Review
Author: Christopher Leonard
Reviewed by: SHA
Issue: June 2020
Fred C. Koch (1900-1967) was a founding partner of what would later be named Rock Island Ore & Refining Co., as well as a founder of the John Birch Society. Rock Island owned an interest in the Pine Bend refinery in Minnesota. When he died in 1967 his second-oldest son, Charles, then 32-years-old, was named Chairman and CEO. Charles was one of four Koch brothers: Fred (1933-2020), Charles (1935- ), and twins David (1940-2019) and William (1940- ). The name of the company was changed to Koch Industries in 1968 to honor Charles' father and Charles has remained the CEO to this day. He has turned Koch Industries, based in Wichita, Kansas, into a global behemoth. The company has rigidly remained private and is now the second largest privately-owned corporation in America with an estimated $115 billion in annual revenue and about 130,000 employees. Charles and his late brother David each owned 40% of the company (Fred and William had been bought out years ago) and each was worth on the north side of $60 billion. The stunning growth and profitability of Koch Industries was the work of Charles by operating privately, reinvesting 90% of the profits in the company, and establishing the management style of the company (Market-Based Management, or MBM), focusing on the Ten Guiding Principles, which are printed and hung throughout the company. Author Leonard notes the following about the company: "It specialized in the kind of businesses that are indispensable to modern civilization but which most consumers never directly encounter. The company is embedded in the hidden infrastructure of everyday life. Millions of people use Koch's products without ever seeing Koch's name attached. Koch refines and distributes fossil fuels, from gasoline to jet fuel, on which the global economy is dependent. Koch is the world's third largest producer of nitrogen fertilizer, which is the cornerstone of the modern food system. Koch makes the synthetic materials used in baby diapers, waistbands, and carpets. It makes the chemicals used for plastic bottles and pipes. It owns Georgia-Pacific, which makes the wall panels, beams, and plywood required to build homes and office buildings. It makes napkins, paper towels, stationery, newspaper, and personal hygiene products. Koch Industries owns a network of commodities trading offices in Houston, Moscow, Geneva, and elsewhere, which are the circulatory system of modern finance. Koch traders sell everything from fertilizer, to rare metals, to fuel, to abstract derivatives contracts. Koch Industries' annual revenue is larger than that of Facebook, Goldman Sachs, and US Steel combined."Kochland is an exceptional work of journalism by Leonard, exposing the warts of this highly secretive company and its problems and failures, e.g. union battles, criminal charges on the oil gathering business, and the Purina Mills debacle. Charles Koch, a libertarian, has also created "a political influence network that is arguably the most powerful and far-reaching operation ever run out of a CEO's office." He and his company have drawn a long line of critics over the years, but their style remains rigid and they employ an army of legal experts to protect their flanks. This book is a superb biography of an institution, well-researched and well-written, that encompasses a wide range of individuals and circumstances over the years that, knitted together, define the institution.