As a trader, Roskind was one of the few middlemen in the global market for industrial chemicals. He sold barges full of sulfur made in Louisiana to factories in Asia that needed it as an ingredient in their manufacturing plants. Roskind spent much of his day in an office in suburban Boston, working the phones to call contacts in Europe or Singapore or Houston, finding people who wanted to buy and sell giant quantities of things like chlorine, caustic soda, polyethylene, and polyvinyl chloride.
Roskind’s business was a murky one, built on a network of personal relationships and deep knowledge that only he held. People like Herbert Roskind were vital to the market: rather than having a transparent market exchange, the buyers and sellers had Roskind’s brain. He knew who was in the market at any given time; he knew what the demand was for polyvinyl chloride; and he knew what a fair price would be. (Of course, whether a trader like Roskind actually quoted the fair price to a customer depended on just how informed that customer happened to be about the market himself.) He had a Rolodex that spanned the globe and a body of knowledge that was integral to success in trading. He knew the habits of customs agents in different countries and knew which shippers could be trusted and which couldn’t. He had an almost encyclopedic knowledge of global shipping rates. He knew the negotiation customs of different cultures and different nations, and he was adept at navigating dark markets—where prices were never posted publicly, where prices always came down to one-on-one negotiations.
Bill Koch was fascinated with the possibilities offered by the chemical trading business. Its prospects seemed a lot better than the oil business during the 1970s. The oil markets were jumping up and down, but chemical prices were rising steadily as nations like China opened their doors to global trade, causing demand for industrial chemicals to climb dramatically. Bill Koch arranged a meeting with Roskind, and soon he proposed to buy Roskind’s company outright.
Roskind didn’t know what to make of Bill Koch the first time he met him. Bill Koch was dressed like a college kid. He looked, in fact, like he was still attending classes at MIT. Everything about him reflected the MIT style, which might be called Privileged Chic. Koch wore slacks and a button-down shirt, but no jacket or tie. He wore leather loafers with no socks. He drove an old Toyota that had a hole in the floor of the front passenger seat.
Bill Koch’s pitch was simple. Koch Industries would buy out Roskind’s company and create a new chemical trading company inside Koch Industries, with Roskind as its head. He would get a 20 percent ownership stake in the trading company, and Koch would invest money to make the firm much larger. Roskind would be able to open a new office, hire more traders, and do more business than he’d ever done before.
Roskind went to Wichita to iron out the details, and that’s where he met Bill Koch’s older brother, Charles. Charles Koch ate with Roskind at the Koch Industries cafeteria and discussed the deal. The differences between Charles and Bill were stark. Charles wore a coat and tie. There was not even a hint of carefree campus life about him. He had an engineer’s mind and an engineer’s demeanor. Charles drove an older car, too, but there wasn’t a hole in the floor. Charles was low-key, but his ambitions were apparent. Roskind asked Charles Koch how his company was doing, and he remembers Koch saying: “Well, we’re the second-largest privately held company in America. . . . We’ll be going to the first largest if we can do it,” Roskind recalled.
“I thought that was a pretty good answer,” Roskind said. He agreed to become part of Koch Industries.
Roskind quickly opened an office, hired traders, and installed a telex machine that could send written messages instantly to almost anywhere in the world. His new division was called Koch International Trading Company, and it did not operate a single production facility. It didn’t make a pound of sulfur or chlorine, but instead it arranged deals for the transfer of countless tons of commodities.
Bill Koch called Roskind and told him that he wanted a job. He wanted to be a chemical trader. Roskind had his doubts.
“I said, ‘Well, Bill, I’ll be honest with you,’ ” Roskind recalled. “I know you have a PhD in chemistry, but we need a PhD in chemical trading. And they don’t offer those. You’d be welcome to work with us, but I’m going to have to treat you like I treat almost everybody else. And that is, I have to pay you a modest salary and see how well you do.”
Roskind pointed out that in the trading business, volatility had its upside. Bill Koch’s salary might be low, but just one or two good trades might easily double or triple his pay. A trader’s income swung wildly, but the payoffs could be enormous.
Bill Koch’s answer was immediate. “I’ll take it.”
* * *
Roskind’s office opened at eight thirty in the morning, and the trading began almost immediately. Roskind often arrived early, but the other employees drifted into work, and most of them were not seated and ready to go until around nine. One morning, Roskind was alone in the office at eighty thirty when the phones began ringing. He went from desk to desk, answering the calls because he didn’t want to miss a potential deal or give his customers the idea that nobody was home. In the chemical trading business, where written contracts were rare, reputation meant everything. A phone ringing with no answer sent the wrong message.
Later that morning, Roskind called all his employees into the office, including Bill Koch. He tore into them.
“I said, ‘I want to tell you something: this office opens at eight thirty. That doesn’t mean you walk in at eight thirty. That means you’re ready to do business at eight thirty. You’re at your desks and you’re doing business at eight thirty! Don’t be late again.’ ”
The employees filed out of his office and got back to work. About an hour later, Roskind’s phone rang. The call was from Wichita. It was Charles Koch.
Roskind’s first thought was that his short career at Koch Industries was now finished. He had just chewed out his boss’s little brother. Charles Koch’s first words affirmed his fears.
“He says, ‘I understand you publicly humiliated my brother,’ ” Roskind said.
“I said, ‘Well, I didn’t mean to. I had a meeting of the entire staff, and I laid down the law about how this company was going to be run. And your brother was part of the staff.’ ”
Charles Koch’s response was chilling: “You know, no one’s ever talked like that to a Koch.”
“I said, ‘Well, Charles, I’m really sorry that that’s upset you.’ ”
Then Charles told him: “It’s about time someone did that.”
* * *
Bill Koch was a very fast learner. He sought out Roskind’s advice, and once he heard the advice, he followed it. Bill Koch also had one of the most important skills a trader needed: he was very good at dealing with people. Bill Koch was not warm or charming, but he was an expert at listening. He quickly absorbed what the client wanted—and what the client was willing to give up to get it.
Roskind taught Bill Koch that trading was about one thing. “The idea of trading is to take what we have and get what we want,” he said. Roskind’s metaphor was that the trader begins his day with pennies, and he ends his day with a sirloin steak. Bill Koch was able to turn pennies into sirloin not just because he listened closely to his clients, but because he had the keen mind of an engineer. He saw commodities markets as a complex game board with several dimensions, and he was able to triangulate between the needs of people scattered around the globe, making them meet in a way that produced a profit.