Many have heard of the Koch brothers, but how many really know how they made their fortune?

1. Who Are The Koch
Brothers Anyway?

2. The Foundations of Koch Industries
• In 1927, Fred Koch—father to David and Charles Koch and graduate of MIT’s
chemical engineering program—developed a revolutionary new way for refiners to
turn crude oil into gasoline.
• The new thermal cracking technique was so disruptive to the industry that big
oil companies filed 44 lawsuits against Koch, all of which were eventually
defeated.
• In 1940, Fred co-founded the Wood River Oil & Refining Company, the predecessor
to today’s Koch Industries.

3. Handing Over the Reins
• In 1961, with Fred’s health deteriorating, Charles agreed to move from Boston,
where he worked for consulting firm Arthur D. Little, back to Kansas to help his dad
run the family business.
• In 1967, after Fred’s passing, Charles took over for the company.
• In 1970, David joined the company as well.

4. Diversification of Industries
The company’s legacy businesses are still a key part of operations:
• Refining
• Chemical and fertilizer production
• Asphalt
• Pipelines
• Engineering equipment
But Koch Industries has expanded into new markets:
• Polymers
• Finance
• Paper products, including many popular brands:
• Quilted Northern
• Angel Soft
• Dixie
• Brawny

5. Building an Empire
Employment
• Roughly 60,000 Koch employees are located in the United States.
• Another 40,000 are spread out across at least 29 different countries.
Revenue
• According to Forbes, Koch Industries is the second biggest privately-owned company
in the United States, behind Cargill.
• The company reportedly brought in $115 billion in revenue in 2012.
Ownership
• David and Charles each reportedly own 42% of Koch Industries.
• According to Forbes, David and Charles are both worth $41.3 billion, or just over $80
billion combined.

6. The Business Approach that Built
Koch
Market-Based Management
This is an approach spearheaded by Charles, and has five key dimensions. Taking directly
from the Koch website:
1. Vision: Determining where and how the organization can create the greatest long-
term value.
2. Virtue and Talents: Helping ensure that people with the right values, skills and
capabilities are hired, retained and developed.
3. Knowledge Processes: Creating, acquiring, sharing and applying relevant
knowledge, and measuring and tracking profitability.
4. Decision Rights: Ensuring the right people are in the right roles with the right
authority to make decisions and holding them accountable.
5. Incentives: Rewarding people according to the value they create for the
organization.

7. How Their Political Views Formed
A Trip to Russia
• While patriarch Fred Koch was fending off law-
suits over his thermal cracking technique, he
traveled to the Soviet Union in the late 1920s and
early 1930s to investigate business opportunities.
• What he saw there distressed him, and
provided the impetus to write A Business
Man Looks at Communism, which highlighted
the key problems he found with that form of
government.
• According to the The Weekly Standard:
“Conversations at the dinner table often revolved
around the Communist threat.”

8. Political Activity
A Run for The White House
In 1980, David was on the Libertarian ticket for
President with running-mate Ed Clark. The duo
garnered 1.06% of the popular vote, the highest ever
for a Libertarian ticket. Ronald Reagan won the
general election.
A Split with Libertarians
David broke rank with Libertarians in 1984 when the
party advocated eliminating all taxes. He then joined
Republican ranks.
Formation of Think-Tanks
The Koch brothers have had a hand in the formation
of the present-day versions of the Cato Institute and
Americans for Prosperity.

9. I Bet You Didn’t Know…
Near-Fatal Accident
In 1991, David was on USAir Flight 1493 when it
collided with commuter plane shortly after landing at
the Los Angeles International Airport.
In total, 35 people loss their life in the accident, and
David was one of the only survivors from the first-
class cabin.

10. Warren Buffett's
biggest fear is about
to come true