his fleet; he knew which ships were losing money and which were making it.
“It got to the point where the boats were competing against each other. I was just sitting back like a big old Cheshire cat in a tree,” Dubose said. Using data to drive changes at the level of each barge, Dubose boosted profits in the marine unit overall. His profit margin reached 33 percent. The trucking division, by contrast, was lucky to see a profit margin of 8 percent or 9 percent. As he boosted profits, Dubose was given more freedom and more resources. He added more ships, buying larger barges that could ship forty thousand barrels of oil at a time.
All the while, he was in contact with managers from Wichita. They helped him prepare his run charts, and they taught him other tricks from Deming. As he talked with more managers, Dubose learned that not everyone embraced the Deming formula. A lot of managers were accustomed to making decisions based on gut instinct. They thought the charts were just a gimmick. But as many Koch Industries employees would learn over the years, Charles Koch did not consider his guidance to be a gimmick. And following his guidance was not optional.
“Some of these poor rascals just couldn’t embrace [Deming’s] thing. They couldn’t get their arms around it. . . . They’d just zigzag a line across with a bunch of numbers. The people who couldn’t support that, well, most of them were let go,” Dubose recalled.
* * *
The Koch University seminars were just the most visible aspect of his efforts to encode his company with a very specific culture. There were other elements of the culture that were being institutionalized behind closed doors.
One of the most important elements of Charles Koch’s philosophy was the need to expand, the need to be opportunistic. Some of this was drawn from Sterling Varner, but there was also a part of it that came from Charles and from his view of the world. One of the key lessons that Charles Koch took from the Austrian economists von Mises and Hayek was that markets never stood still. The status quo never survived. Markets always build up and then tear down. It was an evolutionary process that never ended, and companies that tried to fight the process would only be devoured by the forces of change in the end. Charles Koch wanted his company to change and grow with the markets. He wanted Koch Industries to internalize the forces of change and exploit them rather than trying to fight them.
This desire was institutionalized in a small office down the hall from Charles Koch’s suite. That’s where he started the company’s first development group. To lead the new group, Charles Koch turned to one of his brightest young lieutenants, Paul W. Brooks, the employee who had suggested simply jettisoning annual budgets. While Brooks’s ideas might have seemed brash or even radical, he was no corporate swashbuckler. Brooks didn’t come across as someone trying to impress people around him by parading his shining intellect. He was low-key and analytical and very much like Charles Koch in his deliberate approach to problems. Brooks was part of a small cadre of employees who came to Koch Industries from Exxon in the mid-1980s. Exxon approached the market with a certain hierarchical rigor; it was a company that believed in protocols and an engineer’s approach to problems, disciplined and linear. During the 1980s, this approach failed to master the violent ups and downs of the oil business, and Exxon had to let a lot of its talent go, including Brooks. At Koch, Brooks found that he could still think like an engineer but inside an institution that was more flexible, adaptable, and entrepreneurial.
When he was put in charge of Koch’s development group, Brooks was given one of the most important jobs at the company. The development group would be an acquisition machine. It would work full-time to identify new companies for Koch to buy and new deals in which to invest. The group would formalize Sterling Varner’s instinct to scan the market for new opportunities. The development group was a central hub to which all Koch employees could send potential deals that they’d spotted. Senior managers in every division at Koch were taught to act like scouts in the marketplace, and when they found a deal that was large enough and promising enough, they passed it up the chain of command to the development group for approval. The