Business Wisdom from Charles Koch

This is a very insightful interview with Charles Koch from Koch Industries. Money quotes below.

On what his business will be in 10 years:

The future is unknown and unknowable. This is the perspective of a book called The Black Swan. The future will be comprised of facts that are outside our present concept of reality, so we have no idea what the future will hold.

On the best advice he’s been given:

People are economizers and want to achieve things with the least amount of effort possible. They sometimes learn things superficially, which is where buzzwords are employed. People tend to emphasize form over substance, but we need to develop what Polanyi called "personal knowledge." This involves not merely knowing concepts, but knowing how to do something instinctively, without thinking about it. It involves the ability to think ahead and focus on success in the future. A chess game is an illustration. The master chess player has not merely mastered how each piece moves or developed a few opening and closing strategies; the master chess player can think at least 6 moves into the future, understanding how to trap his opponent and win the game.

On studying business in school:

Studying business in school is way overrated. There seems to be absolutely no evidence suggesting that people with a business degree excel more than those without one. As you go to college, you don’t want specifics on how to run a business; you will learn this as you go along in real life. You need to have fundamental tools, such as reading, writing, doing math and science, understanding reality, and having good values that enable you to work with people and create real value.

(hat tip: Arnold Kling)

5 Responses to Business Wisdom from Charles Koch

  1. My jaw dropped when I read this quote from Charles Koch:

    “These are the two greatest fears, losing humility and being overrun with governmental regulations.”

    I was almost as shocked by the casual way he just tossed it out.

    What nerve.

    I know what it’s like to live on the receiving end of companies like Mr. Koch’s Georgia Pacific that use market based management– where market considerations are given more weight than the effects such management has on humans and the environment they live in.

    Georgia-Pacific operates a pulp mill that discharges effluent into a small creek that feeds into the beautiful St. Johns River near to where I live.

    GP has fought environmentalists tooth and nail on its (GP’s) proposal to ‘clean up’ the creek by running a pipeline to discharge the toxic effluent (including dioxins and chlorines) into the middle of the magnificent St. Johns River.

    Koch is no hero to me.

    I see him as a villain who places profits above the health of the environment that our children and grandchildren will have to live in.

    I fear Koch’s business philosophy more than I do these ‘terrifying’ regulations.

  2. Brian says:

    I’ve noticed a trend in some of your post against business school education. While it may not be the best choice for everyone, it does serve a purpose. Entrepreneurs will need to eventually hire those with skills in finance and accounting if they hope to achieve any amount of success. (Yes – I realize what this implies.)

    I won’t deny you can learn some of this in the ‘real world’, but that is true of most disciplines (excluding rocket science). The truth is most people lack the fortitude to study a subject as intense as they do in college without the pressure of degrees or grading.

  3. Rob says:

    Brian,
    To Koch’s point on buzzwords and knowledge, I think Ben’s anti b-school post trend may stem from a realization that for a large majority of people, degrees do more harm than good with respect to lifelong learning.

    Many people see the degree as an ending point to their learning, and they cease to be flexible, creative, and interested in new ideas. As a fellow entrepreneur, I run into this all the time. I beat my head against the wall talking with lawyers and accountants who have never seen the situation I’m in, and as a result, don’t know what to do. They want to respond with something standard instead of something customized, and it makes it difficult to get things done.

  4. Troy Richardson says:

    @Vince Williams:

    I can understand your concern for responsible manufacturing and environmental sound practices, however I don’t think you are as familiar with Koch and the companies MBM guidelines.

    As it has not even been a full year since Koch announced their intention to buy GP (let alone the realization date of that transaction), I feel it is somewhat premature to attribute long standing environmental deficiencies to Koch as a whole, rather than legacy GP.

    If you have read the book or actually looked much deeper into Koch industries, they are actually shining stewards for compliance and the environment. They believe in self reporting violations that may occur (not waiting until they get “caught”). Integrity and compliance are two of their main guiding principles.

    As someone who is very familiar with Koch and the MBM principles, I ask that you look a little more deeper into Koch practices and not so much at the problems from newly acquired ventures.

    Kind Regards,
    Troy M. Richardson

  5. To Troy Richardson,

    Thanks for your reply, but in spite of your professed knowledge you are mistaken.

    According to GP’s own website, link to gp.com

    2005

    In a $21 billion transaction, Georgia-Pacific was acquired by Koch Industries and became a privately held, wholly owned subsidiary, continuing to operate from its Atlanta headquarters.

    I’d say that Koch’s avowed horror of governmental regulations conflicts with GP’s (ironic) statement:

    “In addition, the company will audit all of its manufacturing and related facilities regularly to support 100 percent compliance with all permits, regulations and company goals.”

    To date the company has achieved compliance by colluding with an industry- and developer-friendly state Department of Environmental Protection and St. Johns River Water Management District.

    It’s an environmental crime that state and federal regulations allow the continued discharge of millions of pounds of sulfur dioxide into the air, and millions of gallons of ammonia into the waters of our state by pulp mill polluters.

    We’ll see if GP’s actual (as opposed to its stated) environmental policies ever change under Koch’s leadership.

    I’m not holding my breath, what’s left of it after being poisoned by pulp mill polluters in this state.

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