In an unfashionable corner of the American heartland sits a self-effacing business leader who can boast that his company's book value has grown 26 times faster than the S&P 500 in the more than five decades since he took control.
Guided by fundamentals rather than fashion, he has become one of the world's wealthiest people by sticking to unglamorous businesses that provide the essentials of everyday life and bringing insight to the markets in which they are traded. Well past his 80th year, he faces inevitable interest in succession, but his record looks as secure as it has ever been.
His company's credit rating is the envy of most governments, and the biggest question it faces is where it will deploy its prodigious cash flow next.
The Midwestern billionaire in question is not Warren Buffett of Omaha, Nebraska, but Charles Koch of Wichita, Kansas. His company, Koch Industries, ranks just behind Cargill at the top of the list of America's largest private companies by revenues. Yet while Buffett built his media reputation as capitalism's most avuncular guru, Koch and his brother David long enjoyed the far lower profiles.
That has all changed in the past decade as the brothers have become symbols of the shadowy influence that business can have over government. Their well-funded promotion of a bracingly free-market brand of conservative purity reshaped the Republican party in their image and gave them singular sway in Washington — at least until the arrival of another family heir with iron self-belief: Donald Trump.
Their network of well-resourced political action committees, think-tanks and research institutes successfully undermined Barack Obama's healthcare and regulatory agenda, even as the Kochs' wealth doubled over his two terms, from 2009 to 2017. That made them synonymous with villainy for many Democrats, prompting former Senate majority leader Harry Reid to dub them "power-drunk billionaires".
While Buffett may still drive himself to work, Charles has ditched his sedan for a security detail: the champion of freedom now works behind a high wall that he erected around his campus.
In the 52 years since their father's death, Charles and David have turned the 300-person refining, pipeline and ranching business they inherited into a combined fortune worth more than Buffett, or anyone else alive besides Amazon's Jeff Bezos. Quite how that happened is the mystery that journalist Christopher Leonard meticulously unravels in Kochland.
Earlier books — Jane Mayer's Dark Money and Daniel Schulman's Sons of Wichita — have detailed Charles's and David's unmatched political influence machine and their battles with the two brothers they bought out of the company.
Leonard's investigation stands out for its dissection of the cultish ethos of a company he calls "Charles Koch's privately controlled free-market utopia". Better than any previous account, it also shows how seamlessly Koch's worldview ties together his business and political activities. That outlook was shaped by his father, a founder of the rightwing John Birch Society, and his own disdain for state intervention — from FDR's New Deal to the Clean Air Act signed by Richard Nixon early in Koch's career running regulated energy operations.
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Leonard also picks out three defining traits that have done the most to build the Koch fortune and guide his political spending: an ability to think in decades rather than quarters; a knack for turning the complexity that others run away from to his advantage; and a calm talent for seeing opportunity in periods of extreme volatility.
Kochland is, first and foremost, a portrait of how Charles's personal obsessions have shaped the family business. His older brother Fred Jr is barely mentioned. David, who owns as much of the company as Charles but retired last year for health reasons, is a secondary character, highlighted mostly for his Libertarian political career. Bill, who as a child stabbed his twin brother David with a sword, plays a more vivid role, pursuing through the boardroom, the media and the courts the brothers he once reported to and later claimed had cheated him in buying out his stake.
But those stories have been told elsewhere, and Leonard makes clear that what holds together this US$110 billion ($171.4b)-revenue conglomerate spanning derivatives trading, pipelines, Dixie Cups and Brawny paper towels is Charles, a secrecy-prizing "fighter" who rules his company with complete authority.
His tool for doing so is a creed of his own invention called Market Based Management, which is drilled into every recruit in training sessions that Leonard likens to induction ceremonies for a secret society.
"MBM" is a philosophy of continuous improvement and employee autonomy derived from Koch's theological commitment to the theories of Ludwig von Mises and Friedrich Hayek, Austrian economists who preached the virtues of an unfettered market and the principle that the status quo never survives. Leonard shows how Koch boiled their thinking down into an approach to business that is both dogmatically conservative and nimble enough to keep seeking out new markets, new deals and new consensus-challenging insights.
Koch's currency, in Washington as in Wichita, is information. Years before the age of "big data", he was investing in early computers to ensure that his company could suck in more details about each of its markets than any rival. That information advantage has enabled the company to push into loosely adjacent businesses from pig-feed to energy derivatives. But does MBM work? Leonard's measured book does not offer a simple verdict, but he makes clear that its aggressive focus on pushing profits forward has contributed to some of Koch Industries' darkest moments.
Integrity is MBM's first "guiding principle", but Leonard makes a persuasive case that the pressure it put on employees helps explain the company's record of regulatory fines, criminal charges and sometimes fatal industrial accidents.
At one lucrative refinery near Minneapolis, for example, he notes that engineers were not a profit centre, so often found their requests for spending on maintenance ignored.
Stopping machines for repairs would interrupt output, so managers left little margin for environmentally devastating error. After one such lapse caused the release of ammonia-tainted wastewater, Koch Industries ended up pleading guilty in 1999 to criminal violations of environmental laws. Costly breaches elsewhere in the company's regulated businesses were "abetted by a general disdain for government," Leonard adds.
Koch Industries now preaches "10,000 per cent compliance", urging staff to abide by 100 per cent of the regulations 100 per cent of the time. It helps, of course, if it has had a hand in watering down those rules.
"To examine Koch [Industries] is to examine the modern American economy," Leonard writes. That economy is not just skewed to favour big, connected companies, he says; it now works best for those businesses that can exploit complexity, in politics as in markets. Koch has made it his business to understand the tax codes and regulations he loathes more closely than anybody else.
His sweeping strategy for getting other Americans to see governments and markets as he does offers the most striking example of his ability to play the very long game. It began in 1974, Leonard explains, after Nixon created the Environmental Protection Agency and capped prices in the oil industry. Determined to overhaul a Republican party that he saw as ideologically bankrupt, Koch set out a multipronged approach spanning education, media outreach, litigation and lobbying. He has barely needed to change it since then, except in scale.
Koch may have grasped sooner than most how broken the US political system has become, but his instinct has been to ensure it remains so, as long as its complexities still work to his advantage. Yet for all his insights, he did not see Trump coming and could not bring himself to back the "drain the swamp" populist in the 2016 election.
As a result, Trump started his presidency owing nothing to Koch, whose Americans for Prosperity political advocacy group lobbied successfully against his plans to repeal Obamacare and levy a Border Adjustment Tax to fund corporate tax cuts. Koch celebrated the new administration's attacks on environmental regulations, but there can be few clearer rebukes to his free market principles than Trump's trade wars, which Leonard oddly glosses over.
Is Koch's corporate power doomed to decline under Trump? Leonard concludes that his record of adapting to volatile times will see his network outlive this administration.
Kochland went to press before one of the more remarkable examples of that adaptability. In June, Koch's foundation said it would fund a new think-tank to campaign against US military adventurism with George Soros, who is as loathed on the right as Koch is on the left.
Expanding on his reasoning, Koch wrote this week: "For several years, we supported efforts in partisan politics with the goal of moving the United States forward. The results fell far short of what we considered acceptable."
If this marks the sharp change in Koch's political engagement which he claims, his core beliefs remain unaltered: in the same piece, he lamented that both parties share "the troubling assumption that the stroke of a politician's pen can turn the country around".
He seems to have more faith in his own pen. Koch is working on a book, says Leonard, which will try to show that MBM is "a guidebook not just for operating companies, but for operating entire societies."
At 83, Leonard gives us to believe, Koch is more confident than ever that we will all one day be living in Kochland. If so, it will test how many of us share its crown prince's stomach for volatility.
Kochland: The Secret History of Koch Industries and Corporate Power in America, by Christopher Leonard, Simon & Schuster, RRP US$35, 704 pages.
Written by: Andrew Edgecliffe-Johnson
© Financial Times