Charles & Chase Koch on How They Quietly Built a $150B Empire

Summary

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Podcast Summary: All-In with Chamath, Jason, Sacks & Friedberg

Episode Title: Charles & Chase Koch on How They Quietly Built a $150B Empire
Date: May 12, 2026

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Episode Overview

This deeply insightful episode features Charles Koch (Chairman & CEO, Koch Industries) and Chase Koch (President, Koch Disruptive Technologies) in a rare long-form conversation. Hosted by David Friedberg (labeled “A” in transcript), the discussion explores the untold story of Koch Industries, their unique operating philosophies, massive growth, lessons from failures, and the vision for both business and society. The episode also dives into personal stories, family dynamics, and the Kochs’ evolving approach to business, talent, education, and social change.

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Key Discussion Points & Insights

1. Koch Industries: Growth, Scale & Operating Model

• Business Evolution & Scale
  • Charles Koch recalls joining the business full-time in 1961 with 300 employees; now over 130,000 employees in 60 countries, growing in value 9,000x ([02:34], [03:09]).
  • The company operates across many sectors: engineered products, energy, chemicals, building products, consumer goods, investments, software, and more ([14:32]).
• Core Principles Driving Growth
  • Focus on being capability-bounded, not industry-bounded; build on demonstrated strengths and move into new domains where the company adds unique value ([10:00], [16:00]).
  • Not a conglomerate: Kochs focus on interconnected capabilities, rather than holding disparate businesses like Berkshire Hathaway ([17:00], [18:11]).

“We need to be capability bounded, not industry bounded... point [our capabilities] at new industries where we can experiment.” — Charles Koch, [10:00]

2. Embracing and Learning from Failures

• Culture of Experimental Discovery

  • Failures are framed as necessary for growth, not avoided; key is to learn and adapt quickly ([11:52], [24:33]).
  • Major failures cited: ill-fated attempts to vertically integrate (the "gas to bread spread"), hiring based on skills rather than values, and poor leadership choices ([22:28], [23:35]).
  • Principle: “If you’re not failing at everything, you’re not doing anything new.” — Charles Koch, [11:36]

• Knowing When to Quit

  • Kochs distinguish between costly misadventures and high-value learning experiments ([12:32]).
  • Success requires walking away when the company is “no longer capable of creating superior value” ([12:41]).

3. Culture & Principles-Based Management

• Codifying and Living the Principles
  • Koch Industries documents and teaches key principles (41 in total) via books, handbooks, and an internal “Principle Companion” app ([44:34], [89:02]).
  • “Sheep-dipping” (one-off seminars) failed; true change comes when small, struggling teams are coached to success, driving others to emulate them ([25:12], [27:20]).
  • Bottom-up empowerment is stressed over top-down command—as opposed to the typical corporate model ([27:25]).

“What if you could have a business and a culture... where everyone knew what to do without being told?” — Chase Koch, [27:25]

• Incentives and Risk-Taking
  • Koch aligns incentives with “overall contribution to Koch’s future,” rewarding not just results but learning, capability-building, and constructive failure ([29:14]).
  • Examples of changing culture after acquisitions (e.g., Georgia Pacific, Molex) show the time and effort required to fully integrate the principles ([33:06], [37:34], [41:54]).

4. Talent and Leadership

• Values First, Credentials Last
  • Values and contribution mindset prioritized over fancy credentials ([41:54]).
  • Example: Current CIO started striping lines in a Koch parking lot—now leads company-wide initiatives ([41:54]).
• Comparative Advantage & “Right Seat on the Bus”
  • Employees are encouraged (and sometimes self-encouraged) to step down from roles where they don’t excel; both the individual and the organization improve ([57:07]).
  • “If you’re not in the right job...figure out your power alley, where you can contribute and add the most value.” — Chase Koch, [59:40]

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Notable Quotes & Memorable Moments

• On Capability vs. Industry Boundaries

  “I created this principle called creating virtuous cycles of mutual benefit...a never-ending cycle of growth, innovation, success and failure.” — Charles Koch, [10:00]

• On Failures

  “We’re understating our great strength in failures. Our worst failures—putting people in leadership that were destructively motivated...almost wiped out all of Koch's earnings in the late 1990s.” — Charles Koch, [20:17]

• On “Gas to Bread Spread” Strategy Fail

  “Some people called it the ass to bread spread too.” — Chase Koch, [23:01]

• On Changing Organizational Culture

  “The best thing is, success will drive social mimicry.” — David Friedberg, [27:20]

• On Motivation and Individual Fulfillment

  “Everyone has capability...if you don’t develop it and apply it in a way that creates value, you may be successful monetarily but you’ll be deeply unhappy.” — Charles Koch, [63:39]

• Family Stories

  • Chase recounts being a nationally-ranked tennis player, burning out, and being “sent to shovel cow shit and dig post holes”—a formative summer job arranged by his father ([52:02], [53:12]).
  • Anecdote about Chase’s fifth-grade Aristotle paper: “Pop, we got an F on our paper.” — Chase Koch, [67:13]

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Principles Applied Beyond Business

5. Stand Together & Social Change

• Social Impact Approach
  • Chase details the structure and mission of Stand Together, a community of 1,000+ business leaders working collaboratively on education, criminal justice, and other issues, guided by Koch principles ([68:53]).
  • Emphasizes bottom-up empowerment, venture-style philanthropy, and supporting social entrepreneurs like Scott Strode (The Phoenix) working on addiction recovery ([82:20]).

6. Education Reform

• Personalized, Motivational Learning
  • From a “teach to test” model to individualized education, gamification, and real-world learning (e.g., Alpha School, Khan Academy, Vela Fund) ([68:42], [71:13]).
  • COVID catalyzed parent/teacher appetite for fundamental education reform ([68:42]).

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Economic & Political Context

Discussion of America’s Economic Crisis

• Host voices concern over declining mobility, rising costs, lack of opportunity ([83:59]).
• Charles insists removing barriers—like occupational licensing, restrictive immigration, and tariffs—is critical; this is a bipartisan failure ([86:29]).

Kochs on the Public/Private Company Debate

• Remaining private and in Wichita is a competitive advantage, letting them escape short-termism and social conformity ([45:14], [48:26]).
• Ownership alone isn’t enough—owner values must align. Public companies can only emulate the Koch method if “sold” on the right principles ([49:11], [50:36]).

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AI, Technology, and the Future

• AI as Enabler or Threat
  • Kochs believe permissionless innovation and principle-based AI (e.g., Cosmos, Principal Companion app) will empower individuals and flatten hierarchies if democratized ([88:38], [89:02]).
  • Internal Koch app uses Socratic questioning instead of answers, promoting learning-by-doing ([90:34]).

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Reflections, Legacies, and the Next Generation

• Writing the Book Together

  • Chase Koch: “I’ve learned more in the last 18 months than the last 18 years. You really don’t know something until you have to teach it.” ([91:08])
  • Charles: “He’s taken it to a whole level, bringing in AI—way beyond me.” ([94:05])

• Charles Koch’s Legacy

  “I want our country to more fully live up to the promise in the Declaration of Independence.” — Charles Koch, [94:52]

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Timestamps for Important Segments

| Segment | Timestamp | |----------------------------------------|--------------| | Koch Industries scale & history | 02:34–06:34 | | Capability vs. Industry boundaries | 10:00–18:00 | | Learning from failures | 11:52–24:33 | | Building and teaching culture | 25:12–29:14 | | Failures due to misaligned values | 19:00–24:33 | | Talent vision & hiring philosophy | 41:54–44:34 | | Comparative advantage & roles | 57:07–61:05 | | Education reform & Stand Together | 68:42–83:59 | | Economic crisis & capitalism debate | 83:59–88:38 | | AI & technology in business | 88:19–90:51 | | Reflections, father-son collaboration | 91:02–94:52 |

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Conclusion

This episode offers a comprehensive look at Koch Industries’ distinct approach to business and social change by centering on capability-building, principle-based management, learning from failure, and empowering individuals. The Kochs provide candid reflections on growth, mistakes, values, family, and legacy—augmented by insightful stories and practical lessons relevant to entrepreneurs, leaders, and anyone interested in scaling organizations or driving societal progress.

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Transcript

[A]

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. Thank you.

[B]

Thanks for having us.

[A]

It's an honor. I'm going all in. Every few years a new ad channel opens before the market catches on. That's Axon AI right now, the AI ad platform behind one of the biggest runs in tech with access to over a billion daily active users. Full screen video ads in mobile games watched for a median of 35 seconds. Businesses are profitably spending hundreds of thousands of dollars a day on it and most advertisers don't even know it exists yet. The window is Open at Axon AI Allin all 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 Coke 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.

[B]

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.

[A]

When did you join the business?

[B]

In 1961. Full time. I'd been working. Well, my father, we lived on a farm, and he told me at age 6 he didn't want me to be a country club bum. So it 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 wore me out.

[A]

When you came into the business, what was the scope of the business? What was the business operating?

[B]

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, I have to laugh at the 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 I. Well, for a number of reasons. One, the first one is I got three degrees at MIT in engineering, and I sucked as an engineer. I mean, get that. 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 needed 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.

[A]

So you come into the business. Couple hundred employees, you said 300 employees. 300 employees. And how did you think was the mandate to grow the business? Was it just to keep it stable?

[B]

No, no, it was. Could I take a few minutes to go through those first two businesses?

[A]

Your sounds great.

[B]

Okay. The first one was making fractionating trays, designing those. We had a president then who was one of our principals. You don't want to be the negative. Is top down and obsessed with controlling everybody. So he would send out memos every week demanding on what they spent. How did you spend it on what did you do? 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 you sold, when they sold the internals for fractionating tower, they wouldn't tell them the design. And 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 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 became profitable. And then we started adding related products. And I'll get to that later, but. And so we started growing.

[A]

Can I ask a question?

[B]

Yeah.

[A]

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?

[B]

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 Younger brother David joined the business and then he continued that growth.

[A]

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.

[B]

Well, that's it. And this is. So I was learning all these different principles and what I saw we were doing not here, 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 would say you need to be an integrated oil company, you need to be in everything. And I was applying divisional labor by comparison. Comparative advantage. No, you need to be in the part of it, of the industry and 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 never ending 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.

[A]

Where do you learn that lesson? So what was the first major failure that, you know, they always say you got a plan until you get punched in the face. What was the first punch in the face?

[B]

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, 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 we had a whole bunch of those and we've had many more.

[A]

How did you make the decision to shut it down or walk away? At 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.

[B]

Yeah, well, when enough is enough. When we lose our ass enough. No, it's when we decide when 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 a company that Case founded, Koch Disruptive Technology, Insight Tech. It does tremendous things, but there's a structure that makes it hard to make it profitable. And so that's the other thing. 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 Koch people here, you all can catch me up if I the ones I miss. But we have engineered products, 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.

[C]

Dave, let me just hit one point something. No, you got it. You did a great job. 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 I started really hanging out with you and the whole tech community and trying to build that network, a lot of people had the same question that you did about who is Coke? 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 Coke 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, 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, 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, those core capabilities for us started off as operations, logistics, trading in the Very early days of Coke, that's what we demonstrated we were good at and we were getting great customers, 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 Coke 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 a really simple way to think about Coke. And it's over the course of time 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, 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.

[A]

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?

[B]

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, that 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. The problem when we do that, the 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 and 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've told our people, look, if you want to hire somebody with bad values because 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

[A]

them get a job.

[B]

But anyway, that was huge. And then we made that even worse by taking people who had terrible values and made them leaders. 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 are 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 minds. 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. It didn't almost bankrupt, but it almost wiped out all of Koch's earnings in the late 1990s.

[C]

You'll appreciate.

[B]

So does that give you a flavor?

[A]

Yeah.

[C]

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 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 than end up on the grocery store shelves and being bred. We got in pizza crusts all this crazy stuff, when you look back on it, 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 could basically kind of control the entire value chain, 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, yeah, we called it the gas to bread spread. Some people called the ass to bread spread too.

[B]

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

[C]

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 business, mainly hogs. Yeah. So hog feed. And did no diligence. And this is one of our principles to 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, millions of out of the money hog contracts. 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 asking, why not? This is the kind of trouble that you get yourself in.

[A]

So let's go back to the management piece. How do you take these principles which you've applied successfully to, I would argue, use the term iterate. Because for me, 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. To them. How did you do that as you develop these over the decades?

[B]

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 I'll 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. 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 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 ship dippy 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 have our people in strategy or our principal based management group who are really good at helping them and boy, they're in more demand than anybody.

[A]

So the best thing is success will drive social mimicry. You'll see others.

[B]

That's it.

[C]

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 like, 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 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 that then you use the collective knowledge of everyone, not a couple smart guys at the top of the company.

[A]

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, 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 10 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, See?

[B]

And that's. 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 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, 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're so, 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 Coke Disruptive, he said, Koch Labs, I want every business to be a laboratory for what we find. Both to help us source these opportunities, these tech opportunities, and then we'll let, if they're just trying something, 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.

[C]

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 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. I call when we did that, when we made those first investments, you know this in venture, 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 we had the. But it was that experimental discovery principle and mindset that, that we applied to it. And oh, by the way, 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 and say just shut this down, right? But then over time, like all these different things and then the return 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.

[A]

How much of that risk were you willing to take? And did you take on acquisitions? So doing homegrown exposure 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 fear?

[B]

Well, how about this? We were a much smaller company and we bought Georgia Pacific for 20 billion.

[A]

Can you just tell us what Georgia Pacific is? For those who don't know, it's a

[C]

wood products company and it's got two big pieces to it. Building products and consumer products.

[B]

Well, it's got a third one, but

[C]

yeah, okay, I'm generalizing, but go ahead.

[A]

Sorry.

[B]

No, no, I'll shut up. Shut up the old guy.

[C]

No, no, no, but, but anyway, but on, on that one.

[A]

So when did you buy it and how big of a betting the company move was that?

[C]

2005 that was.

[B]

Yeah, we were much smaller in 2005. I can't remember how much smaller. Baby, it was a lot smaller.

[C]

It was a massive bet.

[A]

How did it come up?

[B]

Okay. We were 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.

[A]

But his MIT thesis.

[B]

Yeah. Yeah.

[A]

Wow.

[B]

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 wealth with it. And so we said wow, 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 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 officer. 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 end up to be the CEO Joe Mohler, who had been president of a company and. And he. They had. It was totally top down bureaucratic. They were in Atlanta, they had this 51 story building. Is it 51? You can correct me.

[C]

That's right. Yeah, you got it.

[B]

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 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 on the Regular floor and then regular floor and then turned it all into offices, I mean into meeting rooms open. 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 hierarchically.

[A]

Would you say that that business unit operates like the rest of Koch Industries today?

[B]

Oh, absolutely.

[C]

But how long did it take, Paul?

[A]

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.

[B]

And yeah, that wouldn't work for us. The stuff we buy. Let me give, 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. 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 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 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, 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, 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. 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, what they've done. And it just, it still blows me away 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.

[C]

Pop, wouldn't you say that. I mean the common theme on all of these, because we have the same story on Molex, you know, you know, similar but different than Georgia Pacific. This was a technology company, Connector and Cabling and Connector company, one of the largest in the world that makes products in your iPhone and med tech 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 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 because that's what

[B]

the market rewarded them for.

[C]

And so like the whole 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. 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. I want to share just one story with you that really shows like how we apply this at Coke. 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, skill 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 that have the 4.0 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. Team 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 we 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 Coke 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 you know, contribution mindset adding value. He saw the cybersecurity risk and in 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.

[A]

Do you actually codify these principles and everyone at the company has a handbook that list them out and then they're part of the assessment process for quarterly or annual reviews with people?

[C]

Yeah, I mean obviously there's the book and this is his fifth book. It's my first but so good profit Science of Success.

[B]

It's my best book because of Chase. Hey Brian. The one we did is pretty good too.

[C]

Hooks won't like that, but yeah, no, there is a discipline and really it comes down to the leaders taking it seriously. And the leader's first responsibility is to help their people.

[A]

Okay, I'm going to put my analyst hat on for a second and I'm going to say my observation, 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 fundraise 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.

[B]

But they can because they're a bunch in Silicon Valley that are their challenge. So they're not all that way.

[A]

They're not all. Yeah, but is it always been a competitive advantage? I mean, did you ever think to move the headquarters to New York City?

[B]

No, but the main thing. And 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 that's a competitive advantage of us.

[A]

That'll be a clip.

[B]

But this is. No, but the main, the main threat we've had is we had stars that wanted to go 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. 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, what the biggest is push has been for us to go public. God will be worth so much and stuff. 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, 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 people, the analysts can understand. Otherwise we would like Georgia Pacific, we would have a low price earnings ratio.

[A]

And so being private, being in Wichita, competitive advantages. What about being owner operated or founder operated? 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 aren't and can't take the big risks and the risks of failure that you're able to embrace?

[B]

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'd 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 and 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 there's no way he could apply any of these principles in that. So it all matters who the owners are and what their values are.

[A]

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?

[B]

Well, if you can get, 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'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. Well, the other one was buying 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.

[A]

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 Coke? And were you always a believer in the principles from a young age? Were you around the organization, around your.

[B]

I'm kidding.

[C]

I'm a chip off the old block. It took me a while to come around.

[B]

No, this is the most remarkable transformation we've been talking about. Him all year. This is the primo.

[C]

Here we go.

[B]

Unbelievable.

[C]

Do I get to tell my story?

[B]

To the absolute bottom. To the absolute top.

[C]

He'll correct.

[B]

He's blown beyond me. He's doing things I wouldn't even dream of or have the capability to do.

[C]

So he'll correct. He'll correct me 10 times as I tell the story.

[B]

Well, because you're too damn humble.

[C]

So I didn't start when I was 6. I started when I was 15. So he cut me some slack. But it's because I was a pretty competitive tennis player.

[B]

He was nationally ranked. Say the humility ranked.

[C]

That's first time. So. But at 15, I got burned out. 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 six hours a day. So I started throwing 10 tennis matches intentionally to get out of it. Out of these tournaments. So I go home and party with my friends. And he said, look, your attitude is terrible. You can either give 100% on the tennis court and apply yourself, or I'm gonna get you a job. I said, I'm sick of tennis. I'm done with it. And so I had. The job was figured out the next morning for me.

[B]

Yeah. But I interrupt again. Cause this is important. He thought he would get a nice cushy job in Wichita. So he'd go out and party with his friends at night. Well, you know, I may be old and slow, but I'm not that slow.

[C]

Yeah. He was kicked out of a number of schools.

[B]

I was born at night, but not last night.

[C]

But yeah.

[A]

So probably a parallel story movie that could be made.

[C]

Yeah. No, seriously, there really is. But basically all my. Was packed for me and it was thrown in the back of a truck. And six hours later I showed up at a feed yard. And I lived in a single wide trailer the whole summer with my boss. I slept on the floor, worked seven days a week and just shoveled cow shit and dug post holes. No, forgot about that.

[B]

Your.

[C]

Let's keep it manageable here. So. So anyway. But the interesting part of that story, even though I went from literally being like kind of country club rich kid to doing that within 24 hours, it was an absolute transformation for me. The fact that he kind of made me do that. And I chose, but I didn't know what I was exactly choosing. But by after I was a month or two into this job, I started actually feeling better about myself. I was like, I hadn't really made a contribution up until that point. In life. And then I'm working with a team, I'm getting paid minimum wage, I'm working my tail off, I'm adding value, even though it may be just menial work. This is. I go back to a letter that his father wrote to him and his other three brothers.

[B]

No, no, my older brother.

[C]

Your older brother.

[B]

Because I was three months old when he wrote it.

[C]

This letter about basically like when I pass on, you're gonna get what seems to be a large sum of money. I hope you don't squander it. I hope you don't use it forbidden. I hope you actually apply yourself because I want you to feel the glorious feeling of accomplishment. And it's a really amazing letter. He has it hung in his office, but that was the first time I felt that even though I was working at a feed yard, I was like, this feels good. Actually. I could have gone down the path of just kind of staying on the tennis circuit. I have no idea where I'd end up in life had I not gone, 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 kind of summer job, but another. So that was an absolute transformation for me in my life. May I give you one more here?

[B]

See, he has great umoi, which, which is a great bit. And that is. Chase has. I have this gift for abstractions. He's like his mother. He has a gift for people. He understands people and can relate to them. And he can go around like she can. Or Sterling Barner, who was our president in the early days, who by the way, was born, his father had ran mules in an oil filled camp and he was born in a tent and there damn near died. Never went to college. 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, do business. And that's true for Stand Together too. Go people. You think, oh, they don't want these, these capitalists or these free enterprise people to do business with them. And he gets them on our side and shows them the value of these principles.

[C]

Well, let me make.

[B]

Is that fair?

[C]

Whatever you said, no, I mean, that's my job. That's what I do now. Origination and partnerships. And about the time I met you, that's when I started getting into technology and trying to Build a new community so that we could get access to the most disruptive founders. But one quick story I want to tell because I think it'll be helpful for your audience as well, that we haven't touched on yet is the principle of comparative advantage is another meaningful tool shift in my job at Coke and my role at Coke, but also in my personal life was when I was running the ag business. This was later on. We talked about the late 90s, the gas to bread spread and all that. This is a separate business with Coke fertilizer. I spent 10 years in that business really understanding the operations of a business. I worked in sales and in marketing and the accounting, the finance, like every piece of it, the trading. And I ran a lot of the smaller business units. But at one point, my boss at the time wanted to add a whole natural gas trading business to it. So he's like, hey, I gotta put a parent company called Ag and Energy Solutions and I want you, I'm gonna 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 nine months in, I realized that I was not the guy for the job. And I walked in 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 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, president type role. So I learned through all that, you call it a failure in that job, that I wasn't an operator and I wasn't a good optimization type leader and I was a builder. 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 go build the stuff. This whole idea of creative destruction that would disrupt the core business that I was running. And so that whole thing around 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 my hope was that that was a little bit of an extra example for other Koch leaders as well. It's like, if you're not in the right job, you don't have to fire yourself, but figure out what your power alley really is and where you can contribute and add the most value. So that experience, for me, what was amazing, if you look at what happened after that, we got a great president to continue to transform the fertilizer business. It's one of our most exciting businesses today and we keep growing with it. So 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 totally an innovation platform for Coke to see around corners. So that one move made one large business much better and also created a whole new thing. And so I always think about it, it's like we have 130,000 employees. What if that one principle, comparative advantage, what if everyone deeply understood that and redesigned their role to where they are truly in their power alley? And what are the results of the business if we could do that? You're never gonna be perfect. But that's the vision that we think have and how we.

[A]

For the organization.

[C]

For the organization.

[A]

So thinking about individuals, how do I self actualize, 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 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 potential and feeling fulfillment in work today.

[B]

Well, I mean, that's critical. And that's all we have, what, 20 some thousand supervisors in the company. And so this is one of their top jobs is making sure 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 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 the way you empower them. That's what Maslow said. He said that everyone has capability, and if you don't develop it and apply it in a way that creates value for others, you may 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, you're 90, why don't you go out, lie on the beach? I said, what? You want me to die? I'd be dead in.

[A]

It's not your nature.

[B]

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're damn right. You use it too damn much.

[A]

So what keeps most people from realizing their gift?

[B]

Well, I think part of it is an 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. About 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 have five dimensions in the way we apply this. The first is vision. You got to get the right vision. Capabilities of creating value for others. Then it virtue and talents. We've talked about that. Then it's knowledge. That's Republic of Science. Creative destruction. All those things. And then the final one is motivation. And so that's what we need to do. And like Joe Lamont has created the schools. He says 90% or 80% motivation. And so you have games, you have other things, 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 my principles in teaching them 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 living up to this better, who's applying this principle better. And they're loving it.

[C]

Yeah. I'm not having my kids listen to books on tape from Milton Friedman when they're 10 years old.

[B]

No, Aristotle.

[C]

Aristotle. There was plenty of them. But let me just make it public.

[A]

Is it that you were told or suggested or encouraged to listen to Aristotle on tape? Yeah.

[B]

No, he wasn't Encouraged. No, we'd go Sunday evenings.

[A]

I gotta take a note for Mike,

[B]

Elizabeth and Chase and I would go into my library and I would play these tape. I'd only play it for 10 minutes because I knew Chase's attention span. Elizabeth was on it. Boy, she was on it.

[C]

She ran circles.

[B]

She was getting straight A's and everything. And Chase would fall asleep. And then. Then after tape 10 minutes, I'd wake him up and. Okay, what was his point?

[C]

Here is a test every 15 minutes.

[B]

And then you may have seen. On where was it where you talked about. We worked together to do your Aerostar term paper.

[C]

Yes.

[B]

And why don't you tell that story?

[C]

Okay, well, I mean, we had. It was like a fifth grade paper. Like, choose your philosopher. Write about. It's got to be 500 words or whatever. So I came, I was like, I don't know. 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 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 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, we got an F on our paper.

[B]

No, you said, you got an F. Yeah.

[C]

And then I didn't think he was going to pick up the phone and call the teacher. So he said, you know, Dr. Cohen, I'll never forget this. I was hiding under the table during this phone call. He said, Dr. Cohen, you. You know, I helped my son write this paper, and he learned a lot from it. And yet, you know, do you not want me to help my son? Do you not want any parents to help their kids, like, learn? And he said, you know, I think you have a point, Mr. Koch. And so the next day, and the next day I come back and it had 99 written on the top.

[B]

See, I made a contribution.

[C]

Let me go back. It's a great story, I know, but let me go back to something I think you were getting at. Around how do you remove more barriers for more people? 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. Then we also feel like it's a movement with tremendous opportunity right now. And so our vision for education is to go from a teach to Test model teacher at the front of the classroom, talking at kids to one that's individualized education. Because we all, as we talked about, we all learn differently.

[A]

Everyone learns differently.

[C]

Yeah, all of our kids learn differently as well. So we did the research at Stand Together and prior to.

[A]

And Stand Together just.

[C]

Oh, yeah, sorry. So Stand Together. For those that don't know, this is really, you know, comes from my father's efforts on social change, which he's been working on 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 and silos, we're just not going to get the leverage to drive the change that we want to. And so Stand Together is made up of close to 1,000 business leaders. It's just like the name describes. It's a community of business leaders that align on vision and values on where we want to see the country. And it's really around this pretty simple idea that every human has a gift. But there's so many barriers across all of our institutions. Education, broken education system, a broken criminal justice system, bad policy, holding people back so you can't chase the American dream and build a business, all of these things. So we're very broad in terms of the issues that we focus on, but education is one of the biggest ones. And so I described the vision of where we're trying to help take it and be a catalyst for change. And one of the things that 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 to transform the education system because everyone now understands that it's just broken. So we're supporting. We have these amazing preferred partnerships, as my father described, whether it's Joe Leamont with what he's doing at the Alpha School, closing the motivation gap and meeting kids where there are and bringing gamification and 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 three

[A]

months, meeting them where they're at meeting

[C]

them where they're at and solving the motivation gap and making learning fun and cool. Right. Sal Khan did the same. He's a huge partner with Khan Academy. And a really interesting work that 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, these small micro schools. And so with a relatively modest amount of money over the last five, six years, we've helped create and seed over 5,000 schools. So what's happening is there's this huge movement where people see as like my kids are learning the skills of what the future is going to be like. Not this teach to 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 don't, you empower them with these models. Right. It's one of the most exciting movements that I think Stand Together is really leading on and we need more partners that are willing to get behind this.

[A]

I want to go back though, Charles. This work at Stand Together has taken off. I know a lot of people that are engaging with you chase on this work and everything you say is so sensible and 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? Because the narrow view of the word coke comes from a broad public perception of political activity that I think's been amplified and the narrative's 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?

[B]

Well, it started with these principles. I mean, to me they're the principles of human progress. But rather than, as Frederick Douglass say, I'll work with anyone to do right, no one to do wrong. I was only working with the people who believe in all of these. And so we were limited. I mean, I worked with the Libertarian Party and that got so narrow. And then they started fighting over who has bigger, greater, more purity in these principles to get it exactly like another one. Brilliant guy, but totally this way. He said, my libertarianism is plumb line. Anybody disagrees he purged. So it's almost like the Communist Party doing the same thing that Lenin did. And they admired Lenin. Yeah, he had the right strategy. Well, no, you can't go murder anybody that does like. So it doesn't work for liberty, it works for totalitarianism. And then I started reading Maslow Usykhi and management and his strategy. And then Viktor Frankl is the one that really got me going. And Viktor Frankl this tremendous insight. He says 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 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 can go for pleasure. And you see this today and you see this through the history of the world. So 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, 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've given up and you say, well, I've given up, I'm going to go for pleasure. And you dedicate yourself to pleasure without considering the long term course consequences, then you're going to experience failure. You 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 to totalitarianism, authoritarianism and socialism. And that's what we're saying today. So that's the solution is to help people find their gift and a way to apply it that enables them to succeed by helping others succeed. And so what does that mean? That means we need to all of us more fully live up to the promise and the Declaration of Independence to better apply these principles of human progress. And then the other thing that I screwed up on is 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 a Libertarian party with no thought of winning. 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 because 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 the mistake we made, or I made is trying to do it through one party. You can't do that. So now we follow Frederick Douglass advice to work with anyone to do right and no one to do wrong.

[A]

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?

[B]

And upswing? What would be.

[A]

Is there a social.

[B]

I thought hell was down, not up. Damn.

[A]

So where are we?

[B]

I think we continue this path. We're going to hell in a basket. It's what, it's what Thomas Jefferson said. He had slaves, but what he said about slavery, he says, 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 mistreatment, I mean, you look at what's being done. I mean occupational licensure, 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 crime, all of that is. We've got to elect people who have some principles beyond power and pleasure.

[A]

What are your principles for changing people's minds?

[B]

It's what Chase says. We find them where we are, just like we have in the company that. And we show them. This doesn't get results. Now if you're a dedicated communist, if you're like Trotsky is, if we can get rid of private property, we'll get rid of greed. And then every man will be a Goethe and a Beethoven. And we will. Or we will be able to create ever ready warehouses of all the goods and everybody can go in because out of their goodwill they'll be making all this stuff if people still have those fantasies. It's never worked in history,

[A]

but it's different this time.

[B]

Yeah, well, that's right. And so that's what we're trying to do at stand together.

[C]

Dave, what we've learned on this is that to change minds and change paradigms. You show versus tell. And go 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 was stand Together. And that's, I think why it's growing exponentially is because we have stories of we believe in people. We don't need top down to come in and tell people how to solve problem problems.

[B]

That's the book that Brian Hooks and I wrote which we just, we have a new edition based on the 250 and we got Martin Luther King III wrote a foreword to it. And, and that's, that's another book besides this one if you're interested in these, the very, these ideas we're talking about on social change. There's much more in that on than this book on that. Although we have quite a bit on this book.

[C]

One of the key concepts in that is 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. Just give a quick example. Example. Scott Strode from the Phoenix. We found Scott. His story is amazing. About eight years ago where he battled addiction most of his life. He had a mentor that put him in the gym and got him in boxing gloves and like exercise was the thing that helped him kick addiction. And what he did, he's like, well if this helps me, I think I can help other people with the same concept. He built a gym called called the Phoenix. Combined the power of community with others that are struggling with the same thing multiplied by the power of exercise. And he was getting insane results like relapse rates that were below 10%. So what we do is instead of some top down program to handle addiction, go bet on Scott. And that's what we've done the last seven or eight years as we've gone from. He had a couple gyms in Colorado when we met him, impacting a couple thousand people. He just hit a million people. Basically overcoming addiction in this last year. That's a movement. And that's a key difference I think of stand together. How do you do what you're talking about at scale and help people change paradigms? You show them with stories like Scott that let's believe in the People, and let's bet on them to transform society

[A]

for 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

[B]

facing, that's a damn good question. It's like, here's the question, okay, the eggs 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. You almost need, well, maybe Argentina, if he can pull off what he's doing, because they were in worse shape, but

[A]

they went through it. Yeah, we haven't gone through it.

[C]

Well, maybe we will, getting there.

[A]

Well, let me ask a question. Does capitalism work long term? And let me give you 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 9000x, you've built a compounding advantage in your business, 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 is 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.

[B]

Well, it starts from removing the barriers. That's what I said. We've got to workforce 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 should start like occupational licensing, all of this. There are hundreds of hundreds as you know, of occupation 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 do it. And then the way we're treating illegal immigrants, the one here working and contributing, we harass them and are going to kick them out. Don't we ought to welcome them and kick some of the others, the bad ones out? But I mean, so some of this is, is basic. And then 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 that's what Viktor Frankl was trying to tell us. And if we don't, 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 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 divisional labor by comparative advantage which makes everything more expensive. So it's just, I mean everywhere you look it's a tragedy.

[A]

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?

[B]

Well, it depends on how it's done. I mean that's why we backed Cosmos who is backing people who do AI based on these principles of market based management based on these principles of human progress. And why don't you tell everybody what you've done in the book with AI?

[C]

Just one principle on our approach to AI is just simple concept of permissionless innovation. I mean the cost of AI to get it in people's hands is dropping just to an incredibly cheap level, 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. From an AI standpoint, that's our mindset on it and that's what we're doing internally at Coke as well. I think one of the most exciting innovations that we have is all around human empowerment, back to bottom up empowerment with principals. So not only are we trying to make sure that we have the right supervisors that are helping people understand their principles so they can apply them. With the book, we've created an app. I sent it to you, Dave. I don't know if you played with it or not, but it's called Principal Companion. You can download it in the App Store. And it's really taking off within Coke because it's just another way to engage with principals in a very simple way. And meeting people where they are, whether it's ChatGPT or Claude, and solving a problem in five to 10 minutes that otherwise would have taken a long time. We're basically powering it with the principles that are in the book, like any problem. So it's one field, 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 I think that's just one example of how we're trying to like really drive human.

[B]

Well, and it doesn't give you an. 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.

[A]

Okay, so listen, we're going to need to wrap in a minute, but before we do, Chase, what was the experience like writing the book with your dad? What's it like working with your dad?

[C]

Yeah, there's a lot of ways I can go with this.

[A]

I think it's lessons learned from your dad. Yeah. I want to give you a chance.

[C]

Absolutely incredible. I'd say it's probably the most important project that I've ever worked on. 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 the last 18 years. Just because when you write something as you know, 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. I always say you really don't know something until you have to teach it. And writing a book is a form of trying to teach Others with it. So my depth of learning because I got to be alongside this guy and there was many others across Koch that contributed to this book as well, but learned a tremendous amount. The other thing, just doing this with him, he applied the principles to the book writing process. So it's like everything and it's so consistent, it almost drives you nuts in terms 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, 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? But he had that, that mindset to it and applied the principles to it. But I will say he's such a stickler with words. And you should talk to my mother about this and how it drives her effing nuts. So I got kind of an 18 month window on what it's like to be mom maybe. But we had one chapter in there on, on stewardship and I think we're on version 27 of it or something.

[B]

Yeah, I rewrote it. I like pop 15 times myself.

[C]

You are not applying the principle of marginal analysis. Version 26 was pretty damn good

[B]

enough.

[C]

So anyway. But we had a lot of fun with it. Yeah, of course there was tension in terms of how you'd write something or whatever, but overall, most important project I've ever worked on.

[B]

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. For God's sake. That means nothing. The proof is in the pudding.

[A]

What?

[B]

You stuck your foot in it.

[C]

He corrects the Koch leader on that in about every meeting that we're in.

[B]

Oh, and then I used to give grammar lessons and our discovery board.

[A]

What's it like working with Chase? What's it been like writing the book?

[B]

I mean, he is. I thought he'd help some with the book and he would get us a perspective and perspective on how to reach young people and do some things and improve it from his perspective. But he's taken it to a whole level, like bringing in AI and have AI as. As the principal companion to the book. And all of these that are way beyond me. So he's taken as he has in everything. Taken it to a whole level beyond where I am.

[A]

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?

[B]

I want us. I want our country to more fully live up to the promise in the Declaration of Independence.

[A]

Charles Koch. Chase Koch. Thank you. I'm going all in.