Stand Together founder Charles Koch recently sat down for a wide-ranging interview with The Tim Ferriss Show, which has been selected as “Best of” Apple Podcasts for three years running.
Charles discusses how our philanthropic community tackles challenges in society—an approach informed by principles that have helped people improve their lives throughout history. Charles also shares his experiences growing Koch Industries 7,000-fold since he became Chairman and CEO 52 years ago, transforming the company into the second largest private company in the country that makes everything from Dixie Cups and toilet paper to medical devices to electrical components in your cell phone.
Tim’s goal for the interview? It’s “not to get you to like or dislike Charles,” he says, “but to pay attention to his thinking, which I do think is remarkable”—specifically encouraging his listeners to focus on the “importance of attacking the problems, not the people.”
Below are some of the highlights, which range from Charles’ approach to philanthropy and principles that shaped his life, to his views on the environment and public policy. (For brevity and clarity, each of the questions have been paraphrased from their originals. Click here to listen to the podcast in full.)
1. What is Stand Together’s approach to philanthropy?
Our approach there is what we call bottom up, as opposed to top down. It starts with the recognition, as I’ve been saying, that everybody has the capability to realize their potential if they have the right mindset and support.
So, how do we help people get the right mindset and support so they can make a better life for themselves? And as I say, it’s with a bottom up approach rather than a top down approach. And what I mean by that, is rather than have somebody come in and say, “Well, on average, we can improve the statistics on this. Here’s what we’re going to do, and we want everybody to do this same thing.” We find that hasn’t worked.
But what works is to find what we call social entrepreneurs, who are closest to the problem. And this would be largely people who’ve had a problem, have gotten in trouble, have been held back, and have learned to overcome it and now are dedicating their lives to helping others do the same.
So, they have different capabilities than we do. So we advertise, if you’re interested in our help so you can improve your efficiency by better management practices and want to scale and celebrate it, so it can spread so more and more people can benefit from your proven approach, then we’d love to do that.
2. What do you believe is the key difference between societies that flourish and those that fail? And how does that inform what Stand Together is doing?
To me, the basic difference is, do we want a system that empowers people, or one that controls them? You look at systems through history that have tried to advance humanity by controlling everybody and making them follow some theory of the people in charge, as opposed to having incentives and rules that will cause people to want to believe that the way to succeed is by helping others improve their lives. I mean the results throughout history, there is no comparison between the two and the benefit to human flourishing…
People are liberated and empowered, they succeed. If you look at the history of humanity for all the millennia, up until starting in the 18th century, there was barely ever any improvement. And because these were top-down societies where those in charge, they were beyond authoritarian, they were totalitarian. And people weren’t allowed to think differently…
…these ideas of liberation, were, to me, best embodied in the Declaration of Independence. Set as a system of equal rights and everybody having the right to the pursuit of happiness, which, to me, is a different way of saying the opportunity to realize their potential and to learn, contribute and succeed. And to the extent that was followed in this country, made us, the US, the most successful country in the history of the world.
Unfortunately, it was not applied across the board. For example, African Americans and Native Americans had no rights, obviously, with slavery for African Americans and practicing genocide against Native Americans.
Women only had partial rights. And I’m not talking about just the right to vote, but they weren’t allowed to go to college in the early days. When they got married, whatever property they had, their husbands controlled. So, the relationship between husband and wife was almost like a master-servant relationship. It took 80 years to remove the great majority of that.
Then various immigrants, particularly the Chinese and the Irish had only partial rights, and certain religious groups didn’t.
So, all of those were violations of the principles in the Declaration of Independence. And to me, what we’re working on, what Stand Together is working on, is to eliminate the aspects of all those injustices that continue to haunt us, haunt the country today.
3. How has your approach to public policy changed over time, including now working with people who used to be adversaries?
I’ve been at this social change and philanthropic approach for 55 years now. And it was basically, I’d learned these principles that had transformed my life and enabled me to really realize my potential and accomplish more than I ever dreamed possible. And so, I had the desire to help as many others have the same kind of benefits, in their own way, to fit their own situation and gifts.
So I started, as I say… I started in on this in 1963 and for the first, let’s say, 40 years of that, I wasn’t involved in politics at all. I wanted to stay away from that and work with helping people realize their potential and supporting mainly students. And then, as the students talked to their professors about what they were learning, working with our organization, that the professors would come, and they’d want us to help them set up a program to do that. So, it just spread.
And then, to get things done, we decided we needed to build organizations that would … well, first of all, that would take these ideas and develop what are the policy implications of these? And so, I helped found the Cato Institute and a number of other institutes to do that.
And then, we decided we needed to help mobilize people. More and more people were interested in these ideas. How do we get policy changes? Well, we need to mobilize people who are interested in them and help them have a voice. And so, we started doing that.
And then we decided we needed to get more politicians who would be interested in ideas that would really help the country long term rather than just help them get reelected. So, we started doing that, and the Republicans seemed, although far from ideal, seemed more sympathetic to these. So, we started supporting Republicans.
Then we learned that didn’t get us anywhere. So, we have changed. Now, we will support anybody who will advance these policies that will help bring about this society of mutual benefit, where people have the opportunity to realize their potential.
So, if you put it in terms of my philosophy on partnerships, you share vision and values and have complementary capabilities, what I was doing was applying too broad a requirement for shared vision. That is, okay, we’ll only support those and work with those who we share broadly a vision of what kind of society we want. That was really limiting the number of people we could work with.
In the last few years, we’ve changed that to, all we need is to share vision on a specific issue. We may disagree on everything else, but if you can really help us advance this policy that will help people improve their lives, we’ll work together.
That’s how Van Jones has gone from being somebody who was trying to shut us down to working with us and bragging on us, and enabled us to work with Soros and everybody on specific issues, even though we have major disagreements with him.
What we’re finding is doing that it reduces the hostility and the conflict. If you meet somebody, rather than try to find something you disagree with them on and fight him and attack him, search for something you can work together on that will contribute, that will help people improve their lives.
Doing that, now we have allies I never would have believed. And now, as this is changing our brand and how people look at us, now, many, many more people are open to working with us.
4. Who has had the greatest influence in helping you develop your own philosophy related to your work in both business and philanthropy?
The two authors that have had the biggest influence on me are Abraham Maslow and Friedrich Hayek.
A lot of what we do is based on Maslow’s ideas… He was one of the early positive psychologists, rather than most of them in history, Freud and others, had worked on psychiatry of illness.
And he took the other side. He said, “What can enable somebody to have a fulfilling, rewarding life?” And what he said is, “What you can be, you must be. If you are determined to live your life without developing your potential, you may be successful in other ways, but you will be deeply unhappy for the rest of your life.” He said, “A bird has wings, a bird has to fly. What you can be, you must be.”
And then he called that, that state of where you are fulfilling your nature, self-actualization. That what you can be, you’re becoming, not that any of us are ever perfect in that because it’s a continual learning experience, which requires ongoing effort. That’s what we try to apply here at Koch Industries, and that’s what we’re applying in our philanthropic efforts, to enable everybody to have the opportunity to realize their potential.
And then what Hayek said, of all the insights that he’s provided, one that I quote, it’s a first quote in my book Good Profit, that what he called perhaps the greatest discovery in history of mankind is that people can live and work together in peace and to their mutual advantage under generalized rules of just conduct. That is, with generalized rules that enable people to succeed by assisting others, rather than detailed rules that cause conflict and people trying to undermine each other, makes all the difference. And that was from his study of history, well history, philosophy, economics, and so on.
You put those two together and it forms the core of my philosophy and what’s enabled me to accomplish more than I ever was really capable of doing.
5. Your father wrote a letter to you when you were very young that you credit with helping to inform your values today — what did he say?
Yeah, he wrote that in I think January of 1936… And in there he talked about adversity provides the greatest lessons and is certainly the greatest character builder, and then his hope for us and whatever he had given us, that we didn’t misuse it or waste it, but used it so we could experience the glorious feeling of accomplishment. And so, that’s everything he did, whether I liked it at the time, was toward that end.
And I think this is so important for anyone who’s a parent, and certainly we’ve tried to do that, is you don’t lecture your kids on anything that you don’t live up to. And he exemplified integrity, humility, treating others with respect, and as he used to preach to me, “Son, learn everything you can, you never know when it will come in handy.”
Those were all great lessons, and there was no hypocrisy in there. I mean, that’s the way he lived.
6. You also talk a lot about the value of partnerships, and how that’s contributed to your success in business and philanthropy — why is that?
As I said, I just have a narrow range of abilities, and I’ve worked hard at developing those and focusing on that, and then partnering with people who could compliment that. What I’ve learned is to have a good partnership that would do that requires three things: it requires shared vision, shared values, and having complimentary capabilities.
Where I’ve had that, partners who fit those three, or we fit those three together, then I’ve been very successful. Where I haven’t, I’ve generally failed.
My best partnership has been with my wife. We’ve been together 51 years and we share vision and values and I’m good at the few things she isn’t, and she’s good at about everything I’m not good at. So, we make each other better. That’s been another one of my great blessings and advantage in my life.
7. What do you believe is the ideal role of business in society, as well as how you differentiate between what you call “good profit” and “bad profit”?
Our idea, the ideal for business, is to maximize the value you create for others and your profit would come solely as compensation for that value you’re creating for others and to constantly reduce waste and become more efficient in the resources we consume in doing that. Okay, how does that benefit society? It frees these resources then to satisfy other needs. So that’s what good profit is.
Bad profit is all the ways they profit that is antithetical to that approach. That is trying to cheat your customers, misrepresenting what you’re doing and rigging the system, getting corporate welfare, protectionism of all different kinds and including protection from foreign competition but also domestic competition.
And a great example of this is occupational licensure in which there are like a third of all, I think a third of all occupations today required some kind of government approval, and it depends on the state or locale, but there are hundreds of these which are mainly key people who start with nothing from being able to do anything because some of them require a couple of years of going to school and paying a substantial fee that they can’t afford.
So it just, it keeps poor people poor rather than enabling them to realize their potential by learning to, or developing their skills that other people will value. And these are things like hair braiding, hair dressing, manicurists, yoga instructors, funeral parlors, interior decorators, you name it. Not things that will blow people up or anything that you think. Guys that government needs to approve that. So, it’s all just cronyism, protectionism in corporate welfare.
8. What are your views on climate change and the best way to address it?
I mean there’s enough concern about a manmade contribution to warming that various policies have been developed and are being developed. And so, what we want them to do is to find policies that will actually work, actually do something about reducing CO2 emissions, manmade CO2 emissions, and at the same time not make people’s lives worse.
So many of these policies haven’t done anything to reduce CO2, but they make people’s lives worse, particularly the poorest. The biggest reduction has been in the US in recent years because of fracking of natural gas substituting for coal.
And so the US, figures I have seen, is now responsible for 15% of CO2, manmade CO2 generation. Countries in Asia, particularly China and India, share is growing. And the problem with many of our policies is they aren’t doing much for it and they make us less competitive versus China. And China has double the CO2 emissions per unit of GDP than the US does. And so as we push more over there, push more production over there, we’re just increasing, and it’s certain of the production there, for example, in fertilizers and chemicals that are based on coal gas rather than natural gas it’s four to five times the emissions per unit of production.
So these are all dilemmas that we try to do something here, but many of them make it worse. What we think we need are innovations that are going to cause China to adopt them and have them reduce emissions, rather than us try to do it in ways that causes them to increase emissions… And you see that in the world, all of these policies, and all of these initiatives and CO2 emissions are still going up around the world.
So, we need a different approach. I mean to keep doing the same thing over and over is a form of insanity. So, that’s what we’re trying to do is get people focused on something that will make a difference and not make people’s lives worse.
9. What would you be willing to risk your entire personal fortune for?
I’m investing all the (available resources) I have in Stand Together. The economists have a concept called demonstrated preference that pay attention not to what people say, but what they do.
So, that’s what I’m doing. And then I dedicate a lot of my time to that as well, my time and treasure. So, that’s what I’m risking everything to. And the progress we’re making there is one of the reasons I get up in the morning charged up every day.
10. If you could put a quote or a message, question, word, or anything non-commercial onto a billboard seen by billions of people, what would it be?
Yeah, I put, which is our slogan at Stand Together, “Greater your good.” Because that’s a little bizarre. What are they talking about? So, you would hope then they’d follow up. What do they mean by that?
Yeah. I mean just exactly what I’m thinking. Well, I mean what we’ve been talking about that is, discover your gifts, develop them, and apply them in a way that helps others, that’s also beneficial to you so you’ll be motivated to continue to do it.