Guardian Industries. Charles Koch could make the case that his company wasn’t just perpetually growing, but perpetually transforming as well, entering new industries, abandoning the old, always searching for the next opportunity. And bolstering these experimental efforts were the reliable cash cows. The Pine Bend refinery, still refining cheap crude and selling expensive gasoline, throwing off cash around the clock. And now Corpus Christi, repeating the same trick thanks to the fracking revolution. And the trading division, still selling derivatives, still trading in markets where it had an unparalleled view into real-time shipments and inventories.
Charles Koch’s beliefs would have been validated in another way during these meetings. Senior leaders at Koch Industries phrased everything they said in the vocabulary of Market-Based Management. One of Charles Koch’s indisputable accomplishments over the preceding thirty years was creating an organization where every employee—to a person—publicly subscribed to the same intricately encoded philosophy. Division heads who came to Wichita spoke in terms of mental models and discovery processes and the five dimensions. They talked about integrity. Decision rights. Challenge processes. Experimental discovery. Virtues and talents. These weren’t dog whistles or catchphrases. They were the internal vocabulary of Kochland. Learning them was the first condition to winning a seat at the table. Downstairs, on the first floor of the Tower, the hallways were lined with classrooms where new recruits sat around circular tables during daylong learning sessions, memorizing this vocabulary and learning the rules of MBM. As Charles Koch himself put it, the new recruit either subscribed to this philosophy entirely, or they left Koch Industries. There was no halfway.
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The real-world verdict about MBM’s efficacy was less clear than Charles Koch’s faith in it. In 2018, as Charles Koch listened to a parade of business leaders describe their operations, there were signs of trouble within Koch Industries. If MBM really was the code of achieving prosperity, then prosperity was necessarily an uneven and volatile thing.
Invista, for example, was deeply troubled. Depending on one’s point of view, the Invista acquisition in 2004 was either a disappointment or a disaster. In the spring of 2018, the Invista wing of the Koch Industries headquarters was like a ghost town of empty cubicles. In 2017 alone, Invista cut fifty-two jobs in Athens, Georgia, sold a plant in Tennessee, and sold another one in Derry, Ireland. It seemed that MBM couldn’t fix whatever ailed Invista and the global market in synthetic fabrics. Similarly, MBM seemed inadequate to reduce workplace injuries inside Georgia-Pacific. The injury rate fell slightly during the first few months of 2018, but was still at the elevated levels that began in 2012. Jim Hannan and his team were still trying to solve the problem, but it stubbornly persisted.
There were also signs that Koch Industries, in spite of strict adherence to MBM, was repeating some of the mistakes of the 1990s. The company’s acquisition spree had once again saddled it with wildly diversified units that seemed like an unnatural fit with one another—glass, steel, computer sensors, greeting cards, and advanced fertilizers, all under one roof. Molex, the microchip and sensor company, was already delivering mixed results. In 2017, a Molex plant in Minnesota laid off 136 employees.
The economy itself was shaky in the spring of 2018. The stock market swung wildly, rising and falling with volatility that hadn’t been seen in years. There was speculation that the economy had overheated, thanks in part to the kind of government intervention Charles Koch despised. The Federal Reserve Bank had kept interest rates at zero for several years after the crash of 2008, pumping global markets with easy money. This was compounded by a program called Quantitative Easing, which essentially pumped more than $3.5 trillion of new US dollars into the economy. If this radical monetary policy caused asset bubbles to appear in different pockets of the US economy, those bubbles might soon pop. When that happened, Koch’s corporate structure would be tested in ways it hadn’t been tested in a decade. The weaker divisions might suffer massive losses.
If the economic future was uncertain, Charles Koch seemed supremely calm during the winter and spring months of 2018. This might have been due to that fact that even in the worst-case economic scenarios, there was seemingly no plausible scenario in which Koch Industries actually failed. There might be layoffs. The company might have to sell some divisions at fire-sale prices. But the Koch Industries entity itself, the core business that executives referred to as KII, seemed impervious to failure. There