is close to 40%). It is also worth noting to that solar energy falls under a similar principal with the Shockley-Queisser limit which states that the maximum conversion rate for solar energy is 34% (currently the best solar technology is around 26%. Said another way there are physical limits as to how efficient wind and solar can be. Also it is worth pointing out that you still need fossil fuels to even produce wind energy. 

The history is against the side of people who tout renewables as the "future". Germany for instance has about 46% of their energy comes from "clean" energy (33% of the energy in Germany comes from renewables). The country is trying to become carbon-neutral by 2050. The issue however is when the sun doesn't shine or the wind doesn't blow (which can be problematic). Also the cost of energy has increased 59,000% in a two year period (no this not a typo). Germans pay 45% more than the European average (half of the fee are just green taxes). By 2023 Germany could face a shortfall of reliable energy (according to estimates they lost an equivalent of 43% of total secure energy). Germany's transmission operators estimate that there will be a shortfall of 5.5 gigawatts of energy of peak power and reliable power. This would translate into 13-14 million people not having electricity. History will show whether or not Germany can have a secure energy future relying upon wind and other clean energy sources. 

Another country that has a large allocation to unreliables (renewables) is England. Last year in November the National Grid in the UK issued an "electricity margin notice". The issue was that wind farms were expected to produce 16.9 GW (gigawatts) of energy however could only produce 2.5 GW of electricity (or in other words an 85% decrease). When you look deeper through the 2.5 GW of electricity is what optimal amount and due to system constraints only 1.3 GW of energy could be effectively used. Although England didn't suffer any blackouts they are verging on the risk of putting their citizens at a large risk of blackouts. 

It is important to point out that some people often need electricity for live saving medications. If these drugs aren't stored at proper temperatures they can go bad placing the patient at risk for severe side effects. Also electricity allows individuals to perform work (computers/cell phones/other electronic devices) all need energy to run. For instance think of a doctor who doesn't have access to power and therefore can't perform any virtual appointments (due to COVID). When you multiple this by a large factor there is an enormous harm done to many individuals. Also you have the psychological aspect with the power out of not being able to be in contact with co-workers/family/other loved ones (some cells tower did go offline since they to require energy to run). Also living in a home that is 50 degrees (without power) is quite unpleasant. One other thing to keep in mind is when people don't have energy they resort to methods that might lead to death or serious injury. For example as I write this 60 people in the Houston area are hospitalized for carbon monoxide poisonings (example: trying to keep themselves warm by turning their car on with the garage door closed). 

For the past few days it has been difficult to even get a hold of how many individuals have access to power/energy. The question that will need to be asked is if Texas didn't move towards wind turbines to generate power what percentage of an outage would there have been? People on both sides (even though I would favor) are making claims that they have no data to backup. My question if wind turbines weren't used and coal and natural gas were used what would have been the effect been? The religion of people who are obsessed with renewables (unreliable) is very risky business and can lead to having people access affordable and reliable power that they need to stay warm and comfortable. 

What A Free Market Vaccine for COVID-19 Would Look Like

Recently John Cochrane and recently Yaron Brook described what a free market solution for the COVID vaccine would look like. What is interesting is how when we have a free market for products and services that people love (BMW/Gucci/Crumbl Cookies-yes I an a fan) there aren't any complaints about their premium pricing. Generally if people don't like their pricing they just leave or don't do business with these establishments. However, if we apply the same concept to vaccines there tends to be public outcry. 

Allowing drug companies to directly auction off vaccines would make the allocation of vaccines much more efficient, would result in more vaccines for everyone else, would reduce the spread of COVID than otherwise would occur, would allow drug companies to continue to develop life savings vaccines and drugs (that would benefit even more people in the future). What is again interesting is how drug companies have been "greedy" for so many years, but if someone did a recent poll on drug/biotech companies I would be willing to bet the rent money their popularity has never been higher. To be able to develop a vaccine in less than a year is modern science miracle (also let's not forget it what private companies who were able to make this possible-if anything government agencies slowed this down). 

If drug companies had the ability to auction off the drug the people that would bid the most are people who are the most well off, older, and have the most to lose by contracting COVID. For instance, if there was a billionaire in their 80's and a vaccine could grant them 10 additional "quality years" of life you bet they would plunk down a substantial bid. If let's say the billionaire wanted to pay Pfizer or Moderna $1 million for the vaccine and Pfizer/Moderna would personally arrange for a nurse to come to the billionaire's home and administer it (for that price it should be thrown in!) who are we to get in the way? Also not only could individuals bid on the drugs but companies/charities/organizations could bid on the drug. Fortune 500 companies have a large incentive to make their top executives are well. These executives make decisions for multi-billionaire dollar enterprises. The executives are no spring chickens either. The median CEO of a Fortune 500 company is 58. Companies would have a large incentive to buy a vaccine for a CEO/executives (especially if the CEO/executive had any type of underlying health issues that could lead to adverse affects from contracting the coronavirus. Other people that would be interested in a vaccine are performers such as musicians, actors, actresses, comedians, and athletes. Some of these individuals earn millions of dollars per year and by becoming vaccinated they could go back to work without having to worry about getting COVID. Insurance companies would have a large interest in making sure it's policy holders didn't incur extraordinary expenses from coronavirus and would have an incentive to bid on vaccines. Health insurance companies would have an incentive to notify from their data who should get the vaccine first since they have a vested interest to perhaps pay $500 for a vaccine that could avoid $10,000 of hospital expenses. As I have said before regulation (more specifically medical loss ratios-thanks to Obamacare) insurance companies each year can't spend more than 80% of it's premiums on healthcare and only 20% on administrative costs (if the health insurance company fails to do this they must refund the policyholder). This regulation is foolish since health insurance companies should not be required to spend premiums every year as it induces them to overspend and not save for the future (life insurance companies often have to plan their cash flow for many decades to ensure they have enough reserves to cover people passing away). If health insurance companies didn't have to worry about medical loss ratios they could have save enough cash to bid on items such as vaccines. 

Conversely an individual/corporation/organization/entity could purchase vaccines and would obtain ownership (property rights) and could gift the vaccines to whomever they wanted. Pfizer and Moderna could set up an auction site to allow individuals to bid on vaccines. Pfizer and Moderna for the initial vaccine doses would receive large sums of cash flow. Right now the government (i.e. taxpayers are paying $20/dose so round trip costs with 2 doses is $40 per person (if I were on the board of directors at either of these companies I would ask if this was the true market price of a drug that could save so many lives-also who negotiated these contracts with the government).

Hospitals would also have large incentives to bid as some have surgeons who are super stars that earn millions of dollars per year and more importantly save tens of thousands of lives with their skills. Conversely if Pfizer/Moderna were allowed to sell the first dose for $1 million they could use that cash flow to plow back into manfacturing/development/allow the company to offer the drug free of charge to whomever it wanted/invest the money into research and development for the next drug/vaccine. The biggest benefit is this doesn't require any taxpayer money and would allow for vaccines to be allocated in a more efficient manner. Let's remember Amazon/FedEx/UPS ship billions of items per year and there is no question Pfizer/Moderna could directly contract with them (or whomever they wanted) to get vaccines to the right people. Why is the government in charge of distributing one of the most valuable vaccines? 

The first patient/organization/entity could have bid on the first dose that was administrated in March 16, 2020-in actuality if there wasn't bureaucratic red-tape the first dose could have been bid on as early as January 13, 2020 (this was the date Moderna designed the vaccine-only 2 days after the Chinese started sharing information). In July 1, 2020 the results of interim data were published in the New England Journal of medicine which was a complete waste of time since all it showed was safety information and didn't had any useful information regarding immunity. Frankly, given the pandemic a more efficient way to run the trial would have been to allow the companies running the clinical trials to release real time data as it became available regarding how many patients contracted COVID. This would have sped up the knowledge and understanding if the vaccine had worked. 

The Phase III clinical trial for the Pfizer vaccine included 43,000 patients which is utterly insane given most Phase III clinical trials only requires 3,000 patients. The more number of patients adds an enormous amount of data that must be analyzed and approved by regulators. The early stages of the vaccine showed it was safe with very mild side effects. Dr. Marty Makary a doctor/researcher at John Hopkins University who has run over 100 clinical trials argues that Operation Warp Speed is actually Operation Turtle Speed. He says that for clinical trials his team analyzes data for millions of patients and the data on the COVID vaccine (remember only 43,000 patients) would only have taken his team an hour to review (even worse he says the data for reviewing the FDA manufacturing data would have taken hours to review not months). Let's remember that out of the trials for the COVID vaccine (as I write this) no one has died from taking the vaccine. 

I compare the current state of regulation of healthcare to one of yesteryear. For example back in 1953 Michael DeBakey and Denton Cooley (who would end up becoming world famous surgeons) had a patient with an abdominal aortic aneurysm. DeBakey told the patient he never had performed this type of surgery before (although the surgery was successful on animals. The patient who was at death's door went elected to take a chance and have the surgery and went on to live another 15 years. Today this would never happen. The surgery today would have to go through so many different hospital board reviews/intuitional board reviews/committee review boards/meetings before it could even be performed (by then the patient would have been dead too). The state of current regulation of healthcare is literally killing many countless lives in the name of "science". Pfizer submitted data on the safety and effectiveness of the COVID vaccine on November 22, 2020 yet the FDA didn't even schedule a meeting until 3 weeks later on December 10th. In the meantime roughly about 2,000 people per day passed away. As anyone who has studied economics knows there are no perfect solutions only trade offs. 

What is sad is currently Pfizer has millions of doses of the vaccines in warehouses but have not received any additional shipping instructions from the government. Every day that passes allows fewer people to get vaccinated which from a public health perspective is not a good thing.  Amazon/UPS/FedEx/Uber/even Domino's Pizza could work the logistics of ensuring that these vaccines get to the right destination. A free market system would allow vaccines to be allocated much more efficiently/provide cash flow for Pfizer and Moderna to then be able to produce more vaccines which would then allow more people to receive the vaccine at a lower price. Most importantly more people would be vaccinated faster and decrease the risk of people becoming hospitalized or possibly passing away. The government should unleash the power of the free market to make a safer and better world. 

R.I.P. Dr. Walter E. Williams and The World Mourns His Loss

Unfortunately I recently learned that Dr. Walter E. Williams passed away on December 2, 2020 at the age of 84. He died suddenly in his car not too long after teaching the final class of the semester for economics PhD students (the course ended at around 9:30 P.M) and then passing less than 12 hours later. His medical history would show that Walter had a history of hypertension and obstructive pulmonary disease. What many people may not know is that he drove two and half hours (each way) from his home in Valley Forge, Pennsylvania (Walter would fill his drives with recorded scientific lectures from The Teaching Company). Walter got his wish of wanting to be able to pass away after teaching his final course. Walter liked to remind people that he had been around for nearly a 1/3 since the country started in 1776 (which is mathematically accurate). Walter was an intellectual giant that had a profound change in my way of thinking of economics (Walter was actually tall too standing at 6'5). According to life long friend Thomas Sowell Walter was a black belt and did kick some butt in real life. Walter would spend most of his career trying to explain basic principals of economics to the masses and explaining why things like minimum wage, affirmative action, and other government policies while all sounding good didn't make any sense when examining the results. 

I first learned about Walter Williams back on February 7, 2007 when I was in college and I can clearly remember working out (I was in college at the time on an elliptical and it was a Friday afternoon) and I use to watch Kudlow and Company and Walter came out and debated Gary Gensler who was a former Treasury undersecretary and I can remember Dr. Williams explaining in a clear manner why labor unions weren't good and why the minimum wage didn't make any sense either. What I recall was how unique Dr. Williams was compared to anyone I ever heard before. After this I spent more time following the work of Dr. Walter Williams and then learned about other economists such as Thomas Sowell and spent more time studying Milton Friedman (I was somewhat aware of Milton Friedman after his passing back in late 2006). At the time YouTube wasn't as big as it currently is but I remember going to Dr. Williams website and reading his syndicated columns. What was clear was that Walter could take economics a seemingly and boil it down into digestible and understandable pieces. I took micro and macroeconomics as an undergraduate back in the fall of 2005/spring of 2006. What I recall was the classes were mostly either graphs/math/memorization which lead me to believe economics was more difficult then it was. I realized after reading more from Dr. Williams how easy economics really is when you get to the basics. 

What many people have not been aware of is Dr. Walter E. Williams put into practice his free market philosophy regarding his own personal wealth. Dr. Williams was able to command a $20,000-$30,000 speaking fee (at one point he was getting on a commercial flight 2-4 times per month which would say that just from speaking fees he was earning Walter could have been earning $600,000 to $1.2 million per year! The reality is the amount is probably substantially less because given he was teaching economics between September to December and January to June would reduce the ability to market his services. This doesn't include his income from teaching, his regularly published syndicated columns, or any fees from published books. His professorship was fully paid for my an endowment of the John M. Olin Foundation (Walter according to this video never met and he earned $175,000 per year towards the later end of his career. It should be pointed out that Walter also lived well as in 2010 he purchased a brand new Lexus LS 460 that was $70,000 at the time (it was published in an article in which he was trying to describe international trade. In addition to a all this he is was actually on the board of directors of Media General (for over a decade (from 2001-2011) and was the chairman of the audit committee. I am honestly surprised he was on more boards given he could run rings around most corporate board members when it comes to logic and reason. 

I can recall Walter in a speech one time saying "You know if I don't tell you these things you may go the rest of your life not knowing them". The name of this blog is in some ways an ode to his saying of pushing back the frontiers of ignorance. Back in 2003, some friends of Walter had a toast/roast for him that was captured on video. In the video (around the 33 minute mark) Charles Koch discussed how he had at the time known Walter for nearly 20 years and their friendship. This video I was lead me to my curiosity of Charles Koch and Koch Industries which then lead to my fascination and lead to this blog posting more on Koch Industries than any other source available. In a way you could say this blog really was inspired my Walter Williams and created many positive things. 

Walter turned out to live a good, rich, and fulfilling life, he lived 84 years on this earth (also especially true since he was a smoker/however he did work out). He lead a very productive life as a professor, economist, public figure, and no question woke up countless numbers of people to how economics truly works. What is even more interesting is that Walter who grew up in the Richard Allen housing project would lead a life as someone in the top 1% and in the year he was born (1936) the average life expectancy was less than 57 years old! My only wish is that Walter could have lived for another 184 years. Dr. Williams was one of the few defenders of personal liberty, individual rights, railed against the welfare state, and was against good sounding policies and was one of the few people I know that had the courage to do the right thing. His intellect, charm, wit, and take no prisoners' approach was rare and most likely won't ever be repeated again for many generations. You can look at the passing of Walter Williams as inspiring given that on the day he passed he taught his last course and just a few days before had his final syndicated column published which shows he maximized his marginal productivity. 

Believe In People: Bottom-Up Solutions For a Top Down World Review

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).