(Photo credit: Grant Miller)

“When goods don’t cross borders, soldiers will.”
— Charles Koch, quoting Frédéric Bastiat

This episode will no doubt surprise people, and my guest came to me through channels I wouldn’t have expected.

Charles Koch received a bachelor’s degree in general engineering and two master’s degrees, in nuclear and chemical engineering, from the Massachusetts Institute of Technology. 

He is chairman of the board and CEO of Koch Industries Inc., a position he has held since 1967. He is renowned for growing Koch Industries from a company worth $21 million in the early 1960s to one with revenues estimated as high as $110 billion by Forbes. It’s one of the largest privately held companies in the world, and by revenue, it’s larger than both Boeing and Disney. He has transformed the business into a diverse group of companies that employ nearly 130,000 people—making everything from Dixie cups to components in your cell phone. 

Charles credits the success of Koch Industries to applying proven principles of social and scientific progress, which led to the development and implementation of his Market-Based Management® (MBM®) business philosophy. He describes MBM and its applications in two of his books, The Science of Success and Good Profit.

Charles is now using those principles in philanthropy, as the founder of Stand Together, to tackle some of the biggest challenges in the U.S. Stand Together is partnering with thousands of social entrepreneurs to help them improve their effectiveness and scale at tackling poverty, improving K-12 education, bringing justice to our criminal justice system, and more.

Listen to the episode on Apple Podcasts, Spotify, Overcast, Castbox, Stitcher, or on your favorite podcast platform.

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QUESTION(S) OF THE DAY: What was your favorite quote or lesson from this episode? Please let me know in the comments.

SCROLL BELOW FOR LINKS AND SHOW NOTES…

SELECTED LINKS FROM THE EPISODE

• Connect with Stand Together:

Website | Instagram | Twitter | Facebook | LinkedIn

• Connect with Koch Industries:

Website | Instagram | Twitter | Facebook | LinkedIn

• Wichita, KS
• What Is Time Preference? From: The Audiopedia
• Frames of Mind: The Theory of Multiple Intelligences by Howard Gardner
• Charles Koch Shares the Letter That Guides His Life, ABC News
• MIT
• Arthur D. Little
• Good Profit: How Creating Value for Others Built One of the World’s Most Successful Companies by Charles G. Koch
• Why Wages Rise by F.A. Harper
• Human Action: A Treatise on Economics by Ludwig von Mises
• Understanding Maslow’s Theory of Self-Actualization, ThoughtCo.
• Science as Falsification by Karl R. Popper, Conjectures and Refutations
• The Republic of Science: Its Political and Economic Theory by Michael Polanyi, Minerva
• Inside Charles Koch’s $200 million quest for a Republic of Science, The Washington Post
• Everything You Need to Know about Occupational Licensing, Vox
• Whole Foods
• Coca-Cola
• Berkshire Hathaway
• Charles Koch on Separating Good Profit from Bad, Wichita Business Journal
• Big River Steel
• Green Steel: How Arkansas Became Home To America’s Cleanest And Fastest-Growing Steelmaker, Forbes
• Walmart
• Costco
• Boeing
• General Electric
• Personal Knowledge: Towards a Post-Critical Philosophy by Michael Polanyi
• What Is Comparative Advantage? Investopedia
• What Is Creative Destruction? Investopedia
• Kodak Failed By Asking The Wrong Marketing Question, Forbes
• Confirmation of Maslow’s Hypothesis of Synergy: Developing an Acceptance of Selfishness at the Workplace Scale, International Journal of Environmental Research and Public Health
• The Koch Institute Is Worried About Free Speech on Campus. But Not in the Way You Might Think. The Chronicle of Higher Education
• Property Rights, The Library of Economics and Liberty
• Defining Decision Rights, The Conscious Leadership Group
• Market-Based Management Guiding Principles, Charles Koch Institute
• Ludwig von Mises and the Human Action Shift in Economics, Charles Koch Institute
• How Liberals and Conservatives Joined up on Prison Reform, CNN
• Adversaries Unite to Achieve Historic Criminal Justice Reform, Stand Together
• The Cato Institute
• Tim Ferriss Goes to Maximum Security Prison, The Tim Ferriss Show #323
• How Youth Entrepreneurs Is Transforming the Lives of High School Students, Stand Together
• Youth Entrepreneurs: Breaking Through Barriers, Stand Together
• Youth Entrepreneurs
• The First Step Act
• Hudson Link
• How the Koch Brothers Are Fighting the Opioid Crisis, The Daily Beast
• The Phoenix
• Chernobyl
• The Declaration of Independence, National Archives
• In an Astonishing Turn, George Soros and Charles Koch Team up to End US ‘Forever War’ Policy, The Boston Globe
• The Quincy Institute for Responsible Statecraft
• How the Miserable Death of Moammar Gadhafi Factors into Kim Jong Un’s Nuclear Ambitions, CNBC
• Murray Rothbard’s Ideas of Demonstrated Preference and Their Use in Defense of a Free Market, The Rational Argumentator
• The Isle of Grain, The Spectator
• Rice University
• Texaco
• Quanah, Texas
• United Negro College Fund

Op-Eds:

Videos:

SHOW NOTES

• What is Charles’s history with digging dandelions?
• Charles talks about the letter from his father that hangs framed on his wall and why it’s important to him.
• On being talked into returning to Wichita after graduating from MIT to run one of his father’s businesses, and how Charles switched from a mindset focused on instant gratification to one of long-term value.
• The authors who have had the largest impact on Charles’ thinking.
• How does Charles utilize scientific or engineering principles that he learned at MIT for business? Where do Karl Popper and Michael Polanyi figure into the process?
• Specifically, how has Charles applied concepts from Polanyi’s “The Republic of Science” to his work?
• Virtuous cycles of mutual benefit, creating value for others, and the two components of finding opportunities in this value.
• Now that we know what good profit is, what is bad profit — and how does it reduce value and diminish opportunity?
• Do Koch companies participate in bad profit?
• What are the major market distortions that Charles opposes?
• Within the company, how are disagreements hashed out? Is there a framework of principles in place to guide consensus?
• Driving principles: personal knowledge versus conceptual knowledge, three-dimensional learning, comparative advantage, synergy, creative destruction, free speech, property rights, decision rights, market-based management, and the human action model.
• If these principles seem so obvious, why are they so often ignored by countries, organizations, and companies?
• What Charles has found to be the three requirements of a good, successful partnership.
• How has Charles’ approach to policy coalitions changed over time, and what ground has been gained by finding common cause with former adversaries?
• What is Stand Together, and what does it aim to accomplish?
• How does Stand Together incorporate market-based solutions that have proven successful for Charles’ other endeavors?
• A hopeful look forward at Stand Together capturing the national imagination with the same intensity and bipartisan support as prison reform is enjoying today.
• Is Stand Together still accepting applications from social entrepreneurs?
• Charles weighs in on capitalism, the ideal role of a business in society, environmental priorities, and politicized corruption.
• The effect of higher taxes on GDP, the failure of trickle-down economics, and what Charles sees as the best course toward the pursuit of happiness.
• Does Koch Industries fund propaganda to confuse people about climate change?
• What does Charles consider to be the most legitimate existential threats to humankind?
• The cause that unites the seemingly unlikely pairing of Koch Industries and George Soros.
• For what would Charles be willing to bet his entire personal fortune?
• What would Charles’ billboard say?
• After whom was Charles named, and why?
• Where did the nonintuitive (to most Americans) pronunciation of “Koch” originate?
• Parting thoughts.

EDITOR’S NOTE: Dear listeners, timestamps will be added shortly.

PEOPLE MENTIONED

Posted on: August 11, 2019.

Please check out Tribe of Mentors, my newest book, which shares short, tactical life advice from 100+ world-class performers. Many of the world's most famous entrepreneurs, athletes, investors, poker players, and artists are part of the book. The tips and strategies in Tribe of Mentors have already changed my life, and I hope the same for you. Click here for a sample chapter and full details. Roughly 90% of the guests have never appeared on my podcast.

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