had big plans for what he wanted to do with the family fortune.
CHAPTER 6
* * *
Koch University
(1983–1989)
In the early 1980s, after he was unfettered from his dissident brothers, Charles Koch began to reveal just what his management dreams would look like.
There was an auditorium at Koch Industries headquarters, and Charles Koch began to hold events there, filling the seats with between four hundred and five hundred of his most senior managers. Lynn Markel, Brad Hall, Bernard Paulson, and others would file into the room and take their seats. The events were not the typical corporate presentation; Charles didn’t use the forum to talk about business operations or to hold some kind of pep rally. Instead, Charles Koch often sat in the audience himself, taking notes. The executives sitting near Charles Koch saw that this wasn’t a business meeting—class was in session. In fact, they were attending the first seminars in a decades-long curriculum that would become the central work of Charles Koch’s life. The curriculum outlined a specific and codified philosophy; an operator’s manual that defined an immutable set of rules for creating prosperity. He would ultimately call this philosophy Market-Based Management. But in the beginning, the philosophy had no name. In the beginning, there were only the seminars in the company auditorium.
In the earliest sessions, Charles Koch invited outside speakers to address the crowd. He ran workshops on the Dale Carnegie theory of management that built on Carnegie’s famous book How to Win Friends and Influence People. These classes focused on the art of management and productivity, and required managers to give short speeches to help them learn to communicate effectively.
The classes got more technical, and more strategic, over time.
Charles Koch invited one of the brightest young business consultants in the nation to speak in Wichita, a Harvard professor named Michael Porter. Porter published a book in 1980 called Competitive Strategy that offered a new framework for how to run a business. The book provided a detailed plan for companies to analyze the market in which they operated. Porter visited Koch Industries multiple times, accompanied by a team of consultants. The team helped Koch’s managers look into their own business lines and apply Porter’s ideas, using good data to figure out the best path toward boosting profits and growing. Porter helped Koch executives learn how to analyze their competitive advantage, analyze their competitors, and come up with the best plan to capitalize on the company’s market position.
Then Charles Koch began to teach the classes himself. He led sessions with smaller class sizes, maybe a dozen or so senior managers. This intimate setting helped Charles Koch give more attention to each manager. But he wasn’t content for his teachings to reach only the senior leaders. Charles Koch wanted to multiply his efforts. After they attended Charles Koch’s lectures, executives like Markel were expected to return to their offices and repeat the lectures to their own employees—executives were even given pamphlets and slideshows to help them. In this way, Charles Koch’s lectures were passed down through the chain of command, from his senior managers at headquarters out to the most remote branch offices. The managers who attended Charles Koch’s seminars began to call them “Koch University.”
Charles Koch wanted to ensure that every new employee learned how things were done at Koch Industries. He also wanted to ensure that the company culture could endure over time. Sterling Varner, for instance, was the father figure who guided Charles Koch after Fred Koch’s death. Varner was the company’s living library. But Varner was getting older and wouldn’t be at the company forever. Charles Koch wanted to codify Varner’s teachings before he left.
These teachings—the “classic Sterling” guidelines—were some of the key elements of Charles Koch’s new philosophy. Opportunism was one: every employee needed to keep their eyes open for new deals on the horizon. Humility was another: “knowing what you know and what you don’t know,” as Brad Hall recalls it. Humility dictated that while it was important for Koch to expand, the company needed to expand into fields where it already had expertise. Strength would be built upon strength.
But in the early 1980s, Charles Koch’s philosophy was just beginning to be incubated. He didn’t have a fully formed set of guidelines to pass on to his managers. Instead, Charles Koch focused on the fully formed set of guidelines shaped by another man, a consultant named W. Edwards Deming. Charles Koch became fixated on Deming, and he set out to apply Deming’s methods across Koch