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  • Upstart CEO: The Koch Brothers — “Freedom Fighters” or “Selfish SOB’s”

    Are the Koch Brother’s principles and methods ones that empower America or only self-serving.

    Upstart: Gamechangers

    One of the guiding principles of Upstart: Business and Management for 20-40 Year Old Professionals, is that we look at every  situation/circumstance within a 360 degree framing, because we want to weigh the facts and corollaries of each specific event, how it connects to core and peripheral issues, both large and small, and let that determine what our final conclusion might be – based upon the effectiveness and impact on people, places and things.

    Before I go a step further, I must admit that I am a New York City progressive: I am as to the “left-of-center” as you can get. But I was intrigued by the Koch Brothers, (Charles and David), and their adamant injection in the debate over smaller government, laissez-faire environmental regulation and of course, “less taxes.”

    In her article, Covert Operations, Jane Mayer of the New Yorker, wrote, “The Kochs are longtime libertarians who believe in drastically lower personal and corporate taxes, minimal social services for the needy, and much less oversight of industry—especially environmental regulation. These views dovetail with the brothers’ corporate interests. In a study released this spring, the University of Massachusetts at Amherst’s Political Economy Research Institute named Koch Industries one of the top ten air polluters in the United States. And Greenpeace issued a report identifying the company as a “kingpin of climate science denial.” The report showed that, from 2005 to 2008, the Kochs vastly outdid ExxonMobil in giving money to organizations fighting legislation related to climate change, underwriting a huge network of foundations, think tanks, and political front groups. Indeed, the brothers have funded opposition campaigns against so many Obama Administration policies—from health-care reform to the economic-stimulus program—that, in political circles, their ideological network is known as the Kochtopus.”

    What most people don’t know is that the Koch’s are two of the wealthiest industrialists in American history, and their evolution into free-market evangelists, is the basis for their approach to business, which tells much about their politics (see: Tea Party).

    Because of their activism, many people who never heard of the Koch’s, found out how permeating their products and services are within American conusmption. Juli Weiner, writes in her Vanity Fair article, Boycott of Billionaire Koch Brothers Does Not Leave Very Many Paper Towel Options, “Many on the Internet and in supermarkets are boycotting the products of David and Charles Koch, the cagey and conservative titans of industry whose billions benefit G.O.P. and Tea Party causes célèbres. Would-be boycotters whose daily activities depend on such disparate trades as technology, polymers, chemicals, finance, ranching, forest products, fertilizers, pollution control, refining, and/or fibers may find it difficult to completely avoid patronizing the diffuse Koch Industries. It will be a particular challenge for anyone whose dish-washing and laundry habits require the occasional use of paper towels and tabletop products—a market that is somewhat cornered by the Kochs….Koch Industries is the parent company of Georgia-Pacific, the paper manufacturer that produces such products as Quilted Northern® paper towels, Angel Soft® bathroom tissue, Brawny® paper towels, Sparkle® paper towels, Soft ‘n Gentle® bath tissue, Dixie® table products, Mardi Gras® napkins (the most popular napkin in North America!), and Vanity Fair® table products, which bear no relation to this magazine and perhaps even come from different (worse) trees. “

    So I read the book, The Science of Sucess, by Charles G. Koch, which is based on “Marketing Based Management”, and I learned that the Koch’s value nothing more than “freedom:” the freedom to win everything , as well as the freedom to lose everything, as a byproduct of trying to win everything, and that a person’s wins or losses are entirely their own. That what they see as being hyper-focused, would seem myopic and superciliously self-serving to many, yet that’s what makes America one of a kind — at least to the Koch’s.

    Even though I vehemently disagree with their politics, their stance on the environment and their insistence of a sedentary role for the American government, especially for safety-net programs for the aging and America’s most vulnerable, the Koch’s are brilliant engineers and entrepreneurs, and they have created a strategy and process, which is just like their politics: autonomy, performance and metrics – – the Koch’s credo – “Value Creation.”

    This is the Koch’s philosophy on Market Based Management:

    1. Market- Based Management is a holistic approach to management that integrates theory and practice and prepares organizations to deal successfully with the challenges of growth and change. The theory of MBM is rooted in the Science of Human Action…This science is the study of how humans can best achieve their ends through purposeful behavior. It draws on the disciplines of economics, ethics, social philosophy, psychology, sociology, biology, anthropology, management, epistemology and the philosophy of science…Vision, Virtue and Talents, Knowledge Processes, Decision Rights and Incentives.
    2. We constantly pursue innovations and opportunities through internal and external development and acquisition. Similarly, we shed businesses and assets that are unprofitable or worth more to others.
    3. If an evaluation of an employee’s performance only includes his or her contribution to current profits but not the effect on long-term profits and culture, we inadvertently encourage employees to work on the wrong things.
    4. The long-term success of a business is determined by how much it is contributing to improving people’s lives and prosperity through value creation.
    5. The organization that is profitable, is satisfying people’s needs.
    6. A company’s vision should take into consideration the fact that, over time, competition erodes the profitability of every product or innovation. To maximize profit over the life of a product, a business must slow down the inevitable erosion in the profitability of its products and continually renew or replace them.
    7. The future has a way of arriving unannounced.
    8. The development of an effective vision requires recognizing how an organization can create superior value and most fully benefit from it.
    9. At least two sets of criteria are needed to determine priorities. The first set includes those actions that are required to stay in business, such as meeting a deadline or requirements: the second set is determined by gap analysis that estimate the risk-adjusted present value of the opportunities relative to the resources consumed. Thus, an opportunity with a risk-adjusted present value of $100 million will take precedence over one of $20 million, assuming similar resources are required.
    10. MBM Guiding Principles: Integrity, compliance, Value creation, principled entrepreneurship, customer focus, knowledge, change, humility, respect and fulfillment.
    11. Countries that have the greatest exposure to and use of goods, knowledge methods and innovations from all over the world have progressed the earliest and the most.
    12. Knowledge fuels prosperity by signaling and guiding resources to higher-value uses. Besides enabling producers to develop products that create greater value for customers, new knowledge also helps producers do so with fewer resources.
    13. To succeed in an uncertain future, a company must draw on the knowledge dispersed among its employees. It must also encourage them to discover new ways to create value. They must innovate in all aspects of the business.
    14. Benchmarking is the process of identifying, understanding and adapting outstanding practices from anywhere in the world to help us improve.
    15. Merge and harmonize the goals of the individual with the goals of the organization.
    16. Three requirements for individuals to take action: unease or dissatisfaction with the present state of affairs: vision of a better state: belief that they can reach a better state.
    17. Marginal Contribution – the portion of value that can be assigned to a specific change, factor or individual.
    18. Analysis that doesn’t improve a decision is waste.
    19. Develop personal knowledge and feedback mechanisms.
    20. When a business improves faster than its competitors and potential competitors, it grows.
    21. Creative destruction.

    Do you think that the Koch’s principles and philosophies are ones that empower America, or those that are only self-serving, while leaving so many behind. I know what I think: what’s your take?

    Good Luck.

    Calvin Wilson
    Founder and CEO
    Calvin.wilson1@verizon.net

    Upstart: Business and Management for 20-40 Year Old Professionals

    Filed Under: Gamechangers

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