Kochland Page 59

  Charles Koch could spend his long working days surrounded entirely by people who were beholden to him for a paycheck. His office was the epicenter of a corporate empire over which he had almost unchallenged control. But for all this power, there was one thing that Charles Koch could not control, and that was the passage of time. He turned eighty years old in 2015. But it didn’t seem that anyone expected him to retire.

  “They’ll take Charles out of there on a stretcher. And I think he’ll be the happiest that way,” quipped Leslie Rudd, one of Charles Koch’s longtime friends in Wichita.

  But even if he never retired, Charles Koch could not lead the company forever. And this raised a troubling question: Could Koch Industries thrive without him? The politically correct answer among Koch employees was that Market-Based Management would be able to carry on without the charismatic CEO who created it. Charles Koch’s wisdom had been codified into a machine, this thinking went, and the machine could thrive without his personal intervention. But history was replete with examples of companies that had stagnated once their founders left. Koch Industries seemed like a prime candidate for this fate. Charles Koch insisted on maintaining control over the company since he became CEO in 1967. No one knew how the corporation would operate without him.

  Charles Koch had a contingency plan. He had placed a hedge bet against mortality and the passage of time. There was a possibility that Koch Industries might be passed down to an heir, a young man who could carry on the Koch name and the tradition of family ownership.

  Charles Koch was raised in a household with four sons, four potential heirs to the family business. Charles, on the other hand, had only one son. He had vested many hopes, and many years of work, in him and by 2015, Charles Koch’s son was seen as the heir apparent.

  His name was Chase Koch, and everyone who met him thought that he might be CEO of Koch Industries one day. But what people didn’t know was if he’d be ready to do it. Or, more importantly, whether he wanted to.

  * * *

  I. Even the most optimistic of these forecasts profoundly underestimated how much oil would come gushing from the ground.

  II. There were an additional thirteen refineries that produced lubricating oils and asphalt in 2012.

  III. Koch’s complex in Corpus Christi includes two refineries. For the sake of simplicity, the complex is referred to here as simply Corpus Christi, or the Corpus Christi refinery.

  CHAPTER 22

  * * *

  The Education of Chase Koch

  (1977–2016)

  When he was a young boy, Chase Koch might have seemed unteachable. But that didn’t mean that his father didn’t try. On Sunday afternoons, Chase Koch and his older sister, Elizabeth, got personal lessons from their father.

  It was common for families in Wichita to attend church on Sunday, sending the kids to Sunday school while their parents listened to sermons from the altar. This was not the tradition in Charles Koch’s household. Charles Koch developed his own curriculum to teach his children, a curriculum that taught them about his systematic view of human behavior and how best to organize human society. On Sundays, Charles Koch gathered Elizabeth and Chase in the family library.

  The library was a large, imposing chamber in the back of the house, with walls that were lined by thousands of books. The books on philosophy, history, and science were the raw material of Charles Koch’s worldview, which he had encoded in Market-Based Management. When they sat down for their lessons in the library, Elizabeth and Chase Koch were likely the only people on earth to get such deep, one-on-one lessons in MBM from the creator himself.

  Charles Koch played taped lectures from economists like Walter E. Williams and Milton Friedman. As the economists and philosophers droned on, Charles Koch periodically stopped the tape and quizzed his children.

  “He’d pause it and then say, ‘Okay, well, what did you kids learn from that?’ ” Chase recalled. Chase was maybe eight years old at the time; certainly “in the single digits,” as he remembered it.

  Elizabeth, the oldest child who always seemed eager to please, was attentive to the lessons and earnestly answered her father. Chase struggled to stay awake. “Literally half the time, I’d get caught, like, with a baseball hat over my eyes, because I would be sleeping through it,” he said. “And my sister, being the good first child . . . she was valedictorian in her class or second in her class. And so she was, at a very early age, just gobbling this stuff up.”

  Charles Koch tried to teach his son, but it appeared that his son did not want to learn. Chase’s obstinance, or apathy, posed an obstacle to Charles Koch and his future plans.

  Those plans seemed clear to everyone from the first day Chase Koch was born, in June of 1977. At that time, a group of employees at Koch Industries took it upon themselves to print a banner and hang it up above their desks, where Charles Koch would see it when he returned to the office.

  The banner read: “WELCOME CROWN PRINCE.”

  If the birth of Charles Koch’s daughter had not been greeted the same way, it might have had something to do with the conservative culture of Wichita at the time. “In those days, it was logical that your son followed you,” said Leslie Rudd. “A lot of people around the area—the kids followed their fathers.” This was the Koch family tradition. Charles Koch had followed his father, Fred, who had pushed him, disciplined him, taught him to fight, and then pressured him to return to the family company and run it. It seemed natural that Chase would, in turn, follow Charles. “Charles was preparing Chase for success. But it’s damn near impossible to do, to build the drive and all of those things into a person,” said Rudd, who went on vacation with Charles Koch and attended many Koch family events.

  Charles and his wife, Liz, worked hard to instill a competitive drive in their children. They informed Chase and Elizabeth that the children must find a sport outside of school at which they could excel. When Chase was about ten, his parents enrolled him in a local basketball league, which was sponsored by the Salvation Army. One of the league coaches was Brad Hall, who later became CFO of Koch Supply & Trading. Hall often watched Chase Koch play and saw a gangly, mediocre player. But Hall was impressed with the kid’s values. Chase worked hard. He wasn’t arrogant. He didn’t advertise his last name to anyone. Hall remembered seeing Charles Koch at the games, watching closely.

  When it was clear that Chase had no future in basketball, the family focused on a different sport: tennis. Chase showed aptitude here. If Charles Koch was born with a brain for math, Chase Koch was born with a body for tennis. Chase was tall and lean, with powerful legs. He could get to the far corners of the court before his opponent. He had a strong swing. Unfortunately, playing tennis required that Chase Koch spend large amounts of his free time—weekends, nights, and summers—at the Wichita Country Club.

  Just like his father, Fred, Charles Koch vowed that he would never raise any “country club bums.” But Chase Koch seemed to want very much to be a country club bum. It turned out that he was quite sociable and liked having friends. Eventually, Chase’s natural talent for tennis won the day. He was allowed to spend long hours each day, and whole days in the summer, with his friends, as long as he was on the tennis court.

  Things weren’t as easy for Elizabeth. She never found her equivalent of the tennis court. Outside the confines of sports, social interactions were fraught and complicated for the Koch children. Elizabeth Koch wrote later about the difficulties of growing up as the daughter of the richest man in town. She could go wherever she wanted, but could never escape the family name. “I want people to like me, and as a small child growing up in a small town, I learned that having money makes people sort of hate you on the spot,” Elizabeth Koch wrote.

  Every year, a portrait of the Koch family was printed and sent out as a Christmas card to Koch Industries’ employees. The family posed in that awkward manner all professional photographers seem determined to create: Elizabeth Koch sitting on the floor, with her father kneeling behind her, his arm ar
ound her shoulder. Chase and his mother hovering behind them, with frozen smiles. Elizabeth never seems to have escaped the feeling of awkwardly posing as Charles Koch’s daughter. As a young adult, she was filled with anger, and it strained her relationship with her parents.

  “I am such a terror,” Elizabeth Koch wrote in an online essay in 2007. “I’m angry that those girls on the playground in sixth grade called me a rich bitch when they knew nothing about me except my last name. I’m angry that I have everything in the world I could possibly want and yet I’m still angry.”

  Spending time on the tennis courts removed some of these pressures from Chase Koch’s life. Things were uncomplicated and straightforward on a tennis court. There was often very little talking. Everyone focused on the ball. Chase Koch was on a tennis court in the mornings, afternoons, and weekends. He practiced hard and drove himself. Soon, Chase was playing in regional tournaments and winning. He became recognized as one of the best young players in Wichita, and then was recognized as one of the best players in Kansas. He became one of the top players in the Missouri Valley Conference, which covered several states. On the tennis court, Chase Koch’s last name didn’t matter. And if Chase Koch was winning, his father didn’t express dissatisfaction.

  * * *

  By the time he was in middle school, Chase Koch’s tennis regimen became difficult to sustain. All of his free time became dominated by tennis. When he spent time with his mother, it was so they could drive to regional tennis tournaments. Chase began to burn out. He started to hate the game. And he rebelled.

  “I got exposed to new groups of friends and got to hang out with them, and just enjoyed that part of life instead of tennis,” Chase recalled. “In some of these regional matches, I intentionally started throwing matches, and, like, tanking, because I wanted to get home and party with my friends, basically.”

  Chase’s mother, Elizabeth, couldn’t understand what was happening. He was losing now in the early rounds, when he used to win easily. It vexed her, and brought her to tears.

  “So she reported this back to my father,” Chase said.

  After hearing about Chase Koch’s failure on the court, Charles Koch invited his son to come down to Koch Industries headquarters for a talk. Chase expected that they might have lunch. When he arrived, there was no lunch.

  Charles Koch gave his son a choice. Summer was about to begin, and Chase could do one of two things. He could spend his summer working for Koch Industries, or he could reapply himself to tennis and play competitively again.

  Chase would be fifteen years old that summer. It was his last summer before high school. He chose to work for the family company. He thought that he would get an office job, learn some things, and have the evenings to spend time with his friends. Plus, he’d earn some money. The decision was easy.

  “I said, ‘Fine, you get me a job. I’m so sick of this. I’m tired. I’m burned out. I want to do something else,’ ” Chase said.

  The next day, Chase Koch woke up to discover that his father had packed his bags for him. Chase would be leaving for the summer. A driver arrived to give Chase a ride. They would travel four and a half hours due east of Wichita, to a tiny town called Syracuse.

  Within thirty minutes of leaving Wichita, the land flattened out and grew desolate. There was very little to interrupt the landscape of open grassland except for the occasional oil derrick. Two hours outside of Wichita, a person can feel totally marooned in the center of a prairie. Two hours after that, Chase Koch arrived at his destination.

  Syracuse was home to one of Koch Beef Company’s largest cattle feedlots, a centerpiece of the doomed company’s effort during the 1990s to reinvent the agribusiness sector. Chase could smell the place from miles away. Roughly fifty thousand cattle milled around in muddy pens beneath a grain silo, which was one of the tallest structures in the Syracuse skyline. Chase Koch was dropped off and shown to his quarters. He would live in the single-wide trailer of a guy named Kelly Fink, the feedlot’s manager. Fink told Chase that he’d be sleeping on the couch for the summer. Chase set down his things, and tried to settle in. Fink slept down the hallway, in the trailer’s single bed.

  Chase suspected that his father had given Kelly Fink specific orders to break Chase’s spirit. Chase was assigned to shovel shit and pick weeds. “The first two weeks, I was just bitter, because they handed me a shovel and said, ‘Go shovel out that stall and then go pick all these weeds.’ And it was just a lot of busywork just to get my head right.”

  Chase worked at least ten hours a day, seven days a week. He got one day off, the Fourth of July. On that day, his parents called him from Vail, Colorado, where they were vacationing. They told him that it was snowing there. Wasn’t that remarkable?

  Chase kept working and slowly got to know Fink. Then he started to like him. Then, strangely, he started to like the work. Toward the end of the summer, Chase felt something he’d never really felt before. He felt like he had endured an ordeal, and had really earned something.

  When Chase was in sixth grade, his father had helped him write a paper. Chase’s assignment was to pick a philosopher and write about the philosopher’s ideas. Charles Koch told his son to pick Aristotle, and they read Aristotle’s work together. Charles Koch wrote notes on Aristotle in his neat, engineer’s script, listing page numbers from Aristotle’s significant work for Chase to pursue. When Chase turned in the paper, he summarized what he believed was one of Aristotle’s most important ideas.

  “Aristotle taught that the goal in life is to be happy and to be happy you need to use your natural ability,” Chase Koch had written.

  Now, at the end of the summer, before his freshman year of high school, Chase was starting to understand what Aristotle had meant. And what his father had meant. Chase Koch was feeling happy. He was feeling a sense of accomplishment.

  * * *

  Chase enrolled for his freshman year of high school at the Wichita Collegiate School, a private academy located on a spacious, grassy campus less than two blocks from the Koch family compound. To get to school each morning, Chase could leave the front gate of the Koch estate and take a left turn on Thirteenth Street, heading due east, passing the front gates of the Wichita Country Club, and then taking a right turn into the parking lot of his high school. This is the small geographic circuit in which he spent the majority of his adolescence.

  The Wichita Collegiate classrooms were located in a group of modest, beige-brick buildings, set back from the street behind a screen of leafy trees. On the east side of campus there was the football field and the track, and then, farther back, a cluster of tennis courts. This is where Chase Koch spent an inordinate amount of his free time as a teenager. The tennis courts were the domain of a tall, imposing man named Dave Hawley, one of the winningest tennis coaches in Kansas history.I On a typical spring afternoon, Hawley walked from court to court in the tennis complex, calling out to his players in a booming voice. Hawley was uncompromising in his discipline and demands. If he felt that students weren’t practicing hard enough, he sent them home. If he felt they were falling short of their own ability, he let them know in unvarnished critiques. Still, Hawley could be friendly and gregarious. He gave lessons to little kids when things were quiet. While coaching a small girl, Hawley reminded her that tennis wasn’t like bowling; you couldn’t take your time to set up a shot. The game was an intimate competition against an opponent who didn’t want to give you time to think, and who wanted to be unpredictable. As he lobbed balls toward the little girl, Hawley called out to her, “You never know what’s coming! You never know what’s coming!”

  Chase Koch thrived in this world. Over the course of his high school career, Chase faced more than a hundred competitors, and beat all of them except for one. The one student who beat Chase was Matthew Wright, a classmate and fellow player on Hawley’s team.

  Chase Koch was one of the best players that Hawley ever worked with during his decades-long career. “If I had a Mount Rushmore of players that I’ve c
oached, he’d be on it,” he said of Chase. “He’d be one of the four—at the very outside, one of the six—best players I’ve ever coached on the boys’ side.”

  Chase Koch’s style of play reflected his personality. His game relied on two primary strengths: his ability to quiet his mind and react in real time to his opponents, and his willingness to work harder than nearly everyone else in the state. Hawley noticed Chase Koch’s quiet demeanor almost immediately. The tennis team spent a lot of time together, and Hawley had hours to observe Chase interact with his classmates. What Hawley saw was a kid who defied expectations. Everyone in Wichita knew who Chase was the moment he walked into a room. The aura of power and wealth around the Koch name was inescapable. Yet somehow Chase Koch made this aura invisible. He didn’t act superior. He didn’t act like he was better than anyone else. He did drop stories about private jets and the fact that he could attend the US Open in New York every year with his family. Chase seemed happiest on the court, where he competed in silent exertion. “If you had no idea who he was, you never would have known who he was,” Hawley said.

  Chase approached tennis as if it were a seven-day-a-week job. Hawley never saw Chase take it easy during practice. Chase developed a game that Coach Hawley called an “all-court game.” Chase’s primary skill was the ability to be anywhere on the court before his opponent could get a ball there. Chase’s strategy relied in part on wearing his opponents down, volley after volley, until they made too many mistakes and crumbled. It was a strategy that relied on hard work, long practice, and physical conditioning. There wasn’t some secret genius in Chase Koch’s serve. He just outworked the competition.