Excerpt from Kochland by Christopher Leonard, plus links to reviews, author biography & more

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Kochland

The Secret History of Koch Industries and Corporate Power in America

by Christopher Leonard

Kochland by Christopher Leonard X
Kochland by Christopher Leonard
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  • First Published:
    Aug 2019, 704 pages

    Paperback:
    Oct 2020, 704 pages

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This strategy laid the foundation for decades of continuous growth. Koch Industries expanded continuously by purchasing other companies and branching out into new industries. It specialized in the kind of businesses that are indispensable to modern civilization but which most consumers never directly encounter. The company is embedded in the hidden infrastructure of everyday life. Millions of people use Koch's products without ever seeing Koch's name attached. Koch refines and distributes fossil fuels, from gasoline to jet fuel, on which the global economy is dependent. Koch is the world's third largest producer of nitrogen fertilizer, which is the cornerstone of the modern food system. Koch makes the synthetic materials used in baby diapers, waistbands, and carpets. It makes the chemicals used for plastic bottles and pipes. It owns Georgia-Pacific, which makes the wall panels, beams, and plywood required to build homes and office buildings. It makes napkins, paper towels, stationery, newspaper, and personal hygiene products. Koch Industries owns a network of commodities trading offices in Houston, Moscow, Geneva, and elsewhere, which are the circulatory system of modern finance. Koch traders sell everything from fertilizer, to rare metals, to fuel, to abstract derivatives contracts. Koch Industries' annual revenue is larger than that of Facebook, Goldman Sachs, and US Steel combined.

The profits from Koch's activities are stunning. Charles Koch and his brother David own roughly 80 percent of Koch Industries. Together the two men are worth $120 billion. Their fortune is larger than that of Amazon CEO Jeff Bezos, or Microsoft founder Bill Gates. Yet David and Charles Koch did not invent a major new product or revolutionize any industry. The Koch brothers derived their wealth through a patient, long-term strategy of seizing opportunities in complex and often opaque corners of the economic system.

This book tells the history of Koch Industries and shows how the Koch brothers' fortune was made. In doing so, it also provides a portrait of the American economy since the 1960s. Koch's operations span the entire landscape of the American economy. The company's story is the story of America's energy system, of its blue-collar factory workers, of millionaire derivatives traders, corporate lobbyists, and private equity deal makers. To examine Koch is to examine the modern American economy.

This account is based on hundreds of hours of interviews, conducted over six years, with dozens of current and former Koch Industries employees, managers, whistle-blowers, and senior executives, including Charles Koch. Also interviewed were outside regulators, prosecutors, politicians, bankers, and competitors. These verbal accounts were supplemented by internal company memos, minutes of executive meetings kept by firsthand witnesses, government documents declassified for this book, legal transcripts, regulatory filings, contemporaneous news accounts, and other documents.

Ralph Waldo Emerson famously said that an institution is the lengthened shadow of one man. This observation would seem to be particularly true of Koch Industries, which has been led by one CEO since 1967. Charles Koch's control of the company is complete. His portrait hangs in the company's lobby, and employees are trained with his videotaped speeches. Every employee must embrace Charles Koch's highly detailed philosophy called Market-Based Management. But Emerson's quote captured only half of the truth about institutions. They are shadows of people, but they are also shadows of the political and economic systems in which they exist. A large corporation in China, for example, is quite different from a large corporation based in America. The laws, culture, and economic incentives are radically different in each nation. Koch Industries, then, reflects an American system in which it grew and thrived.

When Charles Koch took control of the company, America operated under a political framework called the New Deal, which was characterized by dramatic government interventions into the private marketplace, empowered labor unions, tightly regulated energy companies, and a shackled financial industry. Charles Koch despised it. He subscribed to the philosophy of Austrian economists such as Ludwig von Mises, who believed that government intervention only created more harm than good. During Charles Koch's career, the New Deal system fell apart. The system wasn't replaced by a libertarian society, as Charles Koch might have wanted, but by a dysfunctional political economy characterized by selective deregulation coupled with a sprawling welfare and regulatory state. Charles Koch didn't just operate within this political framework. He dedicated his life to transforming it. He created a political influence network that is arguably the most powerful and far-reaching operation ever run out of an American CEO's office. Koch Industries has one of the largest, most well-funded lobbying operations in the United States. Its efforts are coupled with a nationwide army of activists and volunteers called Americans for Prosperity, along with a constellation of Koch-funded think tanks and university-based programs. Charles Koch's political vision represents one extreme pole in the ongoing debate about the role of government in markets; a view that government should essentially protect private property and do little else. Political figures on the opposite pole believe that a robust federal government should provide a safety net and contain the power of large corporations. There is currently no political consensus in support of either view.

From KOCHLAND: The Secret History of Koch Industries and Corporate Power in America by Christopher Leonard. Copyright © by Christopher Leonard. Reprinted by permission of Simon & Schuster, Inc.

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