Weve done pretty well here, he said. And companies that have moved (away from Wichita) have missed this. You think, OK, we few smart people at the top we have all this knowledge, and were going to move, and lets say we lose half the people. No big deal. Well replace them. And then they find that their computer systems dont work, their accounting system is a mess, the back office is screwed up.
Why? Because people have tacit knowledge. They cant even communicate all the things they know, how to make the system work. And theyve learned to work together in a way that makes an organization highly effective, highly efficient, highly productive. And you lose that tacit knowledge, and lose that culture, and it isnt going to work the same way.
He said he has no plans to move the company out of Wichita, but cant say what will happen after he is gone.
He also prefers hiring people from Kansas, Nebraska, Oklahoma and Texas, because he says they are honest and have a strong work ethic.
A lot of them grow up in a rural area, where theyre out there having to work, and there are no fantasies about who is producing value and who isnt, Charles said. If a cow dies because you didnt feed her, you get a lesson. Somebodys got to feed the cow.
Charles Koch believes so devoutly in pursuing talents with passion and bearing the costs of our behavior that when his son, Chase, half-heartedly played a tennis match years ago, he sent the 13-year-old to work in a cattle feedlot in western Kansas. Liz said that the feedlot was so big that Chase could smell it from 20 miles away.
Inside the massive black-glass building where Koch Industries manages 60,000 employees in 60 countries, Charles Koch steps to his office door and smiles in greeting.
Hes got a soft voice and a full head of white hair, and because he rubs his head excitedly when talking, hes got a tuft sticking up from the back of his head. He is 6 feet 3, lean from disciplined diet and what Liz says is a ruthless, nearly daily 90-minute workout 30 minutes of Pilates, 30 of aerobics, 30 of weight lifting.
Surgeons have replaced both knees and his right shoulder; his joints took a pounding from decades of athletics, including tennis, squash, golf and polo. He once told a meeting of employees that he used to take glucosamine with meals but nowadays I just need a shot of WD-40 and Im fine.
He deliberates over every sentence, frequently stopping in the second clause to re-word the first.
Charles Koch tells the feedlot story. How he summoned his son to his office. I think he thought hed have a job here in Wichita and he could go out with his friends at night, he said with a grin.
Instead, the manager of the Koch-owned feedlot picked up Chase Koch in Wichita and drove him to western Kansas. And he lived with him on a couch, and worked seven days a week, 12, 13 hours a day.
In 44 years of marriage, Liz Koch says, she has given him every haircut because he doesnt want to take time to go to a barber shop.
His ride to work takes only 10 minutes, but he pops an audio book into the player, using those minutes to learn something. There is so much to learn, so much you need to know that there is not enough time, he said.
His hatred of wasting time has sometimes led his wife to stare at him in wonder, on the golf course when he impatiently scoops up her ball when she plays slow, or when he gets in a hurry and runs his cart over her ball.
He is a perfectionist at everything. Occasionally Ill misuse a word about market-based management and he practically gets hysterical on me, Liz Koch said.
After the kids came along, Charles coached son Chase and daughter Elizabeth on values and virtues daily at the dinner table, as his father had done.
Sunday afternoons was economics, Liz said. That was at least an hour of sitting in the library, Chase with his baseball hat pulled down over his eyes with his eyes shut and sound asleep so his father wouldnt see. And Elizabeth pretending to be the bright-eyed and bushy-tailed student.
While Obama and his campaign directors portray Charles Koch as formidable, the man described by Liz seems clueless about some things. When they first met, he showed up dressed in madras shorts, with a pin-striped shirt. God help you, she said. He looked like Willie-Off-The-Pickle-Boat.
But to her, that showed he wasnt vain, because no vain man would dress like that. After they married, she forbade him to ever set foot in a retail clothing store again.
Liz and Charles Koch often finish each others sentences, but he can be remarkably obtuse, she said. After the death threats, he hired security guards for the family and neglected to tell her. Sometimes I get notified after the fact, if you get my drift. She was furious.
Charles Koch sometimes tells stories on himself.
Several years ago, he said, the family owned Lucy, a small and mischievous shepherd dog, and Rufus, a huge Rhodesian ridgeback. Lucy, fearless, pounced on Rufus so much that Rufus cringed by the front door when Charles tried to take him outside.
The big sissy, Charles Koch said. Puzzled, he asked his son why Rufus acted like that. Its obvious, Chase Koch said. He just sees the way you act around Mom.
Now her husband stands accused: A rich guy who doesnt care about the poor or the vulnerable.
Prove it! Liz said. Prove that comment to me! Look at the money that goes into charities and to innovation to make life better. Seriously, do they think all this stuff just comes out of thin air? People love their Internet, their cellphones somebody came up with the ideas. Nobody thinks about where these things come from, they just think, Oh, greedy, greedy, greedy.
What is greed? Greed is a return on investment, the risk you took. And if youre lucky, you get to employ more people. And more people.
In business, theres risk and theres reward, she said. The pride that I see, the upside, is that so many people have put their trust and their faith in him as being the beacon for saving the country.
He believes sincerely that the country is going into debt so extreme that well never recover, she said. He believes were losing a virtue that made us great. When you see the courage and the tenacity of the people who settled this country, you just cant believe that we want to give it away. I really think theres something seriously wrong with education that people dont understand what theyre giving away.
Government giveaways like subsidies or other redistribution of wealth have created the idea that there is something for nothing. The idea that you can take, and make everyone the same. As a result, she said, you have a country of non-risk takers. That just want to be coddled, and taken care of. It never entered their heads that they might be able to do it themselves and do it better.
Charles Koch was so passionate about these ideas that in the first years of their marriage, besides demanding that she learn to cook, he insisted that she go to economics seminars.
That was five years of training, she said. Intense training.
Liz Koch said she and Charles hardly ever talk about the criticism from Obama or others. Were at a point now where we both enjoy a good nights sleep, and we know that if we have certain conversations too late in the day, it isnt going to help us at all, she said. And what are you going to say after somebody has tried to destroy your character, who you are, what youve built? Whats to talk about?
Charles was the rebel son, born Nov. 1, 1935; David was born May 3, 1940, the same year their father, Fred Koch, founded the Wood River Oil & Refining Co., the precursor to Koch Industries.
From their yard in east Wichita, David said, they could all hear the voices of friends at the Wichita Country Club while they worked. Their father made them work, picking dandelions in the yard when little, shipping out to shovel manure on ranches when they got older.
He kept saying, I want all you boys to grow up to be great men, David said. There were four boys in all. The other two sons, Fred and Bill, are not involved in Koch Industries.
Fred rode Charles hard, and Charles was glad to get away to the Massachusetts Institute of Technology.
Charles Koch achieved: bachelors degree, general engineering, 1957. Masters degree, nuclear engineering, 1958. Masters degree, chemical engineering, 1959.
For the next two years he worked for Arthur D. Little & Co. consulting, living in Cambridge, half a continent from the demanding father he adored.
His father pleaded with him to come back.
No, Charles Koch said. I thought, My God, I go back, he wont let me do anything and hell smother me.
Charles went to work for his father in 1961 only after Fred, weakened by illness, threatened to sell the company. Charles Koch took over the division called Koch Engineering. The first thing his father said when he showed up: I hope your first deal is a loser, because otherwise youll think youre a lot smarter than you are.
I didnt disappoint him. I got us in a lot of losers.
He challenged his father immediately after coming home.
One day, after hearing out Charles proposal to buy two trucking companies, his father went on safari in Africa. Fred, preoccupied with saving money to pay federal death taxes, told his son to buy only one. Charles bought both.
He was FURIOUS, Charles Koch said. I met him at the airport when he got back, and he would just barely talk to me. The only thing hed say was, Son, Ive been trying to save enough money to pay my death taxes, and youre going out and just wasting it.
By then, Charles Kochs mind was on fire. Inspired in part by stories his father told at dinner, about Stalinist Russia and how economics really worked, Charles was devouring books on history, philosophy, anthropology, psychology, science, economics. Charles said he read everybody, all the way from anarchists to communists. And I read everybody.
He read like a demon, David Koch said. Nestor Weigand, Charles Kochs longtime friend in Wichita, would see Charles small apartment floor, the couch and tables covered wall to wall with books, many of them open, and Charles would talk excitedly about how he thought the world could be made vastly better if people grasped how free economies work.
After he married Liz, he stuffed their small apartment so full of books that there was no closet for her clothes.
He read until he reached his own conclusions, especially this one:
There are certain laws that govern the natural world, he said recently. He started to wonder if the same isnt true for societal world. Were there also laws that determine to what extent people can achieve their ends? That will determine the extent to which people are more prosperous? That they are better off. Theres more civility. That theres peace. Progress. And so I became very passionate.
He read Adam Smith, Ludwig von Mises, Friedrich Hayek, Milton Friedman economists deeply committed to keeping government out of private enterprise. The key ingredient in a prosperous society is private enterprise, because private enterprise is all voluntary people are doing things they want to do, rather than things they have to do to fulfill some government-imposed obligation.
In all those books, the guy with three degrees from MIT saw what happens, as he believed, when freedom is curtailed, whether by dictators using guns or liberals using laws to redistribute wealth.
He put these ideas into action, as he now says himself.
First, he built a company that had $70 million in annual revenue in 1960, the year before he came home, to one with more than $115 billion in annual revenue. Charles and David Koch are now worth $31 billion each, according to Forbes.
Second, he created think tanks like the Cato Institute to push his philosophy of a free-market society.
He said economists ponder why we have poverty. Were asking the wrong question. We ought to ask what do we need to change so we can become more prosperous? Not how we eliminate poverty. Povertys the natural condition. If we just sit around and guarantee each other, and no one produces, we have extreme poverty.
Like Weigand, Liz Koch says the fight with Obama and the strain of work have taken a physical toll.
Hes lived a full life, she said. Their daughter, Elizabeth, now 36, lives out of town, and is not employed by Koch Industries. But their son, Chase, who slept through some of his dads economics lectures, is now, at 35, senior vice president at Koch Agronomics Services and shows many of the relentless and workaholic traits of his father, Liz said. But Charles full life has its limits, and she wonders whether at age 76 he pushes them too hard.
I watch him like a hawk, because its a concern, to work as hard as he does, and push as hard as he does. Even the things he does for relaxation are ridiculous.
Charles still acts like hes punching a time clock, she said.
What are you doing? shes demanded.
But she knows what hes doing. He worries about employees and business partners who depend on him to keep Koch Industries growing. And hes convinced his economic ideas can help the country.
Slow down, she has told him.
Please dont nag me, hes replied. If I didnt want to do it, I wouldnt do it. Its why I get up in the morning. I love what I do. I love the people I work with.
So he gets up every morning. He goes to work. He doesnt plan to retire. I like to say Im going to ride my bicycle till I fall off, he said. I mean, I dont want to go play golf every day, and I cant read all the time.
Charles Koch said his parents taught him to be humble and that he feels embarrassed every time he drives past the Wichita State University campus and sees Charles Koch Arena in big, dark letters on the wall of the basketball complex that he donated $6 million to renovate.
He felt the same way when Koch Industries built the black-glass block-shaped building that houses his headquarters. He came home from the Barcelona Olympics in 1992 to his new spacious office and felt embarrassed. I said, My god, whatd I do? Why should I have an office that big? I mean its just, I dont know, maybe its the way youre brought up. It reminds me of the story of what the mama whale said to the baby whale: Son, the time you get harpooned is when you come up to spout off. So it just makes me insecure.
Yet with all his claims of humbleness there is soaring ambition: In recent months he has likened himself to the revolutionary who defied the Catholic Church and changed history to this day:
The best way to describe it, which may be ridiculous, but is in a way similar to what Martin Luther must have thought when he said, here I stand, I can do no other, Charles said. I mean, if you believe these ideas are right, and theyre going to benefit the overwhelming majority of people, and you have some capability to advance them, how can you not?
Hes that serious about politics. But he makes fun of himself, too. At a Koch Industries gathering after the White House criticism started in earnest, he told employees: Liz reminded me the other day that when she married me, she knew it would be an exciting life.
But she didnt know it would be one of sheer terror.