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Examining the Kochtopus

Brett Ryder

Koch Industries is one of the great success stories of American business.  The oil, gas and commodities conglomerate is based in Wichita.  It employs more than 100,000 people worldwide and has an annual turnover of about $115 billion.  It’s also one of the most unusual companies in its management techniques, enthusiasm for political activism, as well as the intensity of its family feuds according to a recent article in the Economist about a new book, “Sons of Wichita,” by Daniel Schulman.

Koch Industries is run by Charles Koch.  Charles is the second son of founder, Fred Koch.  David, the younger brother acts the loyal lieutenant, while two other brothers, Fred and Bill have a more complicated relationship with the company.

The company is managed by what Charles called market-based management.  Employees are required to read his 2007 manifesto, and attend a two-day seminar on the theory. 

The system is democratic.  High school graduates can rise faster and go further than Ivy League MBAs.  Workers can earn more than their bosses.  Those who succeed get bonuses of six or seven figures; those who fail cannot hide.

The Koch brothers defy the tradition approach to politics of lobbying and contributions.  They run for office, and fund organizations like the Cato Institute and the Tea Party’s Americans for Prosperity.  Critics worry about the “Kochtopus”—the network of institutions they finance. 

The family is plagued by feuds that one of the protagonists says makes “Dallas” look like a playpen.

Despite that, the company’s success is extraordinary.  Profits aren’t public.  Charles believes staying private has many advantages, and the company will go public, “literally over my dead body.”