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- [00:04]
Tyler Cowen
Conversations with Tyler is produced by the Mercatus center at George Mason University, bridging the gap between academic ideas and real world problems. Learn more@mercatus.org for a full transcript of every conversation enhanced with helpful links, visit conversationswithtyler.com hello everyone, and welcome back to Conversations with Tyler. Today I'm chatting with Chase Koch. He is the lead guitarist of a band known as two Lot. He plays major roles in Koch, Disruptive Technologies and the Foundation Stand Together. And he and his father, Charles Koch, have a new book out, which I was happy to blurb. It is called Becoming a Principle Driven Leader, subtitled 41 Principles to Build an Enduring Business.
- [00:55]
Chase Koch
Thanks for having me on, Tyler. It's an honor.
- [00:56]
Tyler Cowen
Now, early on in the book, you tell a story of you being 10 and your father lecturing you about Hayek, Maslow, Schumpeter, Aristotle and others. You've absorbed a lot of those lectures. But what was it from those lectures that did not stick with you? You either rejected it or just you've still been ignoring it?
- [01:13]
Chase Koch
Yeah, I mean, I definitely rejected it when I was 10 years old, I think like most 10 year olds would. And it was more than a lecture, just people kind of in the room with me and my father and my sister. These were Sunday philosophy lessons, sometimes economics lessons, and they were actually books on tape that he would play whether it was Milton Friedman or Hayek or, you know, choose youe philosopher. Every 10 minutes he would stop the tape and then quiz us with questions to see if we were paying attention. My sister Elizabeth was always, she knew the answer. She was right in there. And I was usually either half asleep or not paying attention. So it wasn't really until later on in life, call it my late twenties, that the principles really hit me. All the things that he'd been trying to teach me hit me at a visceral level. And it was from me experiencing them myself. And I'll give you just one example when these principles really came to life for me. I was running our fertilizer international business and we were trying to expand all over the world. In Brazil was one of the most important import markets and we had a large trading business and I was trying to expand it and we were opening up a new terminal to bring nitrogen fertilizers in with large ships and break bulk, 30,000 tons to get to farmers. There was a new high speed conveyor belt and a storage terminal and everything. And the bureaucracy, the red tape, even the corruption that I, as a kind of a young business leader, felt we Thought would take under a year to build and get in market. Took us over five. And so just feeling that I was like, ah, this is what my father has been telling me since I was 10 years old. We don't want our country to go down this path. Protectionism, not thinking about things from a mutual benefit lens, barriers in business holding people back. All the things that he was teaching me came. Came flooding to the front of my brain and I was like, I got it. And that was just one of many examples on why I became so passionate about the principles that my father was trying to teach me since I was a little kid.
- [03:26]
Tyler Cowen
But there must be something from those books on tape that you absorb the least. So do you wake up in the morning and say, ah, today still A does equal A. Dad was right about Aristotle. Or did that just still like, eh, I don't need this so much. I know A equals A.
- [03:41]
Chase Koch
You know, it's interesting, Tyler, I would say he looks at everything through the lens of principles. And ever since I was a kid, whether it's how he raised Elizabeth and raised me, how he treats my mother, how he does business, the things he's trying to change, you know, in our country, with all of our efforts and stand together to help people improve their lives, those principles, I'm 100% aligned on with them. There's not something I could sit here and tell you. It's like I'm just so polar opposite my father on that. What I will tell you is how I express them is different. He also taught me this. Right. The principle of comparative advantage, which I think of the 41 principles in the book, is maybe one of the most powerful. As you know, the principle of comparative advantage is really focusing on. I mean, you can look at it from an individual standpoint, or you can look at it on a country's comparative advantage and what they make and produce and at what cost. Look at it from a personal level. What my comparative advantage is, is what is my gift? What is my superpower relative to everyone else on the team? If you look at it from a business standpoint, what I could be doing versus all my other alternatives of what I focus on. But also whoever else is on the team trying to go build a business or achieve a vision, what I could be doing relative to them and relative to their comparative advantages. So my comparative advantage compared to my father, completely different. His comparative advantage is abstract concepts. Because he'd studied philosophy his entire life and he studied the philosophers that you mentioned, Hayek von Mises, Milton Friedman. I mean, the List goes on and on. Joseph Schumpeter. But he also studied Lenin and Marx and applied the scientific method to understand the opposite of what he believed, to refine his own views in terms of how to build a business and how the world works. And my comparative advantage is more around that I've discovered over time through lots of failures. And I talk about this in the book. My comparative advantage is much different. I think I got more my mom's comparative advantage around working with people and understanding people and, you know, understanding interpersonal skills and intrapersonal skills. And so what I've learned through a lot of failures that focus on that and don't try to be something that you're not. And so I think that's where my father and I would diverge is like, we have the same principles, but we express them much differently in business and with the social change efforts that we have now.
- [06:16]
Tyler Cowen
Other than your mom, dad and sister, are there other relatives who influenced you earlier on?
- [06:21]
Chase Koch
Absolutely. I mean, I spent a lot of time with my Uncle David as well. Sadly passed in 2019. What he did for the company. And just watching him in the boardroom and watching his leadership with my father to build a company that has grown 9,000 fold since the early 60s. So watching his leadership there, that had a profound effect on me. But also, I'd say the stories of my grandfather. I never met my grandfather, but how my father has passed on, what he learned from his father. And a lot of this is in the book. But I'll just share one little example with you. When my father and his older brother Fred were three months old, Fred Koch, My grandfather wrote a letter that said something like this. And it was the intent of when he passed away, they would open up this letter and read it. So this was dated like 1936, three months after my father was born. And it said something like this. When I pass, you'll inherit what seems to be a large sum of money. You can do one of two things with it. You can either squander it and live an unhappy life, or you can use it for good and apply yourself and apply your gifts and live the glorious feeling of accomplishment. And feel the glorious feeling of accomplishment. I know you won't let me down. That was kind of the message. So a little bit of a guilt trip there for him too. Obviously, that had a profound effect on my father because, I mean, that's the way he's lived his life. He's two doors down from me right now, almost 91 years old and still grinding it out because he wants to add value. He's still co CEO of Coke. People ask him all the time, why do you still do this? Why aren't you laying on a beach somewhere? He's like, what do you want me to die? You know, like, this is how I live. I want to feel that glorious feeling of accomplishment. And he's passed that down to me. So from my grandfather to. I wish I had met my grandfather. He passed before I was born. But a lot of stories like that have really had a huge influence on me.
- [08:26]
Tyler Cowen
Now, you were a very good tennis player when you were young. Obviously you have a good physique for that. But mentally, what do you think it is that made you so good?
- [08:34]
Chase Koch
Well, I don't have a good physique anymore. I had shoulder surgery, so I'm not playing tennis anymore. But I think, you know, my parents wanted both my sister and I to really apply ourselves and take. Whether it's on the academic side or on the sports side. They said, you really find your gift early in life. And I tried a lot of different sports and I frankly sucked at most of them. Tennis was one of those things. I had good eye hand coordination. So they're like, that's it. You know, if you're passionate about it, you need to like really invest the time in it. And I did. And I became nationally ranked when I was 12 years old. I was top hundred in the country. But by the time I was 15, 16, and I had all these new freedoms in my life later, curfew and all that. Like, I had no interest in continuing to invest in tennis and I wanted to party with my friends. So I started throwing tennis matches. And my mother came back and told my father, like, this kid's going off the rails. What are we going to do with them? So he pulled me into his room and said, you either give 100% on the tennis court or you're going to get a job. You're not going to be a country club bum. And said, fine, get me a job. And overnight I went from being frankly, kind of a tennis country club rich kid to. To shoveling cow shit and digging post holes 12 hours later because he sent me to a feed yard. But I always tell people, even though I really despised what he did at the time, that might have saved my life and being in the position I was in with the resources that my family had and going down the path of trying to feel what my grandfather said is that glorious feeling of accomplishment instead of going down kind of the rich kid path, that doesn't apply themselves.
- [10:19]
Tyler Cowen
If we think of the three major tennis players of the previous generation, you know, there's Rafa, Federer, Novak. Which of the three do you feel closest to in terms of either principles or maybe just aesthetics? Like, which of those three resonates with you?
- [10:34]
Chase Koch
Wow, what a question. I think I have a little bit of recency bias, Tyler, because I just watched the documentary last week. Rafa, have you seen that?
- [10:42]
Tyler Cowen
No, but it's on my list to watch.
- [10:45]
Chase Koch
You got to watch it. I think it brought tears to my eyes probably four or five different times because I grew up watching him. I like all of them for different reasons, but Rafa Nadal, just his grit and what he overcame. I'm a little bit of a stoic at heart. I read all like the stoic philosophy. I'm a big fan of Ryan Holiday. And one of the books that had a huge influence on me was the Obstacle is the Way. And when you look at Rafa's life and the injuries and the things that he had to fight through to become the best in the world, it's just an incredible hero's journey, journey story. And also what a gentleman he was as well and how he treats other people. And he's not this guy that because he's number one in the world, he thinks he's above everyone. The way he treated his girlfriend, his wife, the people around him, his coaches, other players. He's a model for tennis.
- [11:36]
Tyler Cowen
Now, to go Back in time, 1992, the Barcelona Olympics. You have a chance to meet and spend some time with the NBA members of the Dream Team, right?
- [11:45]
Chase Koch
Yeah, that's right.
- [11:46]
Tyler Cowen
Who is it you admired the most and why?
- [11:49]
Chase Koch
Oh, wow. Boy, you're taking me back here, 1992. I mean, I've never been on a trip like that. I've been to two or three different Olympics. But going when I was 14 years old, experiencing that three week journey with my father, I had the opportunity to. We accidentally stayed at the same hotel as the 92 dream team. So I got to at least say hello to some of the players. But I don't know why my brain keeps going to Charles Barkley.
- [12:15]
Tyler Cowen
Because he's so smart. He puts things so well.
- [12:18]
Chase Koch
I think he his courage to tell it like it is, you know, he wasn't the best basketball player of all of them, but I always admire him. You know, they called him the round mound of rebounds. I remember that. And he hated that nickname, but I always liked him. I remember my father and I had an interaction with him on the elevator. He Said something like, my dad was like, I've always admired you because you tell it like it is. And he goes, well, you have to tell it like it is because you know, the press is never going to let the truth get in the way of a good story. And it's like just seeing him now with Shaq and Kenny on their NBA show, there's nothing better.
- [12:56]
Tyler Cowen
That's a great show, isn't it?
- [12:58]
Chase Koch
It's incredible. Like, I hope they keep going, but
- [13:01]
Tyler Cowen
I'm not sure Shaq is always quite up to the discussion.
- [13:07]
Chase Koch
Yeah, but there's nothing better than the Shaq Charles arguments. And they start going at it. I mean, that's, that's the best TV you can get, in my opinion. But I'm a basketball guy. You know, being from Kansas, being a basketball kid, I love that stuff.
- [13:21]
Tyler Cowen
Were you surprised by the Knicks winning the title this year?
- [13:23]
Chase Koch
I was. I'm friends with R.C. buford, who's the GM of the San Antonio spurs because he's from Wichita originally. So I've known him for decades. And, and of course I want to support my friend. And I like the spurs and I thought they had more talent, but I think they're young. I think they have the culture, I think they have the organization and the team and they have the values and principles. And I've compared a lot of notes with, you know, what R.C. did with Popovich over the years and how they won so many championships and they're a culture first organization. They don't put up with prima donnas. And, you know, I mean, that's exactly how we think about talent at Coke and how we've built one of the largest private companies, you know, in the country is through a differentiated talent model. So I, even though they lost this year, I think they are set up so well because of the youth of the team, but also just their overall, you know, their mindset and their principle and values driven approach.
- [14:21]
Tyler Cowen
And do they need to jettison Fox? I mean, he was what, 3 for 15 in the final game and made a lot of other mistakes. Can they even trade him?
- [14:30]
Chase Koch
I mean, I would say, is he willing to learn? That'd be my question. Just like we talk about in the book all of our failures. I mean, I've had plenty of failures. My father's had plenty of failures in business. And do you learn through values and principles to dig yourself out of the ditch or do you just say, oh, I'm perfect and I'm right and there's nothing I did that was wrong and it was Someone else's fault. If that's the case, yeah, I would say they need to get rid of him. But if he can learn from it, maybe he can be a great team
- [14:59]
Tyler Cowen
player going forward in the world of music. Are you happy with Spotify or do you agree with the critics who think it sucked too much of the capital out of the sector?
- [15:08]
Chase Koch
Oh, wow, that's a good question. I think with Spotify, I think the consumer captures all the value because I mean, I love it as a platform. It knows me, it knows what I like, what kind of music I like, it feeds me, it's very user friendly. But the artist doesn't capture any value. You know, I mean, I play in a band, we're only three or four years old, but the checks that we get for, you know, something like 5 million listens over time I put myself in other bands shoes that is their living. And it's hard to reconcile the value creation relative to the value capture. But what it's causing the industry to do and artists to do is figure out new methods of monetizing their talent and their value. They've got a tour, they've got to sell merch, they've got to associate themselves with brands. It's just a totally different model disrupted by these DSPs for sure.
- [16:02]
Tyler Cowen
As a boomer, I have the sense that from the years, say 1964 to 1973, music was very, very original. It changed every year. Often you can tell what individual year a piece of music came from when you hear it. And now I often hear pieces and I don't know if it came out yesterday or 20 years ago. Do you disagree with that impression?
- [16:23]
Chase Koch
I don't disagree with it. I think that makes sense. But I will say that given the technology that's available, the perfect processing of a song that you listen to now, and how every artist has that technology at their fingertips and they can record it at home now almost on a phone with high quality. I think that's very different than like listening to an old 1970s Led Zeppelin album where you tell that was in the studio and the grit of the song and the album. So I think that's different. I just think there's been so much innovation in the space that there's a good and a bad to it. Right. I think anyone can sound polished and perfect with the technology that we have now. But sometimes you like that old grit of a song from Pink Floyd or Led Zeppelin or Grateful Dead or whatever the band is.
- [17:11]
Tyler Cowen
But you were age 13 and you heard the Pink Floyd album The Wall. And it just floored you, right? Is there anything in music now that you think can do the same for today's 13 year olds?
- [17:22]
Chase Koch
Oh boy, that's a good question. It's hard to put myself in a 13 year old's shoes. I have three kids and my oldest just turned 14. I don't know. All I can speak to is my own experience and that I hope kids find the music that transforms them. Because I mean, music is a feeling. What you're talking about is my experience. I think I was 11 actually when my sister played Pink Floyd the Wall and it was the David Gilmore guitar solo from Comfortably Numb. That was just. It hit me so viscerally that that was like my hook into music and sunk its teeth into me and I never let go. Music isn't for everyone, but whether it's art or reading or dancing or what, I encourage anyone to find that thing. Because while we all have our work and we all have what we're doing, I think everyone needs that one thing to help them self actualize and live the happiest life possible. For me, music has done that. Not only because I love it and just experiencing it and going to a live show, but what I've learned from going to so many concerts from so many different bands and even DJs over the years is the power of music to unify people. It's the common language that we all have globally, frankly. That's why I founded Stand Together Music by basically leveraging the power of music to unify people. And then our Stand Together platform around that works on issues like poverty, criminal justice, mental health, transforming education, the power of music and artists that have really big followings that want to get engaged but don't have a way to really drive change. That's where we come alongside them and help them push the easy button because we have that platform. So I know that wasn't your original question, but that's what excites me the most about music and why music is a huge part of my life. Not only, yes, I play in a band, but we can drive change with it too. And it's very exciting.
- [19:26]
Tyler Cowen
Money was the song on that album that really grabbed me when I was about 12. I heard that, I thought, wow, I've never heard anything like this before now. This summer you followed around Dave Matthews Band. What did you learn from them?
- [19:37]
Chase Koch
Well, I didn't really follow them around. I would say it was the jam band community more broadly. I loved Fish, Widespread Panic, String Cheese Incident, so that there was some Dave Matthews in there as well. I think it's the fact that you go to the shows with a jam band, Grateful Dead, they're the ones that pioneered this, right? And you have no idea what you're going to get. The element of surprise at a live show. I didn't really like always listen to them like on the radio. I didn't buy them for their albums. It was more of the community aspect of it and the fact that everyone was there because they didn't know what they were going to get and these fabulous musicians were going to put on a great show. But then the friendships that come from that community that I still have long term friendships from back in my early 20s that we all get together back to where I was saying before. The power of music to unify people. That's what the jam band community does. That's why I love it. That's why I still love it.
- [20:35]
Tyler Cowen
NWA Are they good? I like them.
- [20:38]
Chase Koch
I mean, I had my phases, you know. My first business, Tyler, was when I was 15 years old. One of my best friends to this day, Askia Ahmad, he was wiring up car stereos and building custom boomboxes and all that. So we basically built a business out of my parents garage because they had all the tools and materials and everything. Like, let's build a business out of here. My parents hopefully will pay for the machinery and then we can sell these boomboxes to our friends at high prices and capture a big margin. Through that I learned about, you know, the whole like gangster rap. Your listeners may be surprised, but it started, you know, with me, Public Enemy, NWA, Eazy, E. You know, it's all good. Dre, Snoop, you know Snoop. So good. Yes.
- [21:26]
Tyler Cowen
What's Snoop like?
- [21:27]
Chase Koch
Snoop. Okay, this goes back to what I was mentioning on the power of music to unify people. Tyler during COVID So I've been with Stand Together and for the listeners that don't know, Stand Together is an organization that has really a community of like minded leaders that all believe in one thing and the power of human potential and that every human has a gift. But we all know that there's so many barriers in society that are holding people back. Whether it's barriers in education, barriers in regulation so you can't start a business, barriers in our criminal justice system, you name it, right? And so what Stand Together does is we have basically a comprehensive strategy that addresses everything from education to, to policy, to bottom up empowerment in communities to drive real social change. So I've been a part of this for as long as I Can remember my father's been working on social change for 60 years. My passion for music, as you can see from your last line of questioning, we didn't really withstand together in that whole community. We never tapped into culture. Now, when I say, like, culture and what the next generation pays attention to. Sports, music, YouTube, entertainment, creators, media. And so during COVID I kind of had this idea that it's like we've never tapped into music to drive social change. Now is the time. Why? Because artists aren't on tour. They want to help. Everyone's going through this terrible pandemic. And so how can we leverage the power of music to help people? So I founded this concept, Stand Together Jam Together, where we got on Zoom and we got the whole Stand Together community all, like, piling in. Everyone was in their homes with. They couldn't do anything. And I got some of my friends that were artists to come on. It was like Matt Sorum from Guns N Roses, Michael Kang from String Cheese Incident. We had some of the Blues Traveler guys. And then it just kept. We had a few experiments. And then the second, the third show, I had a friend, Pastor Omar Jawar, that was very close with Snoop. And Pastor Omar, we had worked with him on trying to disrupt gang violence through a group called Urban Specialists, based in Dallas, Texas. And so he got Snoop on. And I knew Snoop was big on criminal justice reform. And this was right after all the George Floyd stuff happened. And so it was really a moment that people wanted to air things out and talk about the injustices of our criminal justice system. And so I had my father on the show interview Snoop Dogg. Basically the impact of the war on drugs and basically the criminal justice system and how our approach is lock em up and throw away the key. Don't give people second chances. And that was really how Stand Together music was born is through Stand Together Jam Together, an online Zoom platform. And all of a sudden we realized it's like, wow, we have something that artists want. They want the ability to drive social change and be able to push the easy button. For Snoop, it was criminal justice. For Matt Sorum, it was addiction. You know, with the Phoenix and what we're doing there. We've created a movement called One Million Strong, where we've had more than a million people that have transformed their lives with the Phoenix. So anyway, I could go on. I'm very passionate about this. But it's very exciting what we started with, with folks like Snoop and where it's headed now. And we have meaningful movements, great partners like Live Nation, aeg, we're at all the festivals, Coachella, Stagecoach, the Breakaway festivals, where we're getting to more people at scale through music with these ideas on how we help people.
- [25:13]
Tyler Cowen
For your own group, 2 lot, if I look on Spotify, the song Come Together is much more popular than the next most popular song. Why is that? Is it your best song?
- [25:22]
Chase Koch
If you asked the five bandmates, we'd all have a different answer to that. I love that one. I helped co produce that one, which was very exciting. I think it just, you know, it's one of those. It's hard to articulate. We have no idea. We put a song out, what's going to hit and what's not. I just think it's in that electronic kind of jam, hybrid vibe that gets people dancing, but also has instrumentation to it and it's got a little funk to it as well. So it's a really kind of a cross genre one. The other one, I would say that ties to the principles and ties to, you know, the book is the song Entropy. And really it's the song, the album title song of our very first record that we put out two years ago. And two Lot, you mentioned the band's name. Two Lot is short for the second law of Thermodynamics, which is the law of entropy. And we put the band together because the band members were all going through something. We were overcoming our own entropy. Our lead singer's father had just passed away a few months before our drummer's father, who I mentioned a minute ago, who's the founder of urban specialist, Omar II, we call him two. His father passed away from COVID in his late 40s. He was a close friend of mine. And so Tu's father passed away and I had just gone through a divorce. And so we called it two Lot because we were overcoming entropy in our own lives. But we said, can we build a band that has excellent music and is hybrid soundscaping from EDM and jam band and all the influences from the band, but then help other people overcome entropy in their own lives through the stories of a song like Entropy that's on our first record. But also when we have the stage, we can showcase groups like the Phoenix with the platform that we have and help drive awareness to organizations like that. So it's been a really fun project with those guys.
- [27:19]
Tyler Cowen
And some of your song titles like Masquerade or I Hurt Myself Again, they seem to reflect some inner sense of vulnerability that to me comes through in the music as well. That's quite interesting.
- [27:30]
Chase Koch
Yeah, thank you, Tyler. Thank you. Music's only good if you're really speaking from the heart on it. I mean, listeners get it. They know when you're faking it or you're just trying to copy something else. So we're just trying to make the most authentic stuff we can.
- [27:43]
Tyler Cowen
Which musical genre do you feel if you had to say is the most either classical, liberal, or libertarian, or in accord with your principles? Some people say country and western. I mean, do you have a view? Can you even generalize in that way?
- [27:57]
Chase Koch
That's such an interesting question. I don't think it's one genre, like, too lot. And the guys that we've pulled together, we all have different backgrounds. Two is from funk, pop. He grew up playing drums in the church. He was Chance the Rapper's drummer for a bit when he was 18 years old. So he's got rap influence. Our bassist has influence from funk and R and B. Our lead singer, the same. He can play any genre. And our pianist, synthesizer player, sage, has jazz background. And I come from the jam band community, so literally almost every genre is represented. I think the magic is where it all meets.
- [28:37]
Tyler Cowen
What is Mr. Beast like and what are his principles?
- [28:40]
Chase Koch
That's a great question. Well, just to give your audience context, you know, back to the approach with Stand Together and really trying to help people drive change by really tapping into culture. There's no bigger culture carrier or influencer than Mr. Beast. He's number one YouTuber in the world, right? I think he just hit half a billion subscribers. And if you look at all of his platforms that was on YouTube, but if you look at it across everything, he's more than a billion now. So it's like, it's hard to even wrap your head around. But the reason that I developed a relationship with Jimmy is because of our values alignment. One of the principles that we talk about in the book, Tyler, is preferred partnerships. And so we believe that a preferred partnership, three things have to be present for a long term, mutually beneficial partnership. This applies to everything in life, whether it's your spouse, whether it's a supplier, a customer, a social change partner. This applies to everyone and everything. You have to have an aligned vision where you're going with that partnership. A clear North Star number two, you got to have aligned values. So how you capture opportunities, how you solve problems, can you work together, can you engage in a challenge process to get to a better answer. Humility, respect, integrity, all these principles. That's number two and number three is complementary capabilities. Both parties bring something very unique to the table and different to the table, because when that happens, you have real synergy, and that's what makes it a sticky partnership and long term. So with that context, that is what our partnership with Jimmy Donaldson and his team has been. We started by experimenting on some videos because his whole thing is making kindness go viral. And that's where he started with basically helping other people and demonstrating to his followers that it's cool to help people, to go out and help people that are in need. And you can do that in a million different ways. And that's the spirit of Stand Together as well, is that all we're trying to do is help people remove barriers in their lives. And there's so many different barriers across all of our institutions. So a partnership with Jimmy, he sees what we have with the Stand Together platform, we see what he has. We're aligned on vision, aligned on values. And when you combine those two platforms with messaging and helping kids understand these principles, we think we can really drive some meaningful change. But he's a great human. I was with him two weekends ago. He was filming the Third Beast games for Amazon. And just to see what he does and how he does it is really remarkable.
- [31:25]
Tyler Cowen
Some basic questions about Koch Industries and also Koch Disruptive Technologies at this point, like roughly what percentage of the business is still energy related?
- [31:34]
Chase Koch
I'm glad you asked that question because it's a misperception. I think part of that is because Coke is private and we've always been private and we plan to stay private. But Coke is not an old kind of industrial company anymore. We're a tech company. We've invested over the last, I would say close to 10 years, 50 billion in tech. And that's through companies like Infor, which is ERP software that we acquired over time that brought on more than 30,000 software engineers to help the rest of Koch really think about technology through a different lens. Molex was also a game changer for us. Molex makes connectors in all, whether it's your iPhone, medical devices, what lights up this room, data centers. And I think that was 2000, 2013 that we acquired Molex. That was basically getting us into this Iot world where everything was starting to be connected and you could create so much more value if you could get data off machines and products and plants and processes. So when we acquired that, it transformed our knowledge around what you could do with data, but you need the hardware to make that, make that work too. So the first thing I would say is that Coke's a tech company now. And for those, even old industrial companies that aren't transforming themselves with technology, they're going to be dinosaurs really quick. And so, you know the principle of creative destruction from Joseph Schumpeter, we believe it, we live it. It's not perfect, but we try to inspire that principle in all 130,000 employees in 60 countries creatively destroy what has made us successful in the past and make it better every day, whether it's your individual job and what you focus on or experimenting with new technologies. So back to your question on energy. 4% of the overall capital consumed at Coke is in refining, which is basically where my grandfather started the company. So I think that surprises a lot of people because I think a lot of people are still stuck in this. Well, you're this energy company. No, we're not. We touch the majority of the economy now, and we're in everything from forest products, consumer products, software, as I described, glass manufacturing, to energy and fertilizers, as well as.
- [33:53]
Tyler Cowen
What have you learned from Marc Andreessen?
- [33:55]
Chase Koch
Speaking of partnerships, Mark is amazing. You know, I remember when I started Coke Disruptive Technologies, that was in 2017, and Mark was one of my first mentors. I had actually fired myself from being CEO of Koch Fertilizer because I'd spent 10 years in that business, and I had so much, so many great opportunities in different roles. I got to the point where my boss at the time had said, you're ready. You need to be CEO. I'm moving on to a different role. And I realized that being a CEO operating in 30 countries and 5,6000 employees, it wasn't my comparative advantage back to that key principle that we described earlier. And where my heart was was in technology and innovation. And I wanted to work on the next thing, not, you know, kind of optimizing and operating the existing business. So that's when I had the idea of bringing this, building Koch Disruptive Technologies from scratch and getting us in the tech game like we'd never been in before and invest in technologies that were very early so Coke could look around corners and do a more effective job of driving creative destruction. And Mark, back to your point, was one of those key mentors. He was one of the first people I sat down with in Silicon Valley. We had had a prior relationship with him, but I hadn't really spent a lot of time with him. And. And I spent an hour with him just walking through all his learnings and how he built Mandreessen Horowitz. So, I mean, one of the smartest guys in the Game results speak for themselves. But just how he looks at technology and how he thinks about betting on founders and the values alignment and what he sees in the pattern analysis, given all of his history, to make the right decision based on the quality of the founder. Learned a lot and I modeled a lot with KDT after what I learned from Mark and I would say from Ben as well and become friends with them both.
- [35:55]
Tyler Cowen
Do you think the principles of market based management work especially well in the Midwest and Canada or is it completely culturally neutral?
- [36:03]
Chase Koch
Well, there's a reason we stayed in Wichita, Kansas in the Midwest.
- [36:07]
Tyler Cowen
And how would you articulate that reason?
- [36:10]
Chase Koch
I would say talent and values and I call it access to the farm team. And this is our whole talent vision for Coke. Now case in point, we operate, you know, as I mentioned, in 60 countries and I believe we're in all 50 states. But I would say like how we deliberately think about talent. It's we want to hire kids that are contribution motivated. I think too often you see in our culture that you have people or you know, in kids that are more deficiency motivated if not destructively motivated. So there's a continuum there. Contribution motivated all the way to destructively motivated. And on the contribution motivated side, take the positive. The reason why I say we want to hire the farm team is kids that have, whether they grew up on a farm or not, that doesn't matter. But it's the mindset, the mindset of grit and work ethic and wanting to come in and make a contribution as opposed to deficiency motivated. Where you come in with a victim mindset or you come in with a mindset of well, I went to this fancy school, look at my resume, I had a 4.0 and I'm entitled to some height, some role, some title and some salary when you haven't earned it yet. We want the contribution motivated kids. Let me give you one example. Tyler, our CIO today at Koch, over all of Koch Inc. Has no college degree and he started his first access to Koch was striping lines in the parking lot. So he just wanted to get in the building. This was back when we were way more stringent and way more kind of process driven on talent, which was the wrong way to approach it just based on resumes and GPA 20 plus years ago. But somehow he found a way in Koch. He proved himself that he knew a lot about technology and he was helping us a lot with data science in the early days. And then he saw the cyber wave coming and all the cyber risk that Koch had and all the attacks we were getting. And he built a capability around that. He became CISO head of our cybersecurity capability. Built that and then a number of different roles, but is now CIO of Koch, no college degree. His name's Jared Benson. Jared is, I'd say like that's what we want. We want someone that's come in and wants their role so badly and they come in with fire in their belly just wanting to make a contribution. Look where he is today.
- [38:47]
Tyler Cowen
How is Wichita most changed since you grew up there?
- [38:51]
Chase Koch
That's interesting. It keeps growing. I think the change, you know, there's more and more businesses here. There's something in the water here, Tyler. I think it ties back to kind of access to the farm team and values and there's so many principled entrepreneurs here and so many great businesses have been built in Wichita. But what I would say how it's changed is the people have stayed the same and the value system has stayed the same. I have so many friends that left. They went to college or they wanted to go to the big city. Almost all of them have come back. And it's for the same reason that I described how it's going to change. You know, I have a specific project I'm working on downtown. We talked about my passion for music and the ability to unify people. I'm building around this idea of bringing people together through music. You know, I've helped build festivals here the last couple summers. We have another one coming up in September called Somewhere Fest where we basically mix great music with social change and bring all that together into one concept. But I'm building long term assets here because I think we've had a gap in Wichita around music. And so I'm building an indoor venue that I think fits that gap with a number of other assets around that for housing. Working with Wichita State on a number of things downtown. So I think you'll see Wichita continue to evolve and hopefully attract more and more of those people that I described.
- [40:16]
Tyler Cowen
And you founded a school that is located on the grounds of Wichita State. Do I understand that properly?
- [40:22]
Chase Koch
Yes, I would say my ex wife founded that. I can't remember exactly what year it was, but it's a school called Wonder. My kids still go there today. And it's really this principle of we really support across stand together. That's this idea of where education is going and what's helping kids the most is not a one size fits all approach. The teach to test model that Tyler, you and I probably grew up in with the teacher at the front of the classroom, talking at kids. This is more of a model and I think where most of education is going, project based learning, the kids have agency. The kids are the customer, not the teacher. And it's more of a guided system where each kid has a different gift. So you help guide them and find their gift earlier in life than they otherwise would. They're leveraging things like Claude Code. My son can run circles around me with Claude Code and what he's building, but it's because he has the freedom at school to try these different things on his own. No one's telling him what to do. He and his friends are getting together and saying, hey, we can go build stuff, we can build video games, we can build apps. And that's like what I'm most excited about. What we're working on with Stand Together is around education. And we are in the middle of one of the biggest movements as a country I think that we've ever seen. If you look pre Covid at the research and we Stand Together has done all this research, only 20% of families were open to their kids going to a non traditional school. If you look at over the last year, we've measured that same question and it's north of 70%, I think closer to 80%. So in terms of the biggest opportunity for what we can do to transform education, it's shifting from that one size fits all approach to one where it's individualized education. And as you know better than anyone, we now have the technology to do it. Alpha School is a great example of that. Khan Academy is a great example of that. We have a Vela Fund concept with the Walton family where we're writing very fast checks to any parent, any teacher, any entrepreneur that wants to transform education so they can go build it. And with that model, we've built over 5,000 schools over the last five years.
- [42:45]
Tyler Cowen
If you had to explain to an outsider, in terms of fundamentals, how is Kansas different from Nebraska? How would you put it?
- [42:52]
Chase Koch
Oh, my gosh. Well, I haven't spent, you know, in my tennis days, I toured Nebraska quite a bit. But it's been a while since I've been back there, so I wouldn't be the best person to give you.
- [43:04]
Tyler Cowen
But that's endogenous, right? You don't feel you need to go back?
- [43:07]
Chase Koch
Yeah. Okay, that's fair. That's fair. Yeah. I mean, for the Midwest, Kansas is home. And I shout from the rooftops at how great this state is. But I spent a lot of time, time on the Road with my role. I'm all about finding the new technologies, building new origination and partnerships. So I'm on the east coast, west coast. But you see the trend, right? I mean you see people leaving the coast wanting something different. Whether it's because they're taxed too much or the regulations are too high, the cost of living is too. And they're finding markets like Kansas. Wall Street Journal did a write up on Wichita three weeks ago about how attractive it is from a cost of living standpoint and how more and more people are encouraging people to like, look at markets, mid sized cities and markets like Wichita, Kansas.
- [43:54]
Tyler Cowen
What's physically the most beautiful thing about Wichita weather for this summer?
- [43:59]
Chase Koch
It's been one of the mildest summers so far and we've had. It was in the 60s the other day. But I would say we have an amazing pocket in the fall which is like there's no other place you'd want to be in Wichita. And then we have another kind of a month and a half in spring. That's remarkable. The thing that people knock on Kansas is the wind. It's flat. You can stand on a can and see a long way when you're in Kansas. But yeah, no, I'm obviously very proud to be from Kansas and still live here.
- [44:26]
Tyler Cowen
I think your lightning storms are quite beautiful. And because it's flat, you can see them very clearly. So it's the hot summer months that for me are the most attractive about Wichita.
- [44:36]
Chase Koch
Agree, agree.
- [44:38]
Tyler Cowen
You mentioned AI. How is it in either your personal life or work life, how do you use AI?
- [44:43]
Chase Koch
Well, as I, as I told you, my third. Well, he just turned 14 last week. My oldest son is teaching me how to code and never would I have imagined that I could code. And you know, he got me on cloud. I was using Claude the last year or so, but when he introduced me to Claude code, the ability to become a super coder in about 30 or 45 minutes of someone showing you how to use it. But what's amazing now, I mean the first little project I worked on was my son saw I had a bunch of Excel spreadsheets for my exercises and my stretches that I do. And he's like, what is this? He's like, why don't you have this to where you have checklists in an app you can have analysis and charts and like this is my son telling me this. I was like, well then build it for me. And he whipped it together in about an hour or two. And now I have an app on my phone. It's one of the top apps I use to hold myself accountable to my so something as simple as that. But then when I saw the power of it, I'm working on my own operating system. So for example, and I can talk about what the company is doing with it as well. But you asked me personally, what am I doing? I'm building my own operating system. I said, here's my roles and my responsibilities for Koch as a board leader, as a investment decision maker and being on the investment committee, but also with my role as origination and partnerships and finding the next great opportunity and then staying together all the things I'm doing there. I fed that document in and I said, how can Claude help me become 100x more effective and efficient? And what engines do I need to build to make me a better decision maker across all these disparate roles? And then instead of me saying, well, I do a lot of origination, who are the people that I need to have access to where I can create mutually beneficial opportunities with? I just said instead of me coming up with the engine, Claude came up with all of it. And he gave me five engines. I have it actually right here. Five engines that I use to to just operate my day. And it's everything from origination. It analyzes the quarterly business reviews for all the business, helps me ask better questions, it recommends strategies to me. So it literally is a hundred to a thousand x in terms of what it can do for and that's anyone. It doesn't matter what role you have. If you're head of sales, if you're a salesperson, if you're an admin, whatever role it is can supercharge whatever gift you have. And that's what we're trying to do across the company is help people understand that and encourage people to use things like Claude and ChatGPT and across the
- [47:25]
Tyler Cowen
company and your affiliates, what do you do to incentivize your workers, managers to do something with this?
- [47:32]
Chase Koch
It starts with leadership. And this is one of the key principles that we have in the book Tyler is bottom up versus top down. And so one of the ways I describe principle based management and what is different about Coke is asking yourself the question, if you run an organization, what if you had a culture where everyone knew what to do without being told? I mean it's a really, it's a big question, right? And I'm not saying we have that at Coke, but it is a vision for us. And what that principle is is bottom up empowerment as opposed to top down control and dependency on the one, the smartest guy in the room. So it's really all about empowering people with principles. But to your point, also empowering people with technology and empowering people with tools. The incentive is it just makes them more effective. So I think there's a natural motivation there for any employee to say, do I want to do my job more effectively? Yeah. Well, are there tools out there that can help me with that? Of course. And so role as a supervisor is to encourage and empower these people with principles. Are you driving creative destruction of your own role? Are you driving creative destruction of your own business? Are you practicing experimental discovery with technology? That's another one of our principles. And so their questions, they're not go do this.
- [48:55]
Tyler Cowen
Right.
- [48:55]
Chase Koch
And I think that's what's very different about a bottom up approach as opposed to running an organization from the top down.
- [49:02]
Tyler Cowen
Now, we live in a great country, as you know, Kansas is a great state. We have other great states. What's the most fundamental reason for trying to understand why so many of our political candidates are so terribly bad?
- [49:17]
Chase Koch
That is a great question. I wish I knew the answer to that question. I think we need more people that have been successful in business and that really kind of understand the real world to engage in politics. I would say, Tyler, for me personally, I have never been one to get really excited about politics and engage in politics. And my focus is really more on all the community things that we're talking about. Transforming education, culture and politics is critical, but our focus is around politics is around encouraging principle driven policies. It's policy versus politics. And if we can get away from Republican versus Democrat and apply the principle of openness and work together more and have politicians that have that mindset. My father taught me about Frederick Douglass and that's one of his and frankly mine most inspirational leaders because he taught everyone to work with anyone to do right. We don't see much of that today in politics. It's Republican versus Democrat mudslinging. If we could work together like what we're doing, what we did on criminal justice reform, we worked with Van Jones as an example. Van disagrees with us on probably 7 or 8 out of 10 things. But we saw the one thing we could agree on and we saw a problem around criminal justice system. And we came together and we helped drive change and that we're also doing the same in transforming education, working with anyone to do right. And we've helped pass school reform in like 33 states now, which, going back to this whole, what I think is the biggest opportunity to transform education and one of the biggest movements. That's one of the reasons it's happening, because people are working together, because they see how broken the education system is. So I can't speak to a specific politician or this and that. It's not really my focus. But I can speak to like what I feel like we need to do at the principal level.
- [51:16]
Tyler Cowen
Last question. Obviously you're very busy, including being a father. Is there a place you've never been and you think of going traveling to and what would that place be and why does it so intrigue you?
- [51:27]
Chase Koch
That is a good question. You know, I've with my roles across Koch, I've been to a lot of places around the world. I've seen most of the world, as I mentioned, I spent a lot of time in Brazil. I've been all over Europe. I've built businesses there, spent time in Asia. God, where do I want to go? I would say, well, I'll tell you where I'm going this summer that I've never been. Croatia, just because I've heard it is so spectacularly beautiful. After this book tour over the last like four to five weeks, I'm going to need an opportunity to recharge the batteries. So that's where we're going this summer. So I'll tell you how it is. But I've heard amazing things about it. The culture, the people and the beauty of it. So we're going to spend a week there and I'll let you know how it goes.
- [52:07]
Tyler Cowen
I have loved my trips there and it has arguably the most beautiful people in the world.
- [52:12]
Chase Koch
Oh, wonderful.
- [52:13]
Tyler Cowen
Chase Koch, thank you very much.
- [52:15]
Chase Koch
Tyler, thanks for the opportunity. It's great to see you and great to be on.
- [52:19]
Tyler Cowen
Thanks a lot again, everyone. To repeat, Charles and Chase Koch have a new book out. Becoming a principle driven leader.
- [52:26]
Chase Koch
Hey, Tyler, if I could say one more thing.
- [52:28]
Tyler Cowen
Sure.
- [52:29]
Chase Koch
We didn't think about this just as a book. We think about it as a platform for principles. And one of the things that we built is an app that your audience can download on any of the app stores, whether it's Apple App Store or Google Play. And it's called Principal Companion. And what it is is one field, just like ChatGPT. Solve your problem with principles now and with engaging with this in five minutes on a specific problem that you have today, whether it's in business, whether it's family problems, whether it's sports team problems, it'll coach you through with the principles that many of them I described on this podcast. And I think it's another way for people to engage with something that they're dealing with right now. So I'd encourage downloading Principal Companion as well. So thanks for the opportunity.
- [53:20]
Tyler Cowen
I'll add there's a QR code in the book. I also received my copy of 41 cards for the 41 principals, and here are principled leadership questions in a little red box. Jason, thanks again.
- [53:33]
Chase Koch
Thanks again, Tyler. I really appreciate you.
- [53:37]
Tyler Cowen
Thanks for listening to Conversations with Tyler. You can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. If you like this podcast, please consider giving us a rating and leaving a review. This helps other listeners find the show on Twitter. I'm TylerCowen and the show is OwenConvos. Until next time, please keep listening and learning.