While Charles Koch relied on people like Varner to help him as he laid the foundations of his new company, Koch did some of the most important work on his own. Charles Koch was intently focused on what made people tick, and he approached the subject with the mind of an engineer: he was seeking to discover discernible laws. He knew that there were laws dictating what happened in the physical world, laws that were well understood by physicists and chemists. He thought there must be similar laws that dictated affairs in the human world.
“It’s an orderly world, the physical world is. It follows certain laws. And so I thought: Well, the same thing’s got to be true for how people can best live and work together,” Koch recalled. “So I started reading everything I could on the subject.”
Koch read the work of Karl Marx and other socialist thinkers. He read books on history, on economics, on philosophy, and on psychology. But for all the breadth of his research, it appears that his conclusions about the world came to rest on the small patch of ideological terrain where he was raised. As a boy, Koch’s father had regaled Charles and his brothers with horror stories about his time in the Soviet Union, where he had helped Stalin’s regime build oil refineries. He had impressed upon his boys the evils of government and the inevitable overreach that seemed to arise when the state interfered with the activities of free people.
Charles Koch became enamored with the thinking of economists and philosophers like Ludwig von Mises and Friedrich Hayek, two Austrian academics who did most of their formative work during the 1930s and 1940s. In later years, Charles Koch would be described as a libertarian or a conservative. But these were imperfect labels that didn’t capture his true world view. More than anything, he was an Austrian economist, or a “classical liberal,” as he liked to call it. Hayek, in particular, put forward a radical concept of capitalism and the role that markets should play in society, and his thinking had an enduring effect on Charles Koch.
In Hayek’s view, even well-intentioned state actions ended up causing far more human suffering than the market-based ills that they were meant to correct. His most famous example of this was the policy of rent control, which was big in Hayek’s hometown of Vienna. Politicians put a cap on rent prices to help people who rented homes and apartments. But Hayek described a long list of unintended consequences. The controls made it unprofitable for landlords to reinvest their cash in money-losing apartments, for example, so those apartments devolved into squalor. Because there was no incentive to build new apartment buildings, housing shortages became perpetual. Big families were stuck in small apartments because they couldn’t afford to move out of their rent-controlled dwellings. Hayek said this proved a simple point: cutting one thread in the tapestry of a free market—even with the goal of helping people—only unraveled other parts of the tapestry.
Hayek was almost religious when it came to describing what the market could do when left to its own devices. He believed that the market was more important, and more beneficial, than the institution of democracy itself. A market was able to mediate all the wishes of everyone on earth. When people entered a market, their demands instantly put a price on the thing they wanted. The market also put a price on the things that they had to offer (like their labor). These prices were not dictated or set by a king. Instead, they were derived from the push and pull of supply and demand. The prices in a free market were the most honest assessment of reality that humans could ever hope to achieve. Government, on the other hand, was never really able to mediate between all the competing needs of its people. It was impossible for everyone in a large society to come to some sort of consensus that the government could then enforce through law. Laws and regulations were unworthy tools to use to deal with problems of the natural world, because the natural world was always changing. Laws were static; the world was fluid. Only the market could respond to the ways the world rapidly changed, Hayek believed.
And if markets were Hayek’s religion, then entrepreneurs were his saints. He saw entrepreneurs as the lifeblood of adaptation and efficiency. They were the ones who spotted new ways of doing things. They were the ones who created new products, created new technology, established new orders when it was time for the old orders to decay.
Charles Koch believed this, too. From the very earliest days of Koch Industries, Charles Koch sought to stock his workforce full of entrepreneurs, employees who would keep their eyes open, learn constantly, and spot new opportunities on the horizon before others saw them. That’s why one of the first and most important jobs that Charles Koch and Sterling Varner tackled was bringing new blood into the company.
The two of them quickly began hiring some of the smartest minds they could find.
* * *
Roger Williams was an engineer with Mobil Oil Company, based outside of Houston, Texas. Williams had worked for Fred Koch back in the early 1960s but left the company to strike out on his own as an entrepreneur. His independent business venture had failed, so he took the job with Mobil and was still happily working there in 1968. That year, Williams was in a management meeting when he got a phone call from Sterling Varner, whom he’d worked with years before. Varner said he had a job offer for Williams: he wanted him to move to Wichita and help run Koch’s pipeline system. Williams politely declined. He was very happy with Mobil and felt no need to go job hopping.
Varner told him, “Well, you haven’t ever met Charles.” Williams remembered. It was true—he had never met Fred Koch’s son. At Varner’s suggestion, Williams took a trip to Wichita to meet Charles, just to talk and hear him out. Shortly after the meeting, he quit his job and moved to Kansas.
One of Williams’s first assignments was to open an office in Alaska, near the North Slope region, where Koch would set up a shipping business. Charles Koch and Sterling Varner came to visit his new operation, and they invited him to come back to Wichita with them on their corporate plane. As they flew over the densely wooded mountainsides of Alaska, the three men began discussing a thorny issue: What should they name the new company? Charles and Sterling had successfully fused the many companies Fred Koch ran into one firm, but now they needed to name it. Why not call the company Koch Industries? The name would honor Charles’s late father, and it was an easy enough catchall title for a group of businesses that were already very diverse.
Charles Koch wasn’t wild about the idea. He seemed embarrassed by the thought of having his last name stamped on the entire company. His name would be embossed on the letterhead, emblazoned on the sign outside the company headquarters, spoken on the lips of everyone who worked for him. There was a vanity about this that seemed at odds with Charles Koch’s nature. But Williams argued in favor of naming the company Koch. In his mind, the benefit of the name was that it was neutral, in the way Exxon was neutral. For many industries, neutrality was the enemy. Companies like Coca-Cola spent millions to ensure that their names weren’t neutral and forgettable. But the oil industry was different because Big Oil was cast as the villain in so many economic stories.
For this reason, “Koch” was the perfect moniker for the firm. It was slippery, hard to grasp. Everybody mispronounced it when they read the name, and when they heard the name, they confused it with the much better known soft-drink maker. Koch was the perfect flag to fly for a firm that sought to grow, and grow exponentially, while simultaneously remaining invisible. In June of 1968 Charles Koch announced that his father’s holdings would be consolidated into one company. And it would be named Koch Industries.