How We Grew Koch Inc. to $150 Billion Without Going Public: Charles & Chase Koch

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. >> Yep. 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.

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axon.ai/allin. 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. of 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 and maybe, you know,

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. uh. I'll go. through what we've grown since um the. early 1960s. And then we had uh. 30,000 three 300 employees. Now we have. more than 130,000. And uh in in 60 countries.

And uh we have uh. increased in value 9,000 times over that. period. When did you join the business? >> 1961. full-time. I've been working. Well, my father uh. we lived on a farm and and he told me at. age six he didn't want me to be a. country club bum. So made me work in all of my spare time, which I hated and and so I was always in.

trouble. And uh and so he was kind of tough on. me, rightfully so. And and thank God he. did. Years later I I asked him, "Pop, why. were you. so much tougher on me than you were on. my younger brothers?" And he said, "Son, you plum wore me out.". When you came into the business, what was the scope of the business? What. was the business operating? We 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. and so. so my father. and I I was. I had finished just. a few years earlier finished MIT.

And I was uh. I was working for Arthur D. Little, then. a leading consulting firm, and and I was. and and you'll think this is a joke at. age 25, I was doing managing consult. management consulting. >> [laughter]. >> I have to laugh at the absurdity of. that, but I. >> [laughter]. >> but they were paying me for it, believe. it or not. So, my father called me and. he said, "Son, uh. 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, uh. 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 uh and I don't. have long to live.". Uh. so, I agreed. because. uh.

I. well, for for a number of reasons. One, the first one is. uh 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 [clears throat]. 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 needed to be an entrepreneur. And uh. and because I was good at principles, and that's why we led So, I was always. looking for principles that would. help me. uh. contribute and and succeed. And and and that's what uh. that's what transformed our our company. So, you you come into the business. couple hundred employees, you said, at. the. >> 300 employees. >> 300 employees.

And how did you think was the mandate to. grow the business? Was it just to keep. it stable? >> it was it was Can I take a few minutes. to go through those first two. businesses? >> I'm listening. Okay, that sounds great. Okay, the first one was uh uh. uh making uh fractionating trays. Designing those. Uh we had a president then who. who was uh was one of our principles you. don't want to be. The negative is. top-down. and obsessed with controlling everybody.

So, he would send out uh memos every. week demanding they. on what they spent, what did you spend. it on, what did you do, what how did you. do this right? So, they were first matter of fact, they. started uh ignoring him. And then the whole culture was. protectionist. That is when you sold when they sold uh. uh uh. uh the internals for fractionating tower. uh 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 and then what's even worse, uh. to to satisfy the European market, they. didn't even build a plant there. They. they had a multiple sub contractors 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'll. excuse the expression. And so I changed the the management. and changed the philosophy. Okay, the. first thing we're going to focus on. is creating value for our customers. And then then the second thing we're. going to empower our employees so they. want to to to do this. And the third. thing we're going to build 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. and so we got became profitable. And uh. and and then we started. adding. uh related products. And and I'll get to that later, but. uh. and and and so we started growing. Can I. ask a question? >> Yeah. 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, I it was life or death. >> [snorts]. >> And my father said, you can run this. business any way you want. The only. thing you need me of my approval on is. to sell. That's the way he talked me. into coming back.

after I said I didn't want to. Uh. or I wasn't going to. And then and then in 1970, what really. helped is my brother, younger brother. David, uh. joined the business and then 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 and what I saw we were doing, not. here, not just here, but in other. things, is we were. uh building capabilities. That is. I looked at it, we need to be capability. bounded, not industry bounded. Like okay, you could say. uh to a certain extent, cuz we were in. crude oil gathering, we're in the oil. industry. Oh, that means everybody would.

say you need to be an integrated oil. company. You need to be in everything. And I was applying division of labor by. comparative advantage. No, you need to. be in the part of it. of the 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 happen now. There's more specialization by. comparative advantage. And so that's what so so I I I started. this the created this principle.

called uh. uh. uh. creating virtuous cycles of mutual. benefit. And what that led us. to do is to to. to start this uh never-ending cycle. of uh uh. of growth, uh. 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 in 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?

>> had a bunch of them with with. with with that company where it was. called Coke Engineering then. And like like I said, okay, we're when. we got into refining, we created. petroleum coke. So, I said, well, let's come up with a. a way to 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 did we. had a whole bunch of those. And we've had 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. 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 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 of a business.

Like like. company that Case founded Coke Disrupted. Technology Insight Tech, it's been. it it does tremendous things, but it it. is a structure that makes it hard to. make it profitable. And so so that's the other thing is so. 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 learn from.

failure. So, the businesses where you ask the. businesses we're in now and Chase and. there's Coke people here. You You all. can catch me up if I. the ones I missed, but uh we have uh. uh. engineered projects, engineering. construction. We have uh. uh. we build uh solar plants. We have commodity uh trading and and. distribution. Uh we have uh fertilizers. We have.

refined products. We have chemicals and. polymers. We have glass. We have uh. uh. uh forest and consumer products. We have. four different uh. investment firms with different. comparative advantages. Uh. and we we have uh electrical products. and we. we have uh software uh. systems. uh.

uh for management. >> Dave, let me just hit one point. Something. >> anything? No, you got it. You did a. great job. Oh. Um I mean, basically, like um. eight eight wholly owned um business. unit platforms that he described and. then four investment um uh different. businesses. But, I just wanted to kind. of really drill a point home because. when I when I came out and when I. started um really hanging out with you. and the whole tech community and trying. to like build that network, a lot of. people have 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, you know, we don't know that much about. it. I think this point that is so different. about Koch um versus almost any other. company out there is what my father said. on um 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. um in this discussion, but one of the. absolute core differences is that whole. approach to capabilities. And um 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 um point it at new. industries where I can experiment. This. is one of our um. 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? Um and then along the way, you know, those 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 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 and 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 cuz. then we learned about natural gas?" And. then then the Georgia-Pacific. opportunity comes along and it's like, "Hey, these are wood products. It. doesn't seem similar to these other um. 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 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 Coke 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 you. know a Berkshire Hathaway where you have. all these different businesses a. conglomerate and I 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. Would 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 uh. one chapter on. creative destruction. And. 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. and we didn't. we. the problem when we do that they they. they the tendency is to learn the lingo.

and so you can call everything. by these 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 we had. changed the management. And and once we did that and and and and. and they started applying these. principles, they took off and now they're knocking. it out of the park. But let let me go back to failures. I. cuz I'm I mean we're understating our.

our our great strength in failures. And that is I'll I'll give you our worst. failures and what caused it. And it. caused us by by violating. the principle. of of of hiring people first on values. and second on talent. And 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. some, 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. >> [laughter]. >> Maybe help them get a job. But anyway, that was huge and then. we made that even worse. by uh. by taking people.

who were. terrible values. and made them leaders. And and so I what we call that is is. rather than we want everybody in the. company to be contribution motivated. That I want to succeed by 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 and so they would some of these.

people were destructively motivated. What they wanted was power or control. and and they would hide their failures. and. 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 the company. And then later. cuz I mean much later. shows you. that. that repetition penetrates even the. dullest of minds. So I needed this to. happen a bunch of times so it finally. >> [laughter]. >> Okay, I got it. I got it, God. Don't. punish me anymore, please. For my stupid mistakes. So. So this was we we did it about the same.

time our ag group. We heard. we put leaders in who were destructively. motivated. And in refining we we we got. a leader and they were destroying those. businesses. And uh. and and so it it didn't almost bankrupt. it but it almost wiped out all of Koch's. earnings in the in the the late 1990s. You you'll appreciate. >> that give you a flavor?

>> Yeah. 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 we called it a 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 it you're what the hell were you. doing, right? But Um it was it was what. he was saying is like um like leadership. thinking about we can do we can do. anything. And if we get like basically. kind of control the the entire value. chain, like we can be make that. successful. Completely violates probably. all 41 principles in in the book, right? Experimental discovery, knowing where. your capabilities are, right people, um. right roles. And so the We Yeah, we.

called it the gas to Brad's bread. Some. people called it the ass to bread. spread, too. Um so. >> And there's another one in here, integrity. >> [clears throat]. >> 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 we had a deal within that. You. know, like Purina dog food. So one of. the thing one of the things that was. acquired was the large animal um uh food. uh feed business feed. >> Mainly hog. Yeah, so hog hog feed. And. um did no diligence, and this is one of.

our principles to apply the scientific. method. So disprove your hypothesis as. much as you you try to prove it. And um And so we we closed that. acquisition, and within days we found. out that we had hundreds of millions of. out of the money um hog contracts. Cuz. we didn't didn't even look at the. contracts. So I mean, that's when I. think this is a 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 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 cuz 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. Yeah. But to actually live them, to realize them, to hold people not just. responsible but accountable to them, how. do you 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, and now go do this. And from Polanyi we 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, it's. called personal knowledge. by Michael Polanyi, who was a. a chemist and and then became a. philosopher. And uh. and and he goes through what it takes to. to to develop personal knowledge. It's 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 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. cuz you're not thinking about it. And so cuz your brain gets I mean you. know your body, let's say you're. 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 ship to be because. then the other. uh. businesses and capabilities says, "Gosh, I'd like to do that." So, you don't need.

to call them in. Then then we have more. demand for people who can help them in. the hardest thing is have our people in. strategy or our our principle-based. management group who are really good at. helping them. And boy, they're in. they're in more demand than anybody. So, the best thing is success will drive. social mimicry. You'll see others. >> That's it. Here's another um like take. on what he's saying um that I think like. really connects about culture to your.

question. And that is like the essence. of like principle-based management and. all the principles in this book as well. is like what if you could um. have a business and a culture, small, medium, or large, where everyone knew. what to do without being told? And so, that's like 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 your talent, your. team, your leaders with these principles. so 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 at and my wife and take care. of the family or whatever the the family. situation is and that's my that's my. objective. >> that's and that's that that that. approach creates perverse incentives. And so we we try to align our incentives. that we want to reward people. according to their overall contribution.

to Coke's future. So for example, if they have an. experiment and that doesn't mean doing. this thing in ag 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 you what you learn. from this. is higher value from this failure.

than the cost of the experiment. And and so when we do that and we're. we're evaluating what the person you are. building capability for the future. That's why we're so. we we put so much emphasis on are you. building capability and capability part. of it is the culture and what Chase did. with with Coke Labs when he started Coke. Disruptive, he said Coke Labs, I want. every business to be a laboratory for.

what we find both to help us source. these. these opportunities, these tech. opportunities. and. and then we'll let we'll we'll if. they're just trying something, we'll try. it out in that business. And being in. all these different businesses that 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, in your business, don't you want. to be part of Coke Labs?

We're we're an experimental discovery. group. We're just not a bunch of grunts. here grinding stuff out. Yeah, I think. um the KDT examples are really good one. cuz you asked about motivating and like. what if you fail and then what if you. get fired and and all that. Um we 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 can 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 maybe we're.

going to keep trying. As long as you. don't go sink the company with some. massive bet, right? And I think um KDT. was a. a great experience. Like I call um you. know, when when we did that um when when. we made the those first investments, you. know this adventure, um you're the the. losers fall out first and the winners. take a hell of a lot longer to to uh. 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 we. you had the but but it was that. experimental discovery principle and. mindset that we applied to it. And oh, by the way, we were learn we were. learning so much as Coke from seeing the. technologies that were coming around the. corner that might disrupt our core. business. And so, we value 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'd say just. shut this down, right? But then over.

time, like all these different things in. that 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 destruction. It's 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's 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 failure? >> this? We were a much smaller company and. we bought Georgia-Pacific for 20. billion. Well, can you 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 it's. got a third one, but. yeah. Okay, I'm I'm generalizing. >> [laughter]. >> But, go ahead. >> Sorry, no, no, no, no.

I'll shut up. I'll shut up. Shut up, you old guy. No, no, no. Um. but but anyway, but on on that one. >> when did you buy it and how big of a. betting the company move was it? Uh 2005. Well, that was we were much smaller in. 2005. I can't remember how much smaller, but. it was a lot smaller. >> a massive bet. >> it come up? Okay, we were. like. applying this virtual cycles of mutual.

benefit. We were saying, "Okay, what's. one of these. uh. these cycles. are chemical process industries. And and wood creating the pulp and stuff. was. Matter of fact, we found in my my my. father's thesis, he he he did a. a study in Maine. on this very thing, on pulping. >> [laughter]. >> I mean, I found it later, but that that. didn't Hit that MIT thesis? Yeah, yeah.

>> Wow. So, we said, "Okay, let's look at the. Oh, and they were. they were saying they need to spin off. some of those parts of 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 they have other. because that was a commodity business. and they were trying to get their price.

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 and proposed that. uh we. uh. uh. we buy the the uh the commodity part. and we'll pay them a a high enough price. that then they can. be all. uh consumer products and get their price.

and we showed them all the economics and. they said, "That's fine, but we'll be. cons- sued for constructive fraud. because. we we all have this all these. lawsuits. against us and and uh 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 the couple of them were getting. ready to retire and and the senior. officers, so they were really liking it.

>> Uh. And they were kicked out of all the. board meetings from then. >> [laughter]. >> on, but anyway, so we we sold them and that was the time. when money was tight and stuff, so. nobody came in and and topped us. I'll. give you just one funny story. We sent one of our people in to to be. the CEO, Joe Moller, who had been. president of the company. And uh. and. and and he.

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. And and you they had a private elevator. to get up there. And you didn't have to wear coat and. tie, but if 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 sent the. remaining ones down to work with their. groups. And. >> floor. >> And and regular floor and then turned it. all into offices. I mean, into meeting. rooms open to anybody. And so that I mean, you ask about how. you get culture change. A lot of it is a. signals like that. Particularly when a. bunch of them get fired for. being so bureaucratic and hierarchical.

>> say that that business unit operates. like the rest of Koch Industries today? Oh, absolutely. >> But how long did it take. I'll 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 in Yeah. Yeah, but. that's to say that wouldn't work for us. The stuff we bought Let me let let me. give give another one if I could that's. was even more difficult. And that is. uh. uh sadly, my 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 and so but 2 years later. we were able to buy it. And uh. and it was not being operated very well. because the management had left 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 out 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 they ran. a switch engine and tried to knock down. one of our units. They shot high-powered. rifles in there. And they blocked the gates. I mean it was impossible to get in. there. We had to take helicopter but we. we were successful in operating without. the union. workers.

for 9 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. uh then we said, "Okay, we're going to. empower the employees. We're going to. change the culture." Now you think the. Georgia Pacific was tough. this was much tougher than that. And. and so we we we were 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 would reward them and we got the. unions to to agree with that. And and. like like one they said a group of them. said God, we're buying all these. spare parts we need. Uh we can if you if you 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. You I. mean 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 just uh. it still blows me away how how much. they've taken these principles to heart. and using them. to make that place so it's so we've.

increased the capacity tenfold. and it's one of the best refineries in. the country. >> Pop, wouldn't you say that um I mean the. common theme on all these cuz we have. the same story on Molex, you know, similar 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. um that makes products in your iPhone. and medtech products, your automobile. And um when we bought that in 2013, it.

was a. paradigm that needed to be changed. You. know, you described Georgia Pacific. top-down versus bottom-up. There was a. lot of that too, but it was top line. 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. Cuz that was what the market. rewarded them for. And so like the whole. the stock price the public versus. private uh 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, probably 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 that's what the the. book is about. You can kind of reverse. engineer these stories like well, we. missed that principle, we missed this.

principle. Um but it comes down to. talent and the right people with the. right mindset. And I'll want to share. just one story with you that really um. shows like how we apply this at Coke. Um. he talked about our talent vision being. um you start with um basically culture. first, you know, skill second, values. first, skill second. I always add a. third dimension to that as well. Values. first, skill second, credentials last. And that is a very different a mindset.

than than most companies cuz most. companies I think look at it and say I. want I want the guys, you know, that. have the 4.0 from the Ivy League school. and all that. And there's some. incredibly smart, obviously, folks from. that, but by by our. um 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 and make a.

contribution as opposed to coming in. expecting all this stuff and coming in. with more of an entitlement mindset. So, we um. case in point, our CIO today is named. Jared Benson. Um he start his first. interaction with Coke was base striping. lines in our parking lot. So, no college degree whatsoever, but he. found his way into Coke cuz 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. to. you know, contribution mindset, adding value. He saw the cybersecurity. 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 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 but so. good profit science of success. We have. our values. >> best book because of Jack. >> [laughter]. >> Hey Brian, the one we did is pretty. good, too. Hugs will like that. Right.

Um. But yeah, no, there is a there's a. discipline, right? And and really it. comes down to the leaders taking it. seriously and their leaders 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 structure. 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 there are a. bunch in Silicon Valley that are. They're challenged. Yeah. So they're not all that way. >> They're not all. Yeah, and this is what. >> it is it always been a competitive. advantage? I mean, did you ever think to. move the headquarters to New York City. or. >> No. No, but the main thing the. we've we've never thought of that. But 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 we that's a competitive. competitive advantage of us. That'll be a competitive. >> But but this is No, but the main the. main threat we've had is we we had So I. was wanting to go pop take us public. And I said it'd be over my dead body, and some of them thought well that would. be a good idea.

Just like they're thinking that about. Trump. Well, a lot of people thought. still think about I get a lot of nice uh. notices of my imminent death. >> [laughter]. >> And and they say, "Okay, your brother. died. We hope it was. uh I know it's painful, but I hope it. was slow and painful, and I hope Charles. is even worse." That's the kind of crap. we get. Uh but anyway, what the the biggest is. the. uh push has been for us to go public.

God, we'll be worth so much and stuff. And but it it. And I I think our view. we never could have accomplished what. we've had. First of all, we never have. would have built a principle-based. framework. And then we we never would. have been able to pull off this. uh. capability-bounded. versus industry-bounded.

Because then I mean people don't. understand it. Now, if you're Buffett. and you sold that long, then people. okay, but but he wasn't trying to. integrate them the way we do. No one. would believe it. And and so what the what and and and. that's because. uh. you've got to you've got to have a story. that people 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 the 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 and aren't. and can't take the big risks and the the. risk of failure that that you're able to. embrace. No, but I. I think it depends on the values of the. owners. If. like. 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 to make each other. better. And if you would miss any one of those, you're not going to have a lasting. good partnership. And so I I remember I. was 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. and I answered, "Well, no, it's easier. than in a public company, just like I. did.". And then I. I thought who it was and. he was talking about his father. His father was a total dictator. And there no way he could apply any of. these principles. in that. So, it all demand 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 get a. 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 I'm not going to take. top price. but what meaning 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. his value that he sold that made him.

tremendous. Well, that was the other one. was buying insurance company, 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 you getting. involved in the business. We didn't get. into that, but how did you get started. at Coke? How did and were you always. a believer in the principles from a. young age? Were you around the. organization around your dad? >> [laughter]. >> I'm a chip off the old block, so.

it took me a while to come around. >> No, this is the most remarkable. transformation. I've been talking about. him all evening. This is the primo. >> Here we go. Unbelievable. >> Do I get to tell my story? The absolute. bottom to the absolute top. He'll. correct me. >> No, he's blown me. He's doing things I. wouldn't even dream of or have the. capability to do. So he'll correct he'll. correct he'll correct me 10 times as I. tell the story, but [laughter]. Well, cuz you're too damn humble.

Um so I didn't start when I was six. I. started when I was 15. So you cut me. some slack, but it's because I was a. pretty competitive tennis player and. >> He was nationally ranked. See the. humility. He was nationally ranked. First first time. So um but at 15 I got burned out, you. know, tennis like typical story where I. wanted to hang out with my friends. I. wanted to have a good time. I was tired. of playing 6 hours a day. So I I started. throwing tennis matches intentionally to. get out of it out of these tournaments.

So I go home and party with my friends. and and he he said, "Look, your attitude is terrible. You can. either. give 100% on the tennis court and apply. yourself or I'm going to get you a job.". I said, "I'm sick of tennis. I'm done. with it." And so I had his my the job. was figured out the next morning for me. Yeah, but let me interrupt again cuz. this is important. He thought he would. get a nice cushy job in Wichita so he go. out and party with his friends at night.

Yeah. Well, you know, I'm. I may be old and slow, but I'm not that. slow. Yeah, he was kicked out of a number of. schools which. >> at night, but not last night. But yeah, so. >> a parallel story movie that could be. made. >> Yeah, no, seriously. There there really. is. But basically all my was packed for. me. Yeah. And it was thrown in the back. of a truck and 6 hours later I showed up. at a at a feed yard and I lived in a. single wide trailer the whole summer.

with with my boss. I slept on the floor, worked 7 days a week and. just shoveled cow and dug post. holes. No, and the boils. Forgot about. that. You're popping boils. >> manageable here. So um. So anyway, but the the the interesting part of that. story, even though I went from literally. being like. you know, kind of country club rich kid. to. to doing that within 24 hours, it was an.

absolute transformation for me. The the. fact that he kind of he made me do that. And I chose, but I didn't know what I. was exactly, you know, choosing. But by after, you know, I was like a. month or two. into this job, I started like actually. feeling like better my better about. myself. You know, I was like I hadn't. really made a contribution up till that. point in life. And then I'm actually I'm. working with a team, getting paid. minimum wage, I'm working my tail off, I'm adding value, even though it may be.

like you just menial work. Um. And this is I go back to a letter that. his father, you know, wrote to him and the and his. other three brothers. >> No, no, my my older brother. Yeah, your. older brother, sorry. >> was 3 months old when he wrote it. This letter about basically like when I. pass on, um you're going to get what seems to be. a large sum of money. I hope you don't squander it. I hope you. don't use it for but I hope you actually.

apply yourself because I want you to. feel the glorious feeling of. accomplishment. And it's a it's a really amazing letter. he has it hung in his um. But I you know, that was the first time. I felt that, even though I was working. at a feed yard. I was like, this feels. good, actually. You know, I could have. gone down the path of you know, just. kind of staying on the tennis circuit. I. have no idea where I'd end up in life. had I had I not gone down that path. And.

so I basically worked every summer for. Coke from that summer on. I worked in. the gas liquids plant, I worked in our. refineries. all the way through junior year in. college, always had a Coke, you know, kind of summer job. But, another So, that was a an absolute like. transformation for me in my life. Let. let me let me give you one more credit. here. See, what he he has great humor, which is great, but. and that is Chase has I I have this gift. for abstractions.

He's he's like his mother. He has a gift. for people. He understands people and can rate. relate to them and he can go around. uh like like she [clears throat] can or. Sterling Varner, who was our president. early days, who by the way. uh. was born. his father had ran mules in an oil field. camp and he was born in a tent and they. damn near died. Uh never went to college and.

and. he could Whoever he met with wanted to. do business with us. And that's the way. Chase is. He goes around, meets these. people. and all of a sudden they're friends and. they want to do business, and that's. true for Stand Together, too. Go people. you think, "Oh, they don't they don't. want these. these capitalists or these free. enterprise people to do business with. them.". And and and he gets them.

on our side and shows [clears throat]. them the value of these principles. Well, let me let me make. >> Is that fair? Um what whatever you said. >> [laughter]. >> No, I mean, that's my job. That's what I. do. Now, you know, origination of. partnerships. And about the time I met. you, that's when I started, you know, getting into technology and trying to. build a new community so that we can get. access to the most disruptive founders. But, one quick story I want to tell. because I think it'll be helpful for for.

your audience as well that we haven't. touched on yet is the principle of. comparative advantage is another. meaningful like total shift in my job at. Koch and my role at Koch but also in my. my personal life. Um was when I was running the AG. business. This was This was later on. We. talked about the late 90s the the gas to. bread spread and all that. This is a. separate business. uh with Koch Fertilizer. I spent 10 years in that business really. understanding the operations of the.

business. I worked in sales and and in. marketing and um the accounting the. finance like every piece of it the. trading and um I ran a lot of the. smaller business units but at one point. um my boss at the time wanted to add a. whole natural gas trading business to. it. So he's like, "Hey, I got to want to. put a parent company called AG and. Energy Solutions and I want you I'm. going to throw you the keys to the. fertilizer business. You're ready to run. it." And so I was promoted to president. of Koch Fertilizer at that time and.

about 9 months in I realized that I was. not the guy for the job and I walked in. my boss my boss's office and fired. myself. And the humiliating, right? It's like. especially being the boss's son and like. thinking about, "Oh my god, I'm a. failure, you know, I could I couldn't. make this work." The business was still. doing fine but I wasn't doing a good job. as a leader and I knew there was someone. else that had the comparative advantage. to be a great operator CEO, you know, a. president type role. And so I learned.

through all that you call it a failure. in in that job that. um that I wasn't an operator and I. wasn't a good optimization type leader. I was a builder. Like all I wanted to do. was go work on the innovation stuff. That was about the time I met you and I. learned about Climate Corp and all that. I just wanted to go focus on that and. and go build the stuff you know this. whole idea of creative destruction that. would disrupt the core business that I.

was running. And so, that whole thing. around like understanding your. comparative advantage, what you're good. at, and what you're not relative to. others that could be doing that job, was. a huge deal. And like my hope was that. that was a little bit of an example for. other like Koch leaders as well. It's. like, if you're not in the right job, like. you know, you don't have to like fire. yourself, but. but figure out where what your power. alley really is, and where you can.

contribute, and and and add the most. value. So, that experience for me, what. was amazing, if you look at like what. happened after that, we we got a great. president to continue to transform the. fertilizer business. It's one of our. most exciting businesses today, and we. keep we keep growing. with it. So, that that did better than. it would have done had I stayed in the. role. But then all of this led to Koch. Disruptive Technologies, which we talked. about, which is a totally, you know, an. innovation platform for Koch to to see.

around corners. So, like that one move. made one large business much better, and. and also created a whole new thing, right? And so, like I always think about. it's like we have 130,000 employees. What if that one principle, comparative. advantage, what if everyone like deeply. understood that, and and redesigned. their role to where they're truly like. in their power alley? And what what what. are the results of the business if we. could do that? You're never you're never.

going to be perfect, but that's the. vision that we have and how we apply. >> For the organization. >> For the organization. >> So, think thinking about. individuals, how do I. self-actualize? [clears throat]. How do I find my path of. purpose, happiness, success in life by. leveraging these sorts of principles in. a world that feels radically. transforming and continuously. constrained. I don't have infinite. flexibility. I'm not on the board of.

Coke. I'm not on the board of my my. company that I'm employed by. How do I. find a path in this world because I do. think many people today are struggling. for that sense of purpose, for that. sense of identity, for that sense of. realizing their their their potential. and feeling fulfillment in work today. >> Well, that's. I mean that's critical and that's. that's what every all the we we have. what. 20-some thousand supervisors.

in the company and so this is one of. their top jobs. is is making sure. that that each employee is in the right. role. For example, they're working hard. and trying and part of the work they're. doing well in and others not. Well, rather than beating up you got to keep. doing better. Like like there's certain. things if you told me I had to do, I. mean I'm I'm. I'm good at at concepts and logic and. math and to go do something else.

that's quite different, I mean I'd be a. total failure and you could you could. whip me till I was a grease spot on the. floor and I I couldn't do better. And so that's the role of the. supervisors to not go tell them, "Okay, your role is to go do this." and they're. just trying harder and harder. and so you're making them miserable and. so they hate you, they hate the company. And so that's that's the way you empower. them. That's what what Maslow said if he.

said that that if. everyone has capability. and and if if you don't develop it and. apply it in a way that creates value for. others. you will be you you be successful. monetarily or in some way, but you'll be. deeply unhappy your whole life because. you won't be fulfilling your nature. Your nature, and I know what mine is. I. know what makes people say, "Well,

you're 90. Why don't you go out lie on. the beach?" I said, "What do you want me. to die? I'd be dead in in. in a a week." It's not your nature. No, it's not my nature. My nature is to. is to I have this gift. And a lot of our. people here may say, "Yeah, you damn. right. You use it too damn much." So, What keeps most people from realizing. their gift? Well, I I think part of it. is the education system. So, the schools. need to be set up, "Okay, we're going to.

help you find your gift and what you're. passionate about." And and and and what. is motivating to you. So, the whole. system demotivates you, and that's what. the way businesses are managed. You're. demotivated. Our whole deal, that's why. we we we have a five dimensions in the. in the way we apply this. The first is vision. You got to get the. right vision. Like what capabilities of. creating value for others. Uh then then it's virtue and talents.

We've we've talked about that. Then it's. knowledge. That's Republic of. of science. Uh. creative destruction, all those things. And then the the final one is. motivation. And so, that's what we need to do. And. like Joe Lamond has created the schools. He says it's 90% or 80% motivation. And so, you have games. You have other. things that the kids can do that they. learn from and enjoy doing. They want to. do more. And that's I mean, I raised our.

kids with these principles, and I made. them do it. So, I was piss-poor at. applying that my principles in in. teaching him this. And he's doing it. He. makes a game out of it. He has them. reading the book. and parts of it and then they have. competition on who can do it better and. who's. who's living up to this better? Who's. applying this principle better? And. they're loving it. Yeah, I'm not having. my kids listen to books on tape from.

Milton Friedman when they're 10 years. old. No, Aristotle is the one that. >> there's there's plenty of them. Um but. but let let me just make a comment. You. were told or suggested or encouraged to. listen to Aristotle on tape as Yeah. >> Yeah. >> [laughter]. >> No, he wasn't encouraged. No, we'd go. Sunday evenings. >> I got to take a note from my. >> Elizabeth and and Chase and I would go. over to my library and I would play. these tapes. I'd only play it for 10.

minutes cuz I knew Chase's attention. span. Elizabeth was on it. Boy, she was on it. She was getting straight A's in. everything and Chase would fall asleep. and then I then I'd after 10 minutes I'd. wake him up and okay, what what was his. [clears throat] point here? Is it test. every 15 minutes? >> and then you may have seen on on. where was it where you talked about. uh about you we we worked together to do. your Aristotle term paper. >> Yes. And why don't you tell that story?

>> Okay. Well, I mean we had a like a fifth. grade paper. Like choose your. philosopher, write about it. You know, it's got to be 500 words or whatever. So. I came I was like, I don't know like. what philosopher am I going to write. about? And so he's like, you're going to. write about Aristotle and we're going to. work together on it. But I learned a. hell of a lot about Aristotle in in. fifth grade. And I turned in the paper. and the professor. had a lot of red ink all over it and. said, "F.

You did not write this.". And I was and so I'm like, "Oh god, you. know, this is so embarrassing." And so I. took it back to him and I told him I. said, "Pop, um we got an F on our. paper.". >> [laughter]. >> I know you said you got an F. And um so and then I didn't think he was. going to pick up the phone and call the. the teacher. So he said, um you know, "Dr. Cohen, I'll never forget this." I was hiding. under the table during this phone call. He said, "Dr. Cohen, um you know, I.

helped my son write this paper and he. learned a lot from it. And yeah, you. know, do you not want me to help my son? Do you not want any parents to help. their kids like learn?" And. and um. he said, "You know, I think you have a. point, uh Mr. Cohen.". And so the next day. the the next day I come back and it had. 99 written on the top. >> [laughter]. >> See? I I made a contribution. >> Yeah. Let me Let Let me Let me go back. It's a great story, I know. But um let.

me go back to something I think you were. getting at um around how do you remove. more barriers for more people? Um and. this is really kind of the Stand. Together story. He mentioned education. I just want to use one example of how. important we feel like transforming. education is. And we also feel like it's. a movement with tremendous opportunity. right now. And so um. our vision for education. is to go from a teach-to-test model,

teacher at the front of the classroom, teach you know, talking at kids to one. that's individualized education. Because. we all as we we talked about, we all. learn differently. >> Everyone learns differently. >> And our kid all all of our kids learn. learn differently as well. So um we did the research at Stand. Together and prior to COVID At Stand. Together just Yeah, sorry. Stan So Stand. Together for those that don't know, this. is really um. you know, comes from my father's efforts.

on social change which he's been working. on for for 60 years. And Stand Together. in 2003 was created that really I think. we had the insight of we can do a lot. more together versus do it alone. If we. operate in philanthropy and social. change in silos, we're just not going to. get the leverage to drive the change. that we want to. Um and so Stand Together is made up of, you know, close to a thousand business. leaders. It's It's just like the name. describes. It's a community of business.

leaders that align on vision and values. on where you want to see the country. It's really around this this this pretty. simple idea that every human has a gift, but there's so many barriers across all. of our institutions, education, uh you know, broken education system, a. broken criminal justice system, um bad. policy holding people back so you can't. chase the American dream and build a. business. All of these things, right? So. we're very broad in terms of the issues.

that we focus on, but education is. the one of the biggest ones. And so I. describe the vision of where where we're. trying to help take it and be a catalyst. for change. And one of the things that, you know, we do a lot of research on. where public opinion is. And prior to. COVID, roughly 20% of families were open. to a new model of education. Very low, right? And then everyone saw during. COVID how screwed up the system was. And. they saw their kids come home and they. learned a hell of a lot more on YouTube.

learning than they actually did in the. classroom. So, after. after COVID, three or four years later, you look at that same data and it's 70. to 80% families are open to a. completely, you know, to transform the. education system cuz everyone now. understands that it's just broken. So, we're we're supporting, we have these. amazing preferred partnerships as my. father described, whether it's Joe Lee. Mott with what he's doing at the Alpha. School, like closing the motivation gap. and meeting kids where they are and.

bringing like gamification and like the. principles of Fortnite into education in. a way that kids are like he's taking. kids that are failing students to top of. the class in 3 months because he's. meeting them where they're at. He's. meeting them where they are they're at. and solving the motivation gap and like. making learning fun and cool, right? Sal. Khan did the same he's a huge partner. with Khan Academy. And a really. interesting one uh that we we partnered. with the Walton family on is the Vela. Fund. Basically applying venture capital.

to education entrepreneurs. So coming. out of COVID, there were. thousands of pissed off parents and. teachers that were just fed up with the. system. Like, I'm just going to create. my own school. You know, these small. micro schools. And so with a relatively. modest amount of money. over the last 5-6 years, we've helped. create and seed over 5,000 schools. So. what's happening is there's this huge. movement where people see it as like my.

kids are learning the the the skills of. what the the future is going to be like. Not this teach-the-test model where you. don't know how to interact with people. The reality is it's project-based. learning. They need to have exposure to. these AI models. You don't ban them. You. empower them with these models, right? And so so we're it's one of the most. exciting movements that I think Stand. Together is really leading on. And yeah, we we need more partners that are are.

willing to to get behind this. >> I want to go back though, Charles. This. work at Stand Together is like taking. off. I know a lot of people that are. engaging with you, Chase, on this work. And everything you say is so sensible. and we're all it's also it always feels. so obvious. Can we go back to the work. you've done historically in social. change and what you got right, what you. got wrong? Cuz the the narrow view of. the word Coke comes from a broad public. perception of political activity that I. think has been amplified and the. narrative has been written for you. And. I don't think I've personally seen a lot.

of conversation publicly from you about. what you did. when, how you were thinking about social. change. Maybe you can go back to the. origins of the work you started to. engage in and try to drive social change. and over time what you got right, what. you got wrong. Well, it started with. these these principles. I mean, the to. me the the principles of human progress, but rather than. than. as Frederick Douglas said, I'll work. with anyone to do right, no one to do. wrong.

I. I was only working with. uh. the people who believe in all of these. And and so. we were limited. I mean, with work I. work with a limit libertarian party and. that got so narrow and it and then they. started fighting over who has bigger. greater more purity in these principles. to get in exactly like and that one. brilliant guy, but but totally this way.

He says, I he said, my libertarian is. this plumb line. Anybody disagrees I he. purged. So, it's almost like the. Communist Party doing the same thing. that Lenin did. And they and they. admired Lenin. Yeah, he had the right. strategy. Well, no, you can't go murder. anybody that you don't like. So, it. doesn't work for liberty, it works for. totalitarianism. And so. and then and then I started reading. uh Maslow uh. uh Eusychian Management and his.

strategy. And then Victor Frankl. is the one that really got me going. And. Victor Frankl. uh this. tremendous insight. He says, the. the problem today. is ever more people have the means to. live and no meaning to live for. So, if you can't find a path to a life. of meaning, which comes from.

as I said, from. uh finding your gift. and using it to succeed by helping. others succeed in a way that gives your. life meaning, then. you have two choices. You can either choose. to go for power. or you could go for pleasure. And and you see this today and you see. this through the the history of the.

world. So, if you if you choose power, then you're always going to want you. become addicted to power. I want more. power. I need more power. And we've seen. that in our as I said, in our. businesses. But you damn sure see that. in politicians. And you see that in all. the dictators in the world. Then, if you say if you if you've given. up. and you say, "Well, uh I've given up. I'm going to to go for.

for pleasure." And you and you you you. dedicate yourself to to pleasure. uh without considering the long-term. consequences, then. you have uh. you're going to experience failure. You're also have a tendency. to become addicted to an addict, to become suicidal, and to even.

engage in crime. And we see both of these today. So, the problem today. is when you have a world. that is based on power. and pleasure, it's a slippery slope. slope to to totalitarianism, authoritarianism, and socialism. And that's that's what we're saying. today. So. so that's the solution.

is to help people. find their gift and a way to apply. that enables them to succeed by helping. others to succeed. And so what does that. mean? That means we need to. all of us more fully. live up to the promise in the. Declaration of Independence. to better apply these principles of. human progress. And then the other thing that I screwed.

up on. is is. uh for the first. I've been at this. more than 60 years. and for the first 50 I avoided politics. or major party politics. I mean, being. in the Libertarian Party there was no. thought of winning. The The only reason. I got into that is, well, this is a time. people are listening. They're interested in politics so we'll. engage in that cuz people are talking so.

we'll throw that in the hopper in hopes. it takes on. Well, the way that we did. it it didn't take on at all. It blew up. in our face. So then but we decided we. needed to get in because we desperately. needed some principle-based policies. Look at all the policies that we have. today. They're destructive. They're leading to. more and more power and pleasure, socialism and authoritarianism. And and the mistake we made or I made.

is trying to do it through one party. You can't do that. So now we we follow. Frederick [clears throat] Douglass'. advice. to work with anyone to do right and no. one to do wrong. Where are we in the cycle? So, there's a rising. number of political leaders around the. country. Initially, it was in local elections and. now it's on kind of the national stage. declaring themselves socialist or some. form of socialism.

Are we kind of on an upswing and what. are. >> What upswing? What what what are we. talking about? >> is there a socialist. >> hell was down, not up. Yeah. >> [laughter]. >> So, where are we? I think we can continue. this whether we're going to hell in a. basket. It's what. is what Thomas Jefferson said. He had. slaves, but what he said about. slavery, he says, "If if if God is just, I despair for the.

future of our country.". That's kind of where I am. If God is. just, I despair for the future of the. country. The people we're electing, both. Republicans and Democrats, I mean, and the the mistreatment you I. mean, you look at. at at at what's being done. I mean, occupational licenser, the way they're the the the the way. they're treating illegal immigrants,

you name it, across the board. And the. socialists, the way they're they're. treating all the the crime, all of that. is uh. it's what we. we've got to elect people. who have some. principles beyond power and pleasure. What are your principles for changing. people's minds? I It's it's what Chase. says. We find them where we are, just. like we have in the company, and we show.

them this doesn't get results. Now, if. you're if you're a dedicated communist, if you're like like Trotsky is if we can. get rid of private property, we'll get a. we'll get rid of greed, and then every. man every man will be a Goethe and a. Beethoven, and we will. uh. or we will be able to create Everready. warehouses.

of all the goods, and everybody can go. in cuz out of their goodwill, they'll be. making all this stuff. If people still. have those fantasies, it's never worked. in history. And so. >> this time. Yeah. Yeah, that's well, that's right. And so. that's what we're trying to do at Stand. Together, and Dave, what what we've. learned on this is that the you to to. change minds and change paradigms, you. show versus tell. And um going back to what we were.

talking about before, bottom-up. empowerment as opposed to top-down. control. I mean, I think that's like a. overarching umbrella principle on all of. these. So, our whole thing with Stand. Together, and that's I think why it's. growing exponentially is cuz we have. stories of peop- we believe in people. We don't need top-down to come in and. tell people how to to solve problems. >> that's the book that Brian Hook said I. wrote, which we just. Uh we we have a new edition based on the. 250,

and we got and Mar- Martin Luther King. the Third wrote a forward to it, and. And that's that's another book besides. this one. If you're interested in the. the very these ideas we're talking about. on social change, there's much more in that on than than. this book on that well, though we have. quite a bit on this book. >> The one one of the key concepts in that. is. um if you believe that people aren't the. problems to be solved, the people that. are in the problem, they're the ones. with the best ideas and they're the.

source of the solution. That's a totally different mindset, right? And I mean, that's what Stand. Together does. We talk about venture. capital a lot. We bet on people that. have found something that works. I'm. just give a quick example. Scott Strode. from The Phoenix. We found Scott, um, his story is amazing. About 8 years ago, where he battled addiction most of his. life. He had a mentor that put him in. the in the gym and got him boxing gloves. and like exercise was the thing that. that helped him kick addiction.

And what he did is like, "Well, if this. helps me, I think I can help other. people with this this same concept." He. built a gym called The Phoenix, combined. the power of community with others that. are struggling with the same thing. Um, you know, multiplied by the power of. um, of exercise and he was getting. insane results. Like relapse rates that. were below 10%. So, what we do is like, instead of like some top-down program to. handle addiction, go bet on Scott.

And that's what we've done the last 7 or. 8 years as we've gone from he had a. couple gyms in Colorado when we met him, you know, impacting a couple thousand. people. He just hit a million people basically. overcoming addiction in the last last. year. That's a movement, right? And I. mean, that's a key difference I think of. Stand Together is like, how do you do it. you're talking about at scale and help. people change paradigms? You show them. with stories like Scott that let's be. let's believe in the people and let's. bet on them to transform society. >> addiction and crime, that resonates.

wholeheartedly. Let me ask about the. economic condition of America. Kids are graduating college, they got. hundreds of thousands of dollars in. student loan debt. No one can afford to. go to the doctor. Grocery bills are too. high. People are worried about paying. for their next grocery bill. You look at. the polling data, the survey data, the. average American is really struggling. I. think more than half of Americans 60. plus percent maybe 63% have negative. equity. They have more debt than they. have assets. And everything's getting more expensive. and no one's moving up the economic.

ladder. There's no mobility anymore. People are really struggling and then. they're looking on TV and they're seeing. spaceships launching up to space holding. flowers out the window smiling and. laughing. And it's a really dark time. and it really leads people down this. path of I need the government to help. me. I need support. I need help. I need. to elect the people that will fix this. for me. How do we address the economic. crisis that's facing the average person. in America, the lack of economic. mobility, the principles around these. distraught situations?

Fantastic, but this fundamental economic. crisis that we're facing. That's a damn. good question. It's it's like here's the question. Okay, the eggs have have been scrambled. It's your job to unscramble them. Right. So, that's the problem. Once you create. these entitlements, I mean, you almost can never get rid of. them. I. you you almost need. Well, maybe. maybe Argentina if he can pull off what.

he's doing cuz they were in worse shape. But, they went through it. Yeah. >> gone through it. Well, we're. >> Maybe we will. >> getting there. Well, let me ask a. question. Does capitalism work long. term? And let me give you a an argument. why it might not. The success at Koch. Industries is built on an algorithm, your principles, and you've been able to. adapt that algorithm and as a result. scale your business, generate cash, reinvest that cash, generate more cash, reinvest that cash, and so on, and. you've scaled 9,000X. You've built a. compounding advantage in your business.

>> Right. As is the case with all. successful capitalists, you build a. compounding advantage. The problem with. compounding in any system is it. eventually eats all of the whatever's in. the system or it makes it hard for. others to compete in that system or. participate effectively in that system. And that's the argument that's being. made today against capitalism. How do we. counter that idea and share that. capitalism should be more accessible to. all, that everyone can participate and. everyone can benefit, that it doesn't. end up in this monopolistic end state. where no one Well, it starts from.

removing the barriers. That That's what I said. You We've got. to work for a system. where we remove the barriers they're. holding people back. from realizing their potential, finding. their gifts, realizing their potential, and succeeding by contributing. Okay. So, I mean I mean. So, we we should start like occupational. licensing. All of this There are. hundreds of hundreds, as you know, of.

occupations. where they make it so tough. All the. local people who are in that business. make it impossible for anybody who. starts with nothing to. to do it. And then And then the way. we're treating illegal immigrants, the. one here are working and contributing, we harass them and are going to kick. them out. No, we ought to welcome them. and kick some of the others. the bad ones out. But, I. I mean, so some of this is is basic. And.

then we. uh we we've got to reward people. who want to contribute. That's why we. keep You've got to get people to be. contribution motivated. Then you're. going to have a life of meaning. And And that's what Vic Victor Frankl. was trying to tell us. And if we don't, we're going to we're going to fail. And. we're failing because we're taking away. the chance for most people to have a. life of meaning because we're setting up.

all these obstacles. And And I'm not picking on one party or. the other. They're both doing it. And. then set up all these tariffs, which. undermine the division of labor by. comparative advantage, which makes. everything more expensive. So, it's just. I mean, everywhere you look, it's it's a. tragedy. There's a debate happening at. this moment on AI, regulating AI. How. does AI become an enabler of. self-actualization, giving every. individual the capacity to develop. themselves, accelerate, and succeed.

versus making a fewer number of people. even more wealthy and taking jobs away. from the masses. What's your view on. where AI is taking us? Well, it's it. depends on how it's done. I mean, that's. why we back Cosmos, who is who is doing backing people who. do AI based on these principles of. market-based management by selling these. these principles of human progress. And and and. once you tell everybody what you've done. in the in the book with AI. That I mean,

it was just one principle on like our. approach to AI is just simple concept of. permissionless innovation. Hope I mean, the cost of AI to get it in people's. hands is dropping. it just to an incredibly cheap level. that hopefully everyone can have access. to that. And then combine that with. their gifts to unlock their potential. and learn 10 100x faster. That's I mean, from an AI standpoint, that's that's. that's our mindset on it. But and that's. what we're doing internally at Coke as.

well. Like I think one of the most. exciting innovations that we have is all. around human empowerment. Back to. bottom-up empowerment with principles. So, not only are we, you know, trying to. make sure that we have the right. supervisors that are helping people, you. know, understand their principles so. they can apply them. Um you know, with. the book, we've created an app. Um I. sent it to you, Dave. I don't know if. you you played with it or not, but it's. called uh Principle Companion. You can. download it in the App Store. And um. it's really taking off within Coke.

because it's just another way to engage. with principles in a very simple way and. meeting people where they are Um whether. it's chat GPT or Claude and solving a. problem in 5 to 10 minutes that. otherwise would have taken a long time. We're basically powering it with the. principles that are in the book to like. any problem. So it's one field, you. know, whatever your problem is in. business and philanthropy and if you run. a sports team or you're having problems. with your kids. It helps you with that,

right? And so that I think that's just. one example of how we're trying to like. really drive human And it and it doesn't. give you a net you can't say well, I got. this problem. What's the answer? No, it. asks you questions. Okay. Okay, given that have you thought about. this? Have you thought about that? So it's a Socratic method and we know. what happened to Socrates. So Yeah, >> [laughter]. >> okay. So listen, we're going to need to wrap. in a minute, but before we do Chase, you. know, what was the experience like. writing the book with your dad? What's.

it like working with your dad? >> Yeah. And. >> of ways I can go with this. Lessons learned from that. Yeah. I want. to give you that chance. >> yeah, absolutely incredible. I'd say. it's probably the most important project. that I've ever worked on. I'm getting invited into writing this. book and I've said to many people, I've. learned more in the last 18 months than. I probably have in the last 18 years. just because when you write something as. you know, the the the depth of learning. and going back into the details of the. stories, figuring out how to tell that.

story in a book in a way that connects. with as many people as possible. Um, I always say like you you really. don't know something until you have to. teach it and writing a book is a form of. like trying to to teach others with it. So my depth of learning because I got to. be right, you know, be alongside this. guy and and there was many others across. Coke that that contributed to this to. this book as well. But um, learned a. tremendous amount. Um, the other thing.

it doing this with him. Um he applied the principles to the book. writing process. Right? So, it's like. everything and he's so consistent. It. almost like drives you nuts, right? In. terms of of applying principles to. everything, but principles like. openness, creative He's written This is. his fifth book. This is my first. But he. wanted to drive creative destruction of. his first four. Right? And so, I think bringing me in to. it, just bringing a fresh perspective,

bringing technology to it, and telling. stories in a different way. Um that's an open mindset. He could have. easily Look, I'm the boss. I've done. this before. What the hell do you know? You know? Um but he he had that mindset to it. And. you know, applied the principles to it. But I will say he's such a stickler with. words. And um you should talk to my mother. about this and how it drives her effing. nuts. Um but I so I got I got kind of.

an 18-month window of what it's like to. be mom, maybe. Um. but um. but the you know, we had one chapter in. there on on stewardship. And I think. we're on we're on version 27 of it or. something like that. >> Yeah, I rewrote it a little bit. >> I like pop. >> 15 times myself. >> not applying the principle of marginal. analysis. Version 26 was pretty damn good. >> [laughter]. >> And so good enough. So, anyway, we but. we had a lot of fun with it.

>> Yeah. Of course, there was tension in. terms of how you'd you'd write something. or whatever, but overall, most important. project I've ever worked on. >> Yeah, now words have meaning. I mean, people say, "The proof is in the. pudding." No, the proof of the pudding. is in the eating. >> [laughter]. >> For God's sake. That means nothing. The. proof is in the pudding? Yeah. What, you. stuck your foot in it? Yeah. He corrects. the co-leader on that in about every. meeting before it ends, so. >> Oh, and then and then I used to give. grammar lessons in our discovery board.

What's it like working with Chase? What's it been like writing the book? It's I mean, he is I thought he'd help. some with the book and he would get us a. a perspective from perspective on how to. reach young people and do some things. and. and improve it from his perspective, but. he's taken it to a whole level. Like. bringing in AI and have AI as the as a. principal companion to the book and all. of these that are way beyond me.

So, he's taken the as he has in. everything, taken it to a whole level. beyond where I. You've written a lot of books. You've. built an unbelievable business, one of. the greatest on Earth. You've engaged in extraordinary social. and civic engagement. What do you want. the legacy to be? I want us I want our. country. to more fully live up to the promise in. the Declaration of Independence.

Charles Koch, Chase Koch. Thank you. Thank you, sir. >> [applause]. >> I'm going all in. >> [music]. >> I'm going all in.