With great power comes a lot of publicity — not all of it wanted, as a new book about the secretive Koch Industries makes clear.
In “Kochland,” the business journalist Christopher Leonard adds to a growing shelf that includes Jane Mayer’s best-selling “Dark Money” and Daniel Schulman’s “Sons of Wichita.” Schulman focused on the Koch family story, while Mayer investigated the Koch-funded war chest for a conservative political agenda, including a stubborn denial of climate science. Leonard peers into the black box of the enormous energy conglomerate itself: “Kochland” is a corporate history, lucidly told.
Telling this story as well as “Kochland” does is harder than it looks, and not just for the obvious reasons. Yes, Koch Industries is one of the largest privately owned companies in the world; this means it isn’t beholden to the same transparency requirements of a publicly traded company, whose shareholders expect to see the books.
Charles de Ganahl Koch, the chairman and chief executive, has taken care to keep it this way. In 1981, Wall Street bankers offered him a windfall for what was then an “obscure, midsize energy company.” He refused. “Secrecy was a strategic necessity for Koch Industries,” Leonard writes. So was family control. (Two brothers, Freddie and Bill, were bought out of their shares in the early ’80s; David, who ran for vice president on the Libertarian Party ticket in 1980, retired from Koch Industries last year.)
But there’s another reason that this narrative is impressive: Leonard doesn’t have much by way of rich narrative material to work with. Memorable stories are usually buoyed by memorable characters, but with few exceptions the Koch employees who talked to Leonard have imbibed the company culture and sound remarkably alike, reciting the same canned lines about hard work and, inevitably, “humility.” As Leonard admits in his preface, so many people “come and go” that he felt it necessary to supply a 10-page character directory at the back of the book.
Even Charles Koch doesn’t make much of an impression; he seems less charismatic in “Kochland” than methodical and deliberate — like the engineer he was trained to be. Leonard scored an interview with Koch in 2015, but Koch didn’t reveal much beyond a childhood memory of finding it bizarre that his third-grade classmates struggled with math. “Why? I asked myself,” Koch recalled. “The answers are obvious!”
ImageChristopher LeonardCreditTina Krafts
It turns out that this engineer’s confidence in a rationally ordered universe goes a long way to explaining the Koch approach to business — and to society, too. His most conspiracy-minded critics talk about a “Kochtopus” and imagine Charles as a cartoonish Svengali. But “Kochland” suggests that the truth is much more banal — and maybe more unsettling for it.
Leonard races over the company’s founding in Wichita, Kan., by Fred Sr. in 1940, in order to arrive at the book’s real beginning: 1967, when the paterfamilias suddenly died on a duck-hunting trip and the 32-year-old Charles took over. Charles used the next several decades to transform the energy company that made his father a mere multimillionaire into the behemoth it is today. Fossil fuels, commodities trading, chemicals, paper products, fertilizer: Koch Industries has inserted itself into nearly every aspect of daily life, raking in billions along the way.
As the company grew, Charles Koch developed a corporate philosophy to ensure that its various divisions could focus on their ultimate purpose: to generate profits. He settled on a name for his vision, a set of rules that he codified in a pamphlet for employees and later enshrined in a book. That name — Market-Based Management — didn’t sound all that imaginative, but then neither did the theory itself, which boiled down to treating employees like entrepreneurs and exposing them to market discipline.
For a while, this entrepreneurial risk-taking resulted in a slew of criminal charges and complaints. Leonard recounts the company’s most ignominious hits, including a Senate investigation into whether it had been stealing oil from Native American tribal land. (Charles Koch said the company “got more money than we paid for oil,” but insisted it was only because his employees had mismeasured the oil they took — which they happened to do consistently in the company’s favor.) In 1999, Koch Industries pleaded guilty to dumping contaminated wastewater near its Pine Bend refinery in Minnesota.
The company learned that violating regulations could put a dent in its profit margins, and responded accordingly. It now imprints upon employees the need for “10,000 percent compliance”: obeying 100 percent of the laws 100 percent of the time. But it has also looked for ways to transform the regulatory regime — hence the vociferous lobbying by a division blandly called Koch Companies Public Sector and the “dark money” chronicled in Mayer’s book.
Since the election of Donald Trump, who was the only Republican presidential candidate that the Kochs refused to support, the company has pursued a strategy that Leonard helpfully calls “block-and-tackle”: Block Trump when he tries anything anathema to the company’s interest, and help him tackle the things that Koch wants — deregulation, tax cuts, conservative judicial appointments. Charles Koch has apparently learned to treat the Trump presidency like a natural disaster: an eruption of volatility to prepare for and exploit.
But it’s Leonard’s depictions of Market-Based Management in action that are most illuminating here, and the light they give off is chilling. “Kochland” includes a chapter on warehouse operations that tracked workers’ activity down to the minute (each conversation and bathroom trip had to be accounted for) and posted their performance rankings on a bulletin board. It was an antiseptic, ruthless system that pitted the workers against one another. They were unionized, but they felt so exhausted and degraded at the end of the work day that any solidarity began to fade — to the detriment of their negotiating power and to the benefit of the company’s bottom line.
In his book “The Science of Success,” Charles Koch calls Market-Based Management “a way for business to create a harmony of interest with society.” The question “Kochland” raises is whether this “harmony of interest” results in a place where anyone without a few billion to spare would actually want to live.