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#381: Charles Koch — CEO of Koch Industries

Charles Koch is a complex person that goes far beyond his political involvement. Even though he grew up among wealthy, Charles learned the value of hard work early in life while working on his dad's farm. There he learned to disregard instant gratification and to focus on the long-term. He also realized that unless he figured out how to be good at something unique, he'd be forever stuck digging dirt with his hands. If you want to hear some honestly brutal life and business advice from one of the world's riches men, this is a good podcast to start with.

Updated on October 04
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Key Smash Notes In This Episode

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Charles Koch has received three engineering degrees. He is chairman of the board and CEO of Koch Industries Inc., which he has held the position since 1967. The company is one of the largest privately held companies in the world. By revenue, it’s larger than both Boeing and Disney. He has founded and built many organizations throughout his career.

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Ferriss believes that the more labels you apply to yourself, the stupider you become. You are also more prone to groupthink, which is incredibly dangerous. His role in this episode is not to get you to like or dislike Charles, but to pay attention to his thinking.

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Those who love Charles Koch miss a lot. He means those who have the most intense views about Charles and his company. Those who hate Charles Koch also miss a lot. Ferriss hopes that he can add some nuance and texture to this person who's evaluated in headlines. Also, he wants to encourage people to attack the problems, not the people.

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Charles states how his father loved to experiment with various things, and he had Charles dig up dandelions, roots and all. As Charles' jobs became more difficult, he learned the value of work. He realized that he needed to develop skills that other people would value or else he’d be shoveling and digging for the rest of his life.

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“I hope your first deal is a loser. Otherwise, you’ll think you’re a lot smarter than you are.” His dad did not want wealth to become a curse on his children.

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For Charles, he contributes to his father always giving his dirty jobs. He would put minimum effort into them, and at some point, he realized these jobs were a dead end for him. After receiving three engineering degrees, he grasped the concept of them, but not on how to apply them. When working in business, he found that the concepts came naturally to him.

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Charles states that people can live and work together in peace and to their mutual advantage under generalized rules of conduct. These rules enable people to succeed whenever they are assisting one another, rather than undermining them.

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Find out what can go wrong. Think of the key drivers for the idea to lead to success. Then, find people to brainstorm ways that it can go wrong with each of the key drivers.

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Koch says that innovations occur by taking various ideas and combining them into novel ways. The scientific community, for example, has been able to make decisions by consensus, debate, and knowledge sharing, which has led to new discoveries and productivity.

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It’s when people have an idea or have learned something that they don’t want to share because they may not get credit for it is considered as the kiss of death. Koch’s company wants to encourage building knowledge networks and sharing.

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One component is to become the preferred partner for all your key constituencies, which include customers, employees, suppliers, and society as a whole. The second component is to continually transform yourself. You will become obsolete if you don’t continuously transform.

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Bad profit is finding ways to cheat your customers, misrepresent what you’re doing, and rig the system, and many other ways to hurt customers and your business altogether. Koch states that good profit is to produce products and services that customers will value more than their best alternatives.

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You can’t avoid it. Charles asks the question, what is a company doing if their goal is to provide bad profit? It does not benefit society or the company to have bad profit. Businesses are supposed to improve people’s lives, not make them worse.

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The question is always, will this enable to fulfill our obligation as a business? The principles of human flourishing, the capabilities to create value, and the ability to transform in order to contribute are the values the company upholds to remain successful.

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Koch states that there is a big difference between personal knowledge and conceptual knowledge. Another principle is division of labor by comparative advantage. Creative destruction is when you don’t want to be a pretentious and protective in your own shop. Self-actualization is another concept, which is a state where the selfish and unselfish merge.

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It’s not education, but it’s schooling: teach to test. Real education should be three dimensional instead of one. The three dimensions are: discover your gifts and aptitudes, do whatever you can to fully develop those, then learn how to apply them. When people utilize their potential, it moves society.

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People will only act if the action satisfies three requirements: you become dissatisfied with your current state, you have a better vision of your current state, and you have a path to get there.

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Some of the principles are neglected because they don’t fit a company’s priority. Also, it’s when companies are short-term oriented rather than long-term, which is why a great majority of top companies have declined.

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Successful and good partnerships require a shared vision, shared values, and those who have complementary capabilities.

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Charles says that we need to mobilize the people who are interested in them and help them have a voice. The next was to get politicians that wanted to help the country in the long-term, rather than focus on getting re-elected.

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Instead of being hostile toward them, find something you disagree on, or fight and attack them, search for something you both can work together on to contribute and help people improve their lives. This creates an unexpected ally.

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Charles and his wife started the organization 28 years ago in Wichita. They were inspired to meet so many kids that had abilities, but had received terrible advice and grew up in poor upbringings. The Kochs wanted to teach these kids about principle entrepreneurship by offering a three dimensional education where they could change their mindsets with support from the Kochs.

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He looks for which social entrepreneurs that his company can help scale and capture natural imagination, which can cause change in the way people think about topics. He uses the example of criminal justice reform.

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Because the word assumes that what his company is after is a system where certain people have a lot of capital. His company is after a system where everyone has the opportunity to realize their potential, including those who start with nothing. He feels that businesses should only profit to the extent of them helping improve people’s lives.

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We should decide if we want a system that empowers people or one that controls them. We should want to move toward the system that creates a mutual benefit.

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They are working on eliminating the aspects of all these injustices that are haunting the country. Charles says that people who are liberated and empowered succeed. He states that the world used to be utilitarian and people weren’t allowed to think differently, which stifled the progress. America was once the most successful country in the world, but some people had limited or partial rights.

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Charles says that he hopes not. He is dedicated to the scientific method and good science. What he is trying to do is get several open-minded groups together. He wants them to listen and join together in order to find policies that will do something about man-made emissions and prevent making people’s lives worse.

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Because they tend to have good solutions, microsolutions. They have lived through problems and worked their way out of them. They know what works and are striving to improve every day. Charles says that this is the type of society that we need, one that enables people to pursue their interests in a mutually beneficial way that leads to peace and harmony.

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Charles thinks that trade, immigration, and foreign policies should be paid closer attention to. He states that if goods don’t cross the borders, soldiers will.

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Charles says that he’s investing in all of the liquidity he has in Stand Together.

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His first and middle is is Charles de Ganahl. He is named after an entrepreneur that his father worked for. They became lifelong friends and admired one another.

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Yes. It was later pronounced like “caw,” like a crow. Charles’ father hated that pronunciation. He was traveling for business and his last name was paged as “coke,” and he liked that better. So, that’s how it’s pronounced now.

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