What an honor to be here. Thank you for hosting us, Forbes. And welcome. This will be put out as the all-in interview. So, I'm really excited to share this conversation with everyone on the world on the internet and to get some time with Charles Koch, Chase Koch. Chase and I have known each other since 2013.
When we overlapped in the agriculture industry, got to know each other. We've been business partners. And Charles and I have gotten to know each other a few times over the years. But I'm really excited for this conversation tonight. So, Charles, thank you for being here.
Thanks for having us. It's an honor.
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In Silicon Valley, entrepreneurs and even mature company CEOs always like to learn about the story of other businesses and the success of those businesses. And I've always felt like Koch Industries was that untold story. Probably the most profitable private family-owned business in the world. Maybe I'm off on a couple points, but certainly up there. And one of the most impressive business stories because of the evolution of the business, which I'm hopeful we can hear a little bit about how that evolution came to be tonight.
And just for some statistics, if Koch were publicly traded, the revenue would put it easily in the top 25 of the Fortune 500. It's a family-owned business based out of Wichita. Founded in 1940 by Fred Koch with businesses ranging from energy, agriculture, chemicals, building products, consumer products, even cloud computing and a very active minority investment portfolio with 120,000 plus employees. That statistic might be off across 60 countries. Very unique operating model which we'll get into today including principles around disruptive innovation of the business reinvesting 90% of profits in new businesses and growth meritocratic values and I'm hopeful that tonight we can take an opportunity to hear about the evolution of the business and talk about some of those principles and maybe we can get started Charles if you could give us a sense of the scale of the business what are the business lines that you operate today and maybe provide a little more color to those high-level statistics I shared today.
I can go back through some of the history and the failures and successes, but I'll go through what we've grown since the early 1960s. And then we had 300 employees. Now we have more than 130,000 and in 60 countries and we have increased in value 9,000 times over that period.
When did you join the business?
1961 full-time. I'd been working. Well, my father, we lived on a farm and he told me at age six he didn't want me to be a country club bum. So made me work in all my spare time which I hated and so I was always in trouble and so he was kind of tough on me rightfully so. And thank God he did. Years later I asked him, 'Pop, why were you so much tougher on me than you were on my younger brothers?' And he said, 'Son, you plumb me out when you came into the business.'
What was the scope of the business? What was the business operating?
We had two main businesses. One was to design and make fractionating trays. That is that they separate liquids by differences in boiling points. And then our largest business was a crude oil gathering system in Oklahoma. And so my father and I had finished just a few years earlier finished MIT and I was working for Arthur D. Little then a leading consulting firm and I was and you'll think this is a joke at age 25 I was doing management consulting. I mean that I have to laugh at absurdity of that but they were paying me for it believe it or not. So my father called me and he said son I want you to come back and join the business and as tough as he had been on me and as I say rightly so I declined. So he called me a few weeks later and he said, 'Son, either you come back to run the company or I'm going to have to sell it because my health is bad and the companies aren't doing well and I don't have long to live.' So I agreed because well for a number of reasons. The first one is I got three degrees at MIT in engineering and I sucked as an engineer. I mean, get that. And what? So, how'd you get through MIT? Because I was real good at the math and the science and the theory. And I was no good at making or operating things. So, I figured out pretty quickly that I wasn't going to make it as an engineer. So I need to be an entrepreneur and because I was good at principles and that's why we led. So I was always looking for principles that would help me contribute and succeed and that's what transformed our company.
So you come into the business couple hundred employees you said at the time 300 employees and how did you think was the mandate to grow the business? Was it just to keep it stable?
No, it was. Could I take a few minutes and go through those first two businesses?
Okay, sounds great. Yeah.
Okay. The first one was making fractionating trays, designing those. We had a president then who was one of our principles. You don't want to be a negative is top down and obsessed with controlling everybody. So he would send out a memos every week demanding they on what they spent, how did you spend it on, what did you do, what did you do this right? So they were frustrated. Matter of fact they started ignoring him and then the whole culture was protectionist that is when they sold the internals for fractionating tower they wouldn't tell them the design and well we need to know the design so we can correct it. No, they wouldn't give it to them. And then what's even worse to satisfy the European market, they didn't even build a plant there. They had multiple subcontractors do parts of a tray and then bring them all together and assemble with another contractor. Now, you can imagine how that was for speed and cost. So we were losing our ass if you excuse the expression. And so I changed the management and changed the philosophy. Okay, the first thing we're going to focus on is creating value for our customers. And then the second thing we're going to empower our employees so they want to do this. And the third thing we're going to do a plant we're going to build a plant in Italy to satisfy the European market. We're going to do it all ourselves and so we got became profitable and then we started adding related products and I'll get to that later but and so we started growing.
Can I ask a question? You come in at 25 plus or minus a little bit and you see the problems at the business. It's not profitable. It's not being well managed and you overturn the management team. How did you have the confidence at this age coming with the experience you had to take that level of action that quickly?
Well, it was life or death. And my father said, 'You can run this business any way you want. The only thing you need my approval on is to sell.' That's the way he talked me into coming back after I said I didn't want to or I wasn't going to. And then in 1970, what really helped is my brother, younger brother David joined the business and then he continued that growth.
And then you're now running a profitable operation. You've got a European business. And at that point did you start to think about expanding into other products and other?
Well, that's it. And this is so I was learning all these different principles and what I saw we were doing not just here but in other things is we were building capabilities that is I looked at it we need to be capability bounded not industry bounded. Like okay you could say to a certain extent because we were in crude oil gathering we're in the oil industry oh that means Everybody was saying you need to be an integrated oil company. You need to be in everything. And I was applying divisional labor by comparative advantage. No, you need to be in the part of the industry in the part of the value chain where you can create more value than others. Otherwise, you're going to fail. And that's what we're seeing happening now. There's more specialization by comparative advantage. And so that's what so I started this created this principle called creating virtuous cycles of mutual benefit. And what that led us to do is to start this neverending cycle of growth, innovation, success and failures. And failures that when we did it right that we learned from and made us better and taught us better how to apply principles to create value and we're still going through that. We have a lot of failures and that's when you when you apply creative destruction in your new things. If you're not failing at everything, you're not doing anything new.
Where did you learn that lesson? So, what was the first major failure that you know they always say you got to plan until you get punched in the face. What was the first punch in the face?
Well, I had a bunch of them with that company. It was called Koch Engineering then. And like I said, okay, when we got into refining, we created petroleum coke. So I said, well, let's come up with a way to use that as base to make activated carbon. And that was a fair we spent a fair amount of money on that. And I just we had a whole bunch of those and we've had many more.
How did you make the decision to shut it down or walk away some point? A lot of entrepreneurs have this problem. They build something, they're too in love with it and they don't know when to say enough is enough.
Yeah. Well, that's when enough is enough. When we lose our ass enough. No, it's when we decide we don't have the capability to create superior value for our customers and that we're going to be rewarded for. And sometimes it can be the structure of a business like the company that Chase founded Koch Disruptive Technologies, KDT. It's been it does tremendous things but it is a structure that makes it hard to make it profitable. And so that's the other thing is so that's another these are principles that we've learned. Okay, we didn't apply that. What were the principles that we didn't apply that caused us to fail? That's what I mean we learned from failure. So the businesses we're you ask the businesses we're in now and Chase there's Koch people here. You all can catch me up if I the ones I miss. But we have engineered projects, engineering construction. We have we build solar plants. We have commodity trading and distribution. We have fertilizers. We have refined products. We have chemicals and polymers. We have glass. We have forest and consumer products. We have four different investment firms with different comparative advantages. And we have electrical products and we have software systems for management.
Dave, let me just hit one point something. No, you got it. You did a great job. I mean basically like eight wholly owned business unit platforms that he described and then four investment different businesses. But I just wanted to kind of really drill a point home because when I came out and when I started really hanging out with you and the whole tech community and trying to like build that network, a lot of people had the same question that you did about who is Koch? What are you guys all about? You know, I know it's a large private business, but being in Wichita, Kansas, we don't know that much about it. I think this point that is so different about Koch versus almost any other company out there is what my father said on being capability bounded, not industry bounded. And you know, how do you get from a small crude oil gathering company in southern Oklahoma to all of those businesses that he described? And there's I mean the principles obviously throughout which we'll be talking about in this discussion but one of the absolute core differences is that whole approach to capabilities and I would encourage anyone that's in a business and trying to scale think about it from that lens. What capabilities have I demonstrated that I can add value to customers and then point it at new industries where I can experiment. This is one of our principles as well. Experimental discovery, not trying to do everything at once and trying to conquer the world, but experiment and test. Does the customer value my product or not? And then along the way, you know, those core capabilities for us started off as operations, logistics, trading in the very early days of Koch, that's what we demonstrated we were good at. We were getting great customer feedback. But then when we had the capability approach to say okay we started in energy we started in crude oil gathering pipelines and refineries can we point those same capabilities into natural gas can we point those into chemicals let's experiment there can we point those into fertilizers because then we learned about natural gas and then the Georgia-Pacific opportunity comes along and it's like hey these are wood products it doesn't seem similar to these other businesses, but it's the same core capabilities. We buy Georgia-Pacific and along the way it was somewhat of a happy accident that we started learning about consumer products and branding. So branding became a new capability for Koch through acquisition, but it started with where do we think we can add value and do a good job on that and collect new capabilities along the way. So, I think that's like a really simple way to think about Koch and it's over the course of time like how we're different. One other thing I'll mention too because I've been asked many times it's like well so is it sort of like a Berkshire Hathaway where you have all these different businesses and conglomerate and I would say no. I mean obviously Warren Buffett and his team have done an unbelievable job operating the business the way they have but we think about our business very differently instead of operating them all as independent businesses and almost like in silos think about it as a republic of science. We're not a conglomerate. We're an integrated set of capabilities.
Is it fair to say that you wouldn't consider an acquisition or a new business line if there wasn't some relatedness to an existing competency at the company?
It depends. I mean, as you see when you read the book, we went through one chapter on creative destruction and what Schumpeter called all the different ways to do that and one is to create a new management approach. Okay, that's our biggest one. So the question is when we bought Molex makes electrical connectors which has done fantastic and at first it wasn't doing great. So we said we think if we can get them to apply these principles it will turn them around and we didn't and the problem when we do that they tendency is to learn the lingo and so you can call everything by these names and you still do what you always did and that's what was going on there. And so finally we got in. No, we had changed the management and once we did that and they started applying these principles, they took off and now they're knocking it out of the park. But let me go back to failures. Because I mean we're understating our great strength in failures. And that is I'll give you our worst failures and what caused it. And it caused us by violating the principle of hiring people first on values and second on talent. And what I've for years I told our people, look, if you want to hire somebody with bad values cuz you like them or something, hire them slow and stupid and so we can catch them real quick and get them the hell out. Maybe get them to go to work for our competitors or something.
Maybe help them get a job.
But anyway, that was huge. And then we made that even worse by taking people who had terrible values and made them leaders and so what we call that is rather than we want everybody in the company to be contribution motivated that I want to succeed by contributing. I want to be rewarded for my contributions, not for anything else. And the value I create for our customers or for the future. And so they would some of these people were destructively motivated. What they wanted was power or control and they would hide their failures and make up their successes. And so I'll give you two examples. One goes back to 1973. You remember the war in the Middle East and everything. And they had gotten us into all kinds of wild reckless trade. So that could have bankrupted the company. And then later because I mean much later shows you that repetition penetrates even the dullest of mind. So I needed this to happen a bunch of times. So finally, okay, I got it. I got it. God, don't punish me anymore, please, for my stupid mistakes. So this was we did it about the same time, our ag group. We put leaders in who were destructively motivated. And in refining, we got in a leader and they were destroying those businesses and so it didn't almost bankrupt, but it almost wiped out all of Koch's earnings in the late 1990s.
You'll appreciate. So, you'll appreciate this being an ag guy. To go a little deeper on what happened in the late '90s in our ag business, we called it the strategy the gas to bread spread. So, we wanted to basically be in every element of the value chain all the way from pulling the natural gas out of the ground, converting it into fertilizer, making the nitrogen products to grow the crops that would ultimately then end up on the grocery store shelves and being bread. We got in pizza crust, all this crazy stuff. When you look back on like what the hell are you doing, right? But it was what he was saying is like leadership thinking about we can do anything and if we like basically kind of control the entire value chain like we can make that successful completely violates probably all 41 principles in the book, right? Experimental discovery, knowing where your capabilities are, right people, right roles, and so we yeah, we called it the gas to bread spread. Some people called the ass to bread spread, too. So,
And there's another one in there, integrity, because when they knew there were losses in some of these and then they wouldn't tell us, they wanted to go ahead anyway.
We had a deal within that, you know, like Purina dog food. So one of the things that was acquired was the large animal feed mainly hog. So hog feed and did no diligence and this is one of our principles. Apply the scientific method. So disprove your hypothesis as much as you try to prove it. And so we closed that acquisition and within days we found out that we had hundreds of millions of out-of-the-money hog contracts because we didn't even look at the contracts. So I mean that's when I think this is really important for founders that want to grow right you have this growth at all cost mindset and you start not like asking why not and this is the kind of trouble that you get yourself in.
So let's go back to the management piece. How do you take these principles which you've applied successfully to I would use the term iterate because for me like failure is all about iteration to success and finding paths that work, finding businesses that work and ultimately finding people that work. But how do you drive that culture that represents the principles? Because you could create a book and give it to all your employees and say, 'Guys, here's 41 principles. We've sat down. We've thought about it. We've written them. They're going to work.' But to actually live them to realize them to hold people not just responsible but accountable to them. How did you do that as you develop these over the decades?
Because at first we tried to get them to do it through sheep dipping that is you take everybody in you give them a big seminar now go do this. And from Polanyi if you want to read a book that's hard to read I mean if you want really hard one you can read Human Action this is even harder called Personal Knowledge by Michael Polanyi who was a chemist and then became a philosopher and he goes through what it takes to develop personal knowledge. It's you have to rewire your brain to have it work differently, right? You have a habit. So, you don't need to think about it. And then if you want to change like, do I brush my teeth first or do I comb my hair first? No, I want to start combing my hair first. And all of a sudden you're back brushing your teeth first and you because you're not thinking about it. And so because your brain gets I mean you know your body let's say you're a weightlifter and you want to be a marathoner. Okay it's going to take work with intensity over time to change your body. Well your brain's part of your body. So you've got to do the same thing. So we said, 'Okay, we've got to start with, okay, let's find a group that's really interested in this. They're struggling. They're having problems and here are the principles and we'll coach them. We'll help them start doing it.' And if they work with intensity on it, and then they succeed, then we don't need sheep dipping because then the other businesses and capability says, 'Gosh, I'd like to do that.' So you don't need to call them in. Then we have more demand for people who can help them. And the hardest thing is to have our people in strategy or our principle-based management group who are really good at helping them. And boy, they're in more demand than anybody.
So the best thing is success will drive social mimicry. You'll see other.
That's it. Here's another take on what he's saying that I think really connects about culture to your question and that is the essence of principle-based management and all the principles in this book as well is what if you could have a business and a culture small, medium or large where everyone knew what to do without being told. And so that's hard to get your head around, right? Because I think most businesses come at it from top down. There's the iconic leader that's the smartest guy in the room building the strategy and then telling everyone what to do. And so I think one of the most important principles in this that we tell a lot of stories around is to flip that on its head. And it's about bottom-up empowerment with principles and empowering your talent, your team, your leaders with these principles. So that then you use the collective knowledge of everyone, not a couple smart guys at the top of the company.
Most people in most enterprises that aren't owner operators don't want to fail. They want to keep their job. They want to move up the ladder by being repeatedly successful. And if you want to create a culture of creative destruction, if you want to create a culture of failing and learning from failure, it's very hard to get individuals who live on an income on a salary to do that because if they make a mistake, if they fail and then they fail again and they fail again, I'm worried about losing my job. So what you typically see in most scaled organizations is middle management and even senior management when founders or owners don't operate it anymore saying, 'I'm going to take the less risky path. I'm going to do the less creatively destructive thing. I'm going to do the thing that's least likely to fail because I don't want to lose my job. I want to keep my job, get my bonus, move on to year two and go home to my kids and my wife and take care of the family or whatever the family situation is. And that's my objective.'
But see, and that approach creates perverse incentives. And so we try to align our incentives that we want to reward people according to their overall contribution to Koch's future. So for example, if they have an experiment and that doesn't mean doing this thing in a where you buy all these hogs and you lose hundreds of millions of dollars over what that's not an experiment. It's an experiment. A good experiment is where the value you what you learn from this is higher value from this failure than the cost of the experiment. And so when we do that and we're evaluating what the person you are building capability for the future. That's why we put so much emphasis on are you building capability and capability part of it is the culture and what Chase did with Koch Labs when he started Koch Disruptive he said Koch Labs I want every business to be a laboratory for what we find both to help us source these tech opportunities and then we'll if they're just trying some, we'll try it out in that business. And being in all these different businesses that touch almost every part of the economy, it gives us a big advantage in that. So, but that affected the whole culture. I mean, on your business, don't you want to be part of Koch Labs? We're an experimental discovery group. We're just not a bunch of grunts here grinding stuff out.
Yeah. I think the KDT example is a really good one because you asked about motivating and like what if you fail and then what if you get fired and all that. We tried to basically take a little bit of the Silicon Valley approach and bring the you know of experimental discovery. You learn more and you pivot and learn have a failure but then now I know what I don't want to do. I'm going to pivot my strategy to what may be working. I'm going to keep trying. As long as you don't go sink the company with some massive bet, right? And I think KDT was a great experience like I call you know when we did that when we made those first investments you know this in venture you're the losers fall out first and the winners take a hell of a lot longer to materialize. So if we would have just judged it based on, okay guys, you got three or four years to figure this out, we would have shut down KDT because you had the but it was that experimental discovery principle and mindset that we applied to it. And oh by the way, we were learning so much as Koch from seeing the technologies that were coming around the corner that might disrupt our core business. And so we valued that learning and we rewarded the people that were bringing that knowledge in. If you just look at it on the bottom line basis in the first couple years, you said just shut this down, right? But then over time like all these different things and then the returns are starting to come because we thought long term about it. But it all came from that experimental discovery one principle and then creative destructions like if we're not in the game on technology and we don't see what's coming, something's going to happen. Especially with how fast technology is moving today, some of our businesses are going to become dinosaurs.
How much of that risk were you willing to take and did you take on acquisitions? So, doing homegrown experiments on new business ideas and strategies and products can be lower cost. But if you're going to do an acquisition, do you have less room for fail?
Well, how about this? We were a much smaller company and we bought Georgia-Pacific for 20 billion.
Well, can just tell us what Georgia-Pacific is for those who don't know.
It's a wood products company and it's got two big pieces to it. Building products and consumer products. Well, it's got a third one, but I'm generalizing.
Sorry. No, no, I'll shut up. Shut up.
No, no, no. But anyway, on that one.
So, when did you buy it and how big of a betting the company move was that?
Yeah, we were much smaller in 2005. I can't remember how much smaller but it was a lot smaller.
It was a massive bet.
How'd it come up?
Okay, we were looking applying this virtuous cycles of mutual benefit. We were saying okay what's one of these cycles are chemical process industries and wood creating the pulp and stuff was matter of fact we found in my father's thesis he did a study in Maine on this very thing on pulping I mean I found it later but that did his MIT thesis.
Wow. So, we said, 'Okay, let's look at the Oh, and they were saying they need to spin off some of those parts the pulping part.' And we said, 'Okay, let's buy that.' And we bought that as an experiment and we did real well with it. And so we said, 'Wow, they have other because that was a commodity business and they were trying to get their price to earnings ratio. It was like six and if they became more of a consumer products, they could get it up to nine.' So we proposed we met with them and proposed that we buy the commodity part and we'll pay them a high enough price that then they can be all consumer products and get their price. And we showed them all the economics and they said that's fine but we'll be sued for constructive fraud because we all have all these lawsuits against us and so we can't do it but we like the value and so we went home and says well okay what if we just offered the whole thing and a couple of them were getting ready to retire and the senior officers so they were really liking it and they were kicked out of all the board meetings from then on. But anyway, so we sold them and that was a time when money was tight and stuff so nobody came in and topped us. I'll give you just one funny story. We sent one of our people in to be the CEO, Joe Moeller, who had been president of a company and they had it was totally top down bureaucratic. They were in Atlanta they had this 51-story building. Was it 51? You can correct me.
That's right. Yeah, you got it. I help you.
And they had a private elevator to get up there and you didn't have to wear a coat and tie but if you came up to visit all the management was on this 51st floor and you had to put on a coat and tie and get permission to come up there. And so Joe immediately kicked them all out. Well, we fired a bunch of them and then set the remaining ones down to work with their groups and on the regular floor and then turned it all into offices. I mean into meeting rooms open to anybody. And so that I mean you asked about how you get culture change. A lot of it is signals like that particularly when a bunch of them get fired for being so bureaucratic and hierarchical.
Would you say that that business unit operates like the rest of Koch Industries today?
I mean, I'll just say like that is such a rare and difficult thing to pull off. I mean, there's just countless stories of acquisitions where the acquirer thinks that they have culture, thinks that they know how to transfer culture, and literally no one seems to be able to do it. This was one of the insights from Warren Buffett is you find great managers. You let them continue to operate as owners of that business and they get some profit share or whatnot and they've got a durable moat so he can make a long-term investment and he just leaves them and.
That's see that wouldn't work for us the stuff we bought. Well, let me give another one if I could that was even more difficult and that is sadly my father died not too long after I came with the company in 1967 and we had owned an interest in a small refinery in Minnesota and so but two years later we were able to buy it. And it was not being operated very well because the management had let the union control how it was run. And so it was run very inefficiently. And so the first thing we tried to do is change the work rules. So they went on strike. And by the way that was at the start of my honeymoon. Thanks a lot guys. And it was violent. I mean, they ran a switch engine and tried to knock down one of our units. They shot high power rifles in there and they blocked the gates. I mean, it was impossible to get in there. We had to take helicopter. But we were successful in operating without the union workers for nine months, bringing people in from other plants. And it operated better than they did. So, finally we got the work rules changed and then we said, 'Okay, we're going to empower the employees. We're going to change the culture.' Now, you think at Georgia-Pacific it was tough. This was much tougher than that. And so we worked and worked on it to try to make their jobs better, get their opinions, get them to work as teams, get them to come up with innovations. And when they did, we reward them and we got the union to agree with that and like one they said a group of them said, 'God, we're buying all these spare parts we need. We can if you'll build a machine shop we can do it cheaper and faster and they did and then other things they saved ton of money for us made things more efficient and now the culture there is fantastic. I mean we're talking about we're not talking about Wichita we're talking about Minnesota. So I mean we're so proud of what they've done and it still blows me away how much they've taken these principles to heart and using them to make that place. So we've increased the capacity tenfold and it's one of the best refineries in the country.
Bob, wouldn't you say that? I mean the common theme on all of these because we have the same story on Molex, you know, similar but different than Georgia-Pacific. This was a technology company, a connector and cabling and connector company, one of the largest in the world. That makes products in your iPhone and medtech products, your automobile. And when we bought that in 2013, it was a paradigm that needed to be changed. You described Georgia-Pacific top down versus bottom up. There was a lot of that too, but it was topline thinking versus bottom line thinking. It was all about revenue growth, right? This is a technology company and it was also a public company for 30 plus years as well because what the market rewarded them for. And so like the whole the stock price the public versus private discussion is interesting here and it just what we've learned is it takes a hell of a lot longer than you think to change the culture and almost in every case I mean pop tell me if you agree with this but in almost every case it requires changing leadership that has the paradigm of bottom-up empowerment and that learns and applies the principles. Almost every time when we fail, it comes down to ignoring the principles. You can and that's what the book is about. You can kind of reverse engineer these stories like well we missed that principle, we missed this principle. But it comes down to talent and the right people with the right mindset. And I want to share just one story with you that really shows like how we apply this at Koch. He talked about our talent vision being you start with basically culture first, skills second, values first, skills second. I always add a third dimension to that as well. Values first, skills second, credentials last. And that is a very different mindset than most companies because most companies, I think, look at it and say, I want the guys, you know, that have the 40 from the Ivy League school and all that. And there are some incredibly smart obviously folks from that. But by our experience and also is one of the reasons why we stayed in Wichita, Kansas is that we can basically hire the farm team, right? Kids that have grown up on the farm that have that contribution motivated mindset that work their tails off and want to come in to make a contribution as opposed to coming in expecting all this stuff and coming in with more of an entitlement mindset. So case in point, our CIO today, his name is Jared Benson. His first interaction with Koch was based striping lines in our parking lot. So no college degree whatsoever, but he found his way into Koch because he demonstrated that hey, he knows a little bit about data science and he could help us. This is about 20 years ago. And then ultimately he came in, he proved himself. He was running circles around a lot of the team and like just contribution motive mindset adding value. He saw the cyber security risk and that wave coming built a whole capability to protect us from cyber attacks and then now he's CIO of the company guy with no college degree. So I mean that kind of mindset in terms of our talent vision and like that values first and someone that just wants to come in and they just love the job and they want to make a difference.
Do you actually codify these principles and everyone at the company has a handbook that lists them out and then they're part of the assessment process for quarterly or annual reviews with people?
Yeah, I mean obviously there's the book and he's this is his fifth book. It's my first but so Good Profit Science of Success we have.
It's my best book because of.
Hey Brian the one we did is pretty good too.
Right. But yeah no there is a discipline right and really it comes down to the leaders taking it seriously and there the leader first responsibility is to help their people.
Okay I'm going to put my analyst hat on for a second and I'm going to say My observation would I would create a theory. We could test the theory right now that being in Wichita being founder or owner operated and you know having this ability to be isolated from a monoculture. I just feel like Silicon Valley a lot of companies replicate each other. You have to kind of there's this term that's being used a lot now over socialization. You have to operate like everyone around you or you're not part of the you have to fund raise in the right way and do these deals. You have to hire people this way. You have to do this sort of vesting schedule, this sort of equity. Everyone's the same. And if you don't, you're kind of a weirdo. But by being in Wichita, you don't really have that problem. You can think your own way. You can challenge yourselves. You can debate. You can come up with your own principles without feeling like everyone else is conforming to the groups around you. But they can because they're a bunch in Silicon Valley that are a challenge.
So they're not all that way.
But is it always been a competitive advantage? I mean, did you ever think to move the headquarters to New York City or?
No, but the main thing we've never thought of that, but what we've Sorry about that. I mean, there are advantages of being in New York City. I mean, you have a great mayor now, so we're good to go. But anyway, so we that's a competitive advantage of us.
That'll be a.
But this is No, but the main threat we've had is we had sons that wanted to take us public and I said it'd be over my dead body and some of them thought that would be a good idea just like they're thinking that about Trump. With a lot of people thought still think about I get a lot of nice notices of my imminent death and they say okay your brother died we hope it was I know this is painful but I hope it was slow and painful and I hope Charles is even worse that's the kind of crap we get but anyway the biggest push has been for us to go public God will be worth so much and stuff and but I think our view we never could have accomplished what we have first of all we never would have built a principle-based framework and then we never would have been able to pull off this capability bounded versus industry bounded because then I mean people don't understand it. Now, if you're Buffett and you've sold that long, then people Okay, but he wasn't trying to integrate them the way we do. No one would believe it. And so what and that's because you've got to have a story that the analysts can understand. Otherwise, we would like Georgia-Pacific, we would have a low price earnings ratio. And so being private, being in Wichita, competitive advantages, what about being owner operated or founder operated? There's this argument that the best.
There's this argument that the best.
Silicon Valley companies are those who are founder-led for as long as possible because the founders are willing to destroy the business creatively. They're willing to think about what's over the hill, make the tough decisions, reinvent the company, hire and fire as needed, be willing to take the short-term financial loss for the long term. Have you been able to get that to distill down into the organization? Because that's the thing that most public companies that are not owner-operated deal with and struggle with is managers that are short-term incentivized and can't take the big risks and the risks of failure that you're able to embrace.
No, but I think it depends on the values of the owners. One of our principles is that any good partnership of any kind, whether it's marriage, friend, employee, partner, requires three things. It requires shared vision, shared values, and having complementary capabilities that you use to make each other better. And if you miss any one of those, you're not going to have a lasting good partnership. And so I remember I was to the YPO group in Wichita. I was presenting, this is like 20 years ago, presenting what we were doing and why. And one of them said, 'Well, how do you get that to work in a private company?' And I answered, 'Well, no, it's easier than in a public company, just like I did.' And then I thought who it was and he was talking about his father. His father was a total dictator and no way he could apply any of these principles in that. So it all matters who the owners are and what their values are.
Can a public CEO that doesn't have a big ownership stake in the company adopt these principles and transform the culture of that company?
If you can sell it like Buffett has, but I mean he wasn't doing these principles, but he had a different principle and that is I'm going to buy companies, not going to take top price, but what's meaningful to them is they run it. So I'm going to buy it and let them run it. And so that was his value that he sold that made him tremendous wealth. The other one was buy insurance companies so you'd have a lot of liquidity to go do all these things. And those two things are what made him successful.
Right. Chase, I want to just go back to your getting involved in the business. We didn't get into that, but how did you get started at Koch? How and were you always a believer in the principles from a young age? Were you around the organization around your kid?
