Kochland Read online

  The ranchlands spoke to Fred Koch in a special way. He owned thousands of acres of pasture, land that he would pass on to his sons and that they would keep for decades, knowing how much it meant to their dad. A ranch was an unfettered place; a place of freedom. It was also a place of ceaseless work; a place where any enterprise, whether it be a family or a business, survived or failed based solely on the work ethic and competence of the people who ran it. Ranching was honest, and it happened in the most wide-open and most free countryside in America. Maybe Fred Koch went to Bear River to think—to make plans for his business and his life in a place where he could enjoy a little silence. His business empire was a complicated set of interlocking companies. He oversaw an oil refinery, oil pipelines, manufacturing plants, and, of course, his beloved ranches. Bear River would have been a good place to escape it all, to consider it from a distance. It was the kind of place where a man could think, where he could compose a game plan to enact when he went back home. Considering Fred Koch’s life, it seems highly likely that he was considering those things as he scanned the horizon, waiting for the V-shaped flocks of ducks to come into view and start circling, looking for a place to land.

  Fred Koch sat in the duck blind with a field guide who helped him handle his weapon and other provisions. According to Koch family lore, Fred Koch aimed his weapon at the sky, took a shot, and then marveled at his marksmanship when a duck came wheeling down.

  Then, Fred Koch slumped over. He was unconscious, and he was very far from the nearest hospital. The gun loader must have tried to figure out what to do, but there was nothing to be done. Fred Koch died there at the foot of the mountain range, overlooking the salt marshes and ranchland.

  Whatever plans he might have been considering disappeared with him in that instant. His company and his family would never hear another word of guidance from him. It would be entirely up to them to figure out how to go forward.

  In one moment, the great patriarch was gone.

  Fred Koch’s sudden death was not the end of a story, but the beginning of one. It was the first surge of volatility in an era that would be defined by volatility for Fred Koch’s family. It was only the first time that stability would disappear in an instant and leave everyone scrambling to figure out what to do. And these waves of volatility would crash primarily onto the shoulders of one person. One person, more than anyone, would have to figure out how to negotiate this era and, ultimately, how to profit from it. That person was Fred Koch’s second-oldest son, Charles.

  * * *

  One of Charles Koch’s earliest memories is of sitting in a public school classroom in Wichita, watching the teacher write math problems on the chalkboard. He was in the third grade. He would always remember how the other students were asking questions, and how the teacher kept trying to explain to them the mechanical interactions between the big white numerals and symbols.

  This was puzzling to Charles Koch. He didn’t understand why the other children should be confused. “I can remember that clearly. Most things back then, I can’t remember at all. But I remember that clearly,” he later said in an interview. “All the other kids, or most of them, were struggling. . . . Why? I asked myself,” he recalled, and then he laughed. “The answers are obvious!”

  This was when he realized that he had a gift for math and the mind of an engineer. He could clearly see a set of rules, the language of numbers. And this was a set of rules that existed perfectly within its own realm, whether people understood it or not. Math didn’t change just because a person struggled with it. Math was perfect. And Charles Koch understood it.

  * * *

  Charles Koch was not completely surprised when his father died. Fred Koch had been ailing for many years. The end was sudden, but not unexpected.

  When that terrible moment came, Charles Koch had a plan. He had been constructing this plan for years.

  During the summers of his childhood, Charles Koch’s family belonged to the Wichita Country Club. There was the pool and the clubhouse and the Elysian green hills of the golf course, all of it contained in a tiny oasis hidden away from the rest of the city. The Koch family’s house was close enough to the country club that the Koch boys, when they were teenagers, could hear kids playing at the pool during the long summer days. This was a place where the rich kids in town whiled away their summers and charged meals to their parents’ accounts. In the evenings, a teenaged Charles Koch would have been able to sneak liquor with friends at the clubhouse or organize card games in private rooms where the walls were paneled with tasteful, burnished hardwood.

  But Charles Koch was denied that kind of summer while he was growing up. It was understood that he would stay away from the country club, as close as it might be to his backyard. Fred Koch felt that too much leisure time would corrupt the boy’s character. So he sent Charles out west to the ranch country that Fred loved so much. As a teenager, Charles Koch learned to ride horses, which might sound nice, or even romantic. But it wasn’t. For Charles Koch, learning to ride a horse was more like learning how to drive a forklift. His job was to ride on horseback for monotonous hours on end, inspecting the fence lines that kept the cattle from wandering off into the wilderness. At night, during those summers, he slept in a log cabin with other ranch hands, who had names like “Bitterroot Bob”—men who had likely never set foot in a country club.

  This was the rhythm of Charles’s childhood. Work, and school, and back to work again. It was the rhythm prescribed by his father. And Charles Koch rebelled against it. He got into trouble as a teenager and was sent to a military-style prep school in Indiana. He didn’t straighten out until he graduated high school, when he enrolled at the Massachusetts Institute of Technology, receiving an engineering degree in 1957, just as his father had done before him.

  But even then, Charles Koch rebelled. He wasn’t satisfied to follow in his dad’s footsteps. He didn’t return to Wichita but stayed out east in Boston and got a job on his own. Fred implored Charles to come home and join the family business. The business was a complicated thing, and Fred wanted a capable son who could help him run it. The business units included Rock Island Oil and Refining Co., which held a refinery and pipelines; the Matador Cattle Company, which ran the vast expanses of ranchland; and Koch Engineering Co., which made specialized equipment for the oil refineries and chemical plants. Fred Koch wanted to pass this group of companies on to someone who could manage it well, and he made it clear that Charles was the person for the job.

  But Charles resisted. He was happy making his way in the wider world. Fred Koch had been a domineering father, a forceful personality who had an unmovable set of beliefs about how the world worked and how a man should conduct himself. Charles had carved out his own life in Boston, getting a job as a management consultant with the prestigious firm Arthur D. Little. He knew that if he went back home, he’d be living in his father’s shadow, always subject to his father’s authority.

  “I thought, My God, I go back, he won’t let me do anything, and he’ll smother me,” Charles Koch recalled decades later in an interview with the Wichita Eagle.

  When Fred Koch was unable to persuade his son to return home, he resorted to guilt. He told his son that unless Charles returned to run the firm, Fred would sell it. The patriarch knew that his health wouldn’t last forever, and if Charles didn’t want the company, then someone else would.

  Out of a sense of guilt, or obligation, or simple duty, Charles Koch finally relented. In 1961, he came back home to join his father’s company. Over the years, Fred Koch gave Charles increasing authority. Charles had originally been hired within the Koch Engineering division, and eventually Fred Koch gave up his job as president of that division and handed over the title to Charles. In 1966, Fred Koch did the same thing with the much larger division of Rock Island Oil and Refining Co., which was the main pillar of the family’s fortune, making Charles president. But Fred kept his authority over Charles by remaining chairman of the board.

  On Monday, November 2
0, 1967, Charles Koch attended his father’s funeral. The services were held at the Downing East Mortuary, and Fred’s remains were cremated. When prominent members of the Wichita business community dropped by to pay their respects, they tried to console the large family that Fred Koch had left behind. Most prominent in the crowd, of course, was Fred Koch’s elegant widow, Mary Koch, a poised and beautiful woman who was known throughout Wichita as an energetic supporter of the arts.

  And then there were the couple’s children, the four boys. As they stood shoulder to shoulder, the Koch boys were an impressive sight. They were very tall, all of them, standing well above six feet. The Koch boys lived their lives looking downward during most conversations. And they were handsome on top of it, with slender, muscular frames and square jaws inherited from their father. It might have seemed natural that Frederick Koch, the firstborn, would be heir apparent to his father’s company. But Frederick, or Freddie, as everybody knew him, never had a strong interest in the family business—or any commercial business, for that matter. He was interested in art, and he studied drama in college rather than engineering. Freddie drew himself away from the orbit of the family company very early on in his life. When Fred Koch died, Freddie was teaching acting classes and producing plays in New York City.

  After Freddie came Charles, who adopted the role of surrogate firstborn.

  Then there were the youngest Koch boys, a set of fraternal twins named David and William. Both twins, like their dad and Charles, attended MIT. When their father died, David had graduated and was working as a chemical engineer in New York. He was not just tall, but also possessed the muscular physique of a star athlete. He’d played basketball at MIT and was captain of the team. During his tenure on the team, Koch averaged twenty-one points and twelve rebounds per game, allowing him to graduate as the school’s top-scoring player. He set the record for most points scored during a single game, at forty-one, a record that wouldn’t be broken for forty-six years. His twin, Bill, was also on the team, but he didn’t have David’s talents. Bill, who was slightly shorter, spent more time on the bench. When their father died, Bill was still studying at MIT, working on his PhD.

  Charles was the only son working at his father’s company at that time. As he stood there, at Fred Koch’s funeral, he was standing alone in a very significant way. Their father’s business empire—everything that Fred Koch had built during his life—all of it was suddenly left to Charles to manage. He was thirty-two years old.

  * * *

  It’s a truism of family business. The second generation of a successful family company is destined to ruin everything. Charles Koch was painfully aware of this stigma and wanted to prove that he was a builder. When he was left alone to run the company, he arrived early every day at the office, stayed late, and worked over the weekends. It was not uncommon for Koch to call employees on a Sunday afternoon, asking them to come down to the office for a meeting.

  And he didn’t just work hard. He worked with an intense purpose. Even in early 1968, just a few months after his father died, it was clear that Charles Koch had a stunningly ambitious vision for the company he and his brothers just inherited. He also had a strategy for how to get there. He wasted no time in carrying out a plan of his own, a plan that would fundamentally reshape everything that Fred Koch had built during his lifetime.

  The first pillar of the plan to fall into place was organizational. Almost immediately, Charles Koch set about restructuring the interlocking group of companies that Fred Koch had left behind. The confusing amalgam of corporate entities—the engineering company, the oil gathering business, the pipelines, the ranches—would soon be welded into a single entity.

  The second pillar of Charles Koch’s plan was physical: the company would be based in a new office complex. Before Fred Koch died, the company had offices in a downtown building that was named after him. But by a stroke of coincidence, that building was scheduled to be demolished just when Fred died, torn down in order to make way for an urban renewal project. In its place, Charles Koch oversaw the construction of new headquarters, this one on the far-northeast corner of town. The new complex included an office building and a midsize factory floor where the company would make oil refinery equipment and other products. This is where Charles Koch would start to build a new company. Over the next forty years, the office complex would expand. Parking lots would be made where the prairie grass stood in 1967, a corporate tower would be added alongside the low-slung office complex just north of the factory. The complex, located on a remote stretch of Thirty-Seventh Street, was the blank slate on which Charles Koch would draw his plans and execute his vision.

  The third pillar was personal. Charles Koch surrounded himself with the smartest people in the company that his father left behind, and the people that Charles Koch could trust. The most important of these people was a man named Sterling Varner.

  Varner was a tall man, like Fred Koch, and, also like Fred Koch, he had the giant personality to match his imposing physical presence. When Varner walked through the hallways of the new Koch offices, he was known to stop and talk with employees of every rank. He was a backslapper and a shoulder squeezer. He remembered everyone’s name and always took a moment to ask how he or she was doing. He was the kind of boss who made an employee feel important, no matter their rank. “Some people get sought out—you just want to be with them and be around them. And that’s just the way Sterling was,” recalled Roger Williams, who worked alongside Varner at Koch for many years.

  Varner was born into a poor family, and famously told stories of life growing up in the Texas and Oklahoma oil patches, working as a roughneck on the drilling rigs and sleeping in tents. A Koch employee named Doyle Barnett recalled one moment when Varner was driving through rural Oklahoma and saw a vagrant by the side of the road. Varner declared, “But for the grace of God, there goes I.”

  Charles Koch relied on Sterling Varner from the very beginning of his time at the head of the company, and not just for counsel. Varner provided a measure of warmth and personal charisma that Charles Koch simply lacked. Charles Koch was not imperious—he didn’t demean the people who worked for him. But he didn’t have the common touch. Charles Koch was quiet, almost awkward. But he seemed to recognize this shortcoming, and he kept Varner close.

  While Charles Koch relied on people like Varner to help him as he laid the foundations of his new company, Koch did some of the most important work on his own. Charles Koch was intently focused on what made people tick, and he approached the subject with the mind of an engineer: he was seeking to discover discernible laws. He knew that there were laws dictating what happened in the physical world, laws that were well understood by physicists and chemists. He thought there must be similar laws that dictated affairs in the human world.

  “It’s an orderly world, the physical world is. It follows certain laws. And so I thought: Well, the same thing’s got to be true for how people can best live and work together,” Koch recalled. “So I started reading everything I could on the subject.”

  Koch read the work of Karl Marx and other socialist thinkers. He read books on history, on economics, on philosophy, and on psychology. But for all the breadth of his research, it appears that his conclusions about the world came to rest on the small patch of ideological terrain where he was raised. As a boy, Koch’s father had regaled Charles and his brothers with horror stories about his time in the Soviet Union, where he had helped Stalin’s regime build oil refineries. He had impressed upon his boys the evils of government and the inevitable overreach that seemed to arise when the state interfered with the activities of free people.

  Charles Koch became enamored with the thinking of economists and philosophers like Ludwig von Mises and Friedrich Hayek, two Austrian academics who did most of their formative work during the 1930s and 1940s. In later years, Charles Koch would be described as a libertarian or a conservative. But these were imperfect labels that didn’t capture his true world view. More than anything, he was an Austri
an economist, or a “classical liberal,” as he liked to call it. Hayek, in particular, put forward a radical concept of capitalism and the role that markets should play in society, and his thinking had an enduring effect on Charles Koch.

  In Hayek’s view, even well-intentioned state actions ended up causing far more human suffering than the market-based ills that they were meant to correct. His most famous example of this was the policy of rent control, which was big in Hayek’s hometown of Vienna. Politicians put a cap on rent prices to help people who rented homes and apartments. But Hayek described a long list of unintended consequences. The controls made it unprofitable for landlords to reinvest their cash in money-losing apartments, for example, so those apartments devolved into squalor. Because there was no incentive to build new apartment buildings, housing shortages became perpetual. Big families were stuck in small apartments because they couldn’t afford to move out of their rent-controlled dwellings. Hayek said this proved a simple point: cutting one thread in the tapestry of a free market—even with the goal of helping people—only unraveled other parts of the tapestry.

  Hayek was almost religious when it came to describing what the market could do when left to its own devices. He believed that the market was more important, and more beneficial, than the institution of democracy itself. A market was able to mediate all the wishes of everyone on earth. When people entered a market, their demands instantly put a price on the thing they wanted. The market also put a price on the things that they had to offer (like their labor). These prices were not dictated or set by a king. Instead, they were derived from the push and pull of supply and demand. The prices in a free market were the most honest assessment of reality that humans could ever hope to achieve. Government, on the other hand, was never really able to mediate between all the competing needs of its people. It was impossible for everyone in a large society to come to some sort of consensus that the government could then enforce through law. Laws and regulations were unworthy tools to use to deal with problems of the natural world, because the natural world was always changing. Laws were static; the world was fluid. Only the market could respond to the ways the world rapidly changed, Hayek believed.