In late 2012, Koch bought a stake in the privately held glassmaker Guardian Industries, making Koch the largest shareholder. Koch placed an executive on Guardian’s board and monitored the company’s performance, eventually purchasing the rest of Guardian’s shares. In 2013, Koch paid $7.2 billion to buy the technology company Molex, which made electronic sensors and chips. This acquisition gave Koch its first major presence in the technology sector and it also played to Koch’s strength as a commodity company; Molex made its products by using huge quantities of rare earth materials and metals.
Also in 2013, Koch invested $1 billion to help build a high-tech steel mill in Arkansas, anticipating that the specialty steel it produced would be in high demand as America’s economy improved and replaced its aging electricity grid. Somewhat strangely, in April of 2013, Koch financed a deal to buy the greeting card company American Greetings and take it private in a deal worth $878 million. Outsiders wondered if that wasn’t some sort of add-on to Koch’s paper business, but it seems that Charles Koch just thought the card company was a good buy. In August, Koch paid $1.45 billion to purchase Buckeye Technologies, a company that made specialty fabrics and materials out of wood and cotton, which was then tucked into the Georgia-Pacific division.
The sense of mastery within Koch Industries only intensified in 2014 when Charles Koch and his team expanded and renovated company headquarters. The corporate campus had not grown significantly since the Tower was built in the 1990s, and now Koch needed more room to accommodate its growing workforce. The only hindrance to this expansion was Thirty-Seventh Street, the busy two-lane road that ran through the north side of the headquarters campus. Many employees had to park on the north side of Thirty-Seventh Street and use an underground pedestrian tunnel to get safely into the Tower. To alleviate this problem, Koch Industries paid to have Thirty-Seventh Street torn out and rerouted in a large semicircle that arced around the headquarters. The newly laid Thirty-Seventh Street created a giant horseshoe shape. Inside the horseshoe, Koch built a new office building with 210,000 square feet of space and enough room for 745 employees.
The most noticeable renovation, however, was the wall.
Koch Industries erected an earthen wall that encircled the north end of the complex, running in a curve along the newly rerouted Thirty-Seventh Street. The wall was tall and sloped, with trees planted along its length. Before the wall was erected, visitors could turn from Thirty-Seventh and steer directly into Koch’s visitors’ lot. Uninvited guests could walk directly from the lot into the Tower’s lobby. Now the only means of entrance were a series of checkpoints. Two of the checkpoints were located on the north side, where metal gates had been installed into the side of the wall. To gain access, a visitor had to first receive an e-mail from the address [email protected] that included a bar code in the message. A security guard inside a squat building next to the gate scanned the bar code with a red light. If accepted, a yellow guardrail rose up and allowed the visitor to pass inside.
The wall around Koch Industries reflected the cost that came with Charles Koch’s political victories. For decades, Charles Koch had fiercely guarded his privacy. In just a few short years, he had become a public figure and a walking political cartoon. The “Koch brothers,” meaning Charles and David, had become fodder for countless political ads and exposés. Their image became a shorthand illustration for the influence of big money on politics. Charles Koch began receiving death threats in steady volume. The earthen wall helped keep such threats at bay. Now packages delivered to Koch Industries were received first in a bomb-proof room at the Tower where packages ran through X-ray machines to scan for bombs. When Charles parked in a special lot with indoor access to the building, Koch Industries became more fortresslike and more culturally insular, even as it extended its reach further each day into industries that underpinned modern life.
Charles Koch could spend his long working days surrounded entirely by people who were beholden to him for a paycheck. His office was the epicenter of a corporate empire over which he had almost unchallenged control. But for all this power, there was one thing that Charles Koch could not control, and that was the passage of time. He turned eighty years old in 2015. But it didn’t seem that anyone expected him to retire.
“They’ll take Charles out of there on a stretcher. And I think he’ll be the happiest that way,” quipped Leslie Rudd, one of Charles Koch’s longtime friends in Wichita.
But even if he never retired, Charles Koch could not lead the company forever. And this raised a troubling question: Could Koch Industries thrive without him? The politically correct answer among Koch employees was that Market-Based Management would be able to carry on without the charismatic CEO who created it. Charles Koch’s wisdom had been codified into a machine, this thinking went, and the machine could thrive without his personal intervention. But history was replete with examples of companies that had stagnated once their founders left. Koch Industries seemed like a prime candidate for this fate. Charles Koch insisted on maintaining control over the company since he became CEO in 1967. No one knew how the corporation would operate without him.
Charles Koch had a contingency plan. He had placed a hedge bet against mortality and the passage of time. There was a possibility that Koch Industries might be passed down to an heir, a young man who could carry on the Koch name and the tradition of family ownership.
Charles Koch was raised in a household with four sons, four potential heirs to the family business. Charles, on the other hand, had only one son. He had vested many hopes, and many years of work, in him and by 2015, Charles Koch’s son was seen as the heir apparent.
His name was Chase Koch, and everyone who met him thought that he might be CEO of Koch Industries one day. But what people didn’t know was if he’d be ready to do it. Or, more importantly, whether he wanted to.
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I. Even the most optimistic of these forecasts profoundly underestimated how much oil would come gushing from the ground.
II. There were an additional thirteen refineries that produced lubricating oils and asphalt in 2012.
III. Koch’s complex in Corpus Christi includes two refineries. For the sake of simplicity, the complex is referred to here as simply Corpus Christi, or the Corpus Christi refinery.
CHAPTER 22
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The Education of Chase Koch
(1977–2016)
When he was a young boy, Chase Koch might have seemed unteachable. But that didn’t mean that his father didn’t try. On Sunday afternoons, Chase Koch and his older sister, Elizabeth, got personal lessons from their father.
It was common for families in Wichita to attend church on Sunday, sending the kids to Sunday school while their parents listened to sermons from the altar. This was not the tradition in Charles Koch’s household. Charles Koch developed his own curriculum to teach his children, a curriculum that taught them about his systematic view of human behavior and how best to organize human society. On Sundays, Charles Koch gathered Elizabeth and Chase in the family library.
The library was a large, imposing chamber in the back of the house, with walls that were lined by thousands of books. The books on philosophy, history, and science were the raw material of Charles Koch’s worldview, which he had encoded in Market-Based Management. When they sat down for their lessons in the library, Elizabeth and Chase Koch were likely the only people on earth to get such deep, one-on-one lessons in MBM from the creator himself.