Charles Koch is the CEO of Koch Industries, one of the largest privately held American companies. Brian Hooks is the CEO of philanthropic community Stand Together. Together, they wrote Believe in People: Bottom-Up Solutions for a Top-Down World.
What We Discuss with Charles Koch and Brian Hooks:
- In what ways is our world “top-down,” and what are “bottom-up” solutions?
- Should corporations with unfathomably deep coffers be allowed to contribute so much money to the political process and crafting of policies that affect us all?
- In recent years, what problems have warranted Charles’ collaboration with figures from the “other” side of the political spectrum (like George Soros — who is vilified by the right for contributing to Democratic initiatives just as Charles is vilified by the left for his contributions to Republican causes)?
- Good profit versus bad profit, and why making money should be a side-effect of creating mutual value, not the goal itself.
- How does Charles answer detractors who say Koch Industries is only in favor of government deregulation and pushing climate change denial so it can pollute with reckless abandon for maximum profits at the expense of the world’s poorest?
- And much more…
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Depending on which side of the political spectrum you align yourself, you probably have a certain kind of reaction when someone mentions the name “Charles Koch” or the Koch Industries over which he presides. In our divisive climate where shades of gray between black and white no longer seem to exist, you may admire Charles as a bootstrap-tugging entrepreneur who built an empire worth billions and paints a perfect picture of the American Dream in bold strokes of red, white, and blue, or you see him as a loophole-exploiting demagogue who uses his vast fortune as a weapon to annihilate legislative regulations on the free market that would hinder his company’s ability to profit at the expense of the country’s poorest.
On this episode, we talk to Charles as well as Brian Hooks, CEO of philanthropic community Stand Together and co-author of their book Believe in People: Bottom-Up Solutions for a Top-Down World to see if maybe we can rediscover some of those shades of gray for a more accurate, less cartoonish idea of what really motivates the top-level decisions of Koch Industries. We’ll explore how Charles believes we can generate bottomless solutions through the empowerment of others, the place of money in politics, collaboration with people known for standing on the other side of the political spectrum (like George Soros) in order to solve the world’s biggest problems, good profit versus bad profit, why Charles doesn’t consider himself a Libertarian anymore (but another surprising “L” word, instead), finding new ways to address poverty, why a society that gives away its shiniest resources without requiring some kind of reciprocation is in need of serious reexamination, and much more. Listen, learn, and enjoy!
Please Scroll Down for Featured Resources and Transcript!
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Miss our two-parter with former Westboro Baptist Church spokesperson Megan Phelps-Roper? Make sure to catch up starting with episode 302: Megan Phelps-Roper | Unfollowing Westboro Baptist Church Part One here!
THANKS, CHARLES KOCH AND BRIAN HOOKS!
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Resources from This Episode:
- Believe in People: Bottom-Up Solutions for a Top-Down World by Charles G. Koch and Brian Hooks
- Koch Industries
- Stand Together
- 264: Mike Rowe | The Way I Heard It | TJHS 264
- Arthur D. Little
- Fred Chase Koch (1900–1967) | New Netherland Institute
- The Koch Brothers: 2nd Wealthiest Family in America | Investopedia
- Recent Discovery Highlights Frederick Douglass, the Businessman | WXXI News
- Autobiographies by Frederick Douglass
- Historic Criminal Justice Reforms Begin to Take Effect | Brennan Center for Justice
- George Soros and Charles Koch Take On the ‘Endless Wars’ | Politico
- Strange Bedfellows: Why Are the Koch Brothers & Van Jones Teaming Up to End Mass Incarceration? | Democracy Now!
- Continually Transforming Koch Industries Through Virtuous Cycles of Mutual Benefit | Koch Industries
- Good Profit: How Creating Value for Others Built One of the World’s Most Successful Companies by Charles G. Koch
- Everything You Need to Know About Occupational Licensing | Vox
- Charles Koch vs. Crony Capitalism | Master Resource
- What Koch Industries Reveals About American Corporate Power | Time
- Did Luther Really Say, “Here I Stand?” | Concordia Publishing House
- “Insanity Is Doing the Same Thing Over and Over Again and Expecting Different Results” | Quote Investigator
- Family Independence Initiative
- The Worldwide Employee Engagement Crisis | Gallup
- Gallup Student Poll Finds Engagement in School Dropping by Grade Level | Education Week
- The Three Laws of Thermodynamics | Introduction to Chemistry
- Comparative Advantage | Investopedia
- Multiple Intelligences: What Does the Research Say? | Edutopia
- Charles Koch Says His Partisanship Was a Mistake | The Wall Street Journal
- Why the ‘Classical Liberal’ is Making a Comeback | Politico Magazine
- Understanding Maslow’s Theory of Self-Actualization | ThoughtCo.
- Schumpeter: The Great Divergence | The Economist
- Einstein the Nobody | Nova, PBS
- Favorite Books | Charles G. Koch
- Maslow on Management by Abraham H. Maslow
- Charles Koch Shares the Letter That Guides His Life | ABC News
- Preference Falsification | Wikipedia
- Transcend: The New Science of Self-Actualization by Scott Barry Kaufman
Transcript for Charles Koch & Brian Hooks | Bottom-Up Solutions for a Top-Down World (Episode 437)
Jordan Harbinger: Coming up on The Jordan Harbinger Show.
[00:00:02] Charles Koch: It's changed my whole approach on how to get things done and who can be helpful and not. So I'm now open to work with everybody. I mean, this is huge. As we can get more and more people to start thinking this way, then we can break down this divisiveness and this antagonism toward others who disagree with us.
[00:00:29] Jordan Harbinger: Welcome to the show. I'm Jordan Harbinger. On The Jordan Harbinger Show, we decode the stories, secrets, and skills of the world's most fascinating people. If you're new to the show, we have in-depth conversations with people at the top of their game, astronauts, entrepreneurs, spies, and psychologists, even the occasional billionaire. Each episode turns our guests' wisdom into practical advice that you can use to build a deeper understanding of how the world works and become a better critical thinker.
[00:00:53] Today on the show, the famous or possibly infamous Charles Koch and his co-author Brian Hooks. Charles Koch is a business powerhouse that many admire with a net worth of over $47 billion. Koch Industries is larger than Boeing and Disney with over 130,000 employees. So just let that sink in for a sec. Of course, many loathe him for his libertarian and conservative viewpoints. And we'll be getting into that a bit here on the show today.
[00:01:19] When they approached me, I was a little surprised because I thought, "Isn't Charles Koch, that evil billionaire destroying everything that he touches?" the more I researched him, the more annoyed I got at myself for ignoring all of his work. Candidly, I don't agree with everything he does, of course, but there's a lot of baby in this bathwater that should not be tossed out.
[00:01:36] I encourage you to listen to this one with an open mind and suspend your suspicions of the source here. In other words, trust me on this. I do think this episode is an interesting dive into the way that he thinks even tells us how he messed up a lot as a kid and was transferred to eight different schools before he even got to college. Regardless of your politics, I hope you find this episode of the show as interesting as I did. There's something to be admired about a man who was 85 and still reading and learning a ton even if we disagree in many areas.
[00:02:03] And of course, Brian Hooks adds a lot to the conversation here. He is the CEO of Stand Together, one of Charles Koch's organizations, and these are not just softball questions. I do ask a lot of challenging stuff here. So if you're warming up your hate mail fingers right now, which many of you are, you should listen to the whole podcast. Otherwise, you're doing the exact thing you probably hate when other people do it, which is criticizing something you haven't actually explored. And regardless of our opinion, on his political moves, he is one of the most significant business figures of our time. So, whether you like or dislike Charles Koch, his thinking is remarkable. And I hope you enjoy this episode of the show.
[00:02:38] If you're wondering how I managed to book all these great authors, thinkers, and celebrities every single week, well, it's because of my network. And I'm teaching you how to build your network for free over at jordanharbinger.com/course. By the way, most of the guests on our show, they already subscribed to the course and the newsletter. So come join us, you'll be in smart company. Now here's Charles Koch with Brian Hooks.
[00:03:01] You know, I owe Brian an apology at first I said, "Oh, I don't want to — this is some ghostwriter guy who probably doesn't even know anything about this stuff. I don't want to have both of them." And then I look and it's like, CEO of this and the founder of the — I'm like, "Oh God, I should have googled this guy. Look what an amateur. Of course, he knows everything about it, he wrote the book.
[00:03:16] Charles Koch: You want me to tell the story of how he got involved? I'll keep it clean.
[00:03:21] Jordan Harbinger: Yeah, keep it clean. Yeah, we can do a short version of that. Sure.
[00:03:23] Charles Koch: Yeah. So I started on this book five years ago after I finished Good Profit. And I had other people working with me until I had a book, but I was about to give up. It's not what I want. It didn't go to convey. I don't know how to do it. So I said, "Brian, either I quit on this or you come in and straighten me out, guide me." I mean, there are a couple of things on the business part I could do all right. I felt fairly comfortable with that in my own life. But everything we were doing in our philanthropic and social change efforts; I wasn't because I wasn't involved in the details. And so it didn't convey what I wanted to do. Once Brian got in and we reorganized the book, debated every chapter, almost every sentence —
[00:04:15] Brian Hooks: Every word, yeah.
[00:04:16] Charles Koch: — every word. And that's what I say whenever we get people with different backgrounds and different approaches together and brainstorming, we come up with a better solution than I ever had by myself. And that's the case in the book. And that's how we came up with a decent book because of him.
[00:04:33] Brian Hooks: Well, this is my 20th year working with Charles.
[00:04:36] Jordan Harbinger: Oh, wow.
[00:04:36] Brian Hooks: So the chance to be able to partner with him on this book and kind of share with the world what we've been doing for a while. It's pretty incredible.
[00:04:42] Jordan Harbinger: Yeah. And the premise of the book is — one of the premises of the book — it doesn't sound right when I say it that way but it is — is bottom-up empowerment, not top-down. Top-down doesn't work. One-size-fits-all doesn't work. I experienced that going through the public education system. I'm sure you are familiar with that. It's one of the examples you mentioned in the book, which was great because I thought of it like, "Yeah, like education, where I'm sitting in a class with people who want to do different things later and have different abilities." And we're all being crammed down one funnel to the slaughterhouse, so to speak. You phrase this really well in the book. You said, when we do this, it says, we believe in some people, but not really others because it's this top-down approach where it's — some of you are going to be fine, others of you not, but we're just going to see who makes it through the cookie cutters, through the shredder, so to speak.
[00:05:29] Charles Koch: Yeah. And that's basically why I wrote the book and most basically it was to help many more people apply the principles of human progress of bottom-up empowerment. That had transformed my life. And I had seen it transform many, many others. And through history when large numbers of people experienced that and became social entrepreneurs, that's what transformed societies for the better. To enable more and more people, none of them have been perfect because humans aren't perfect. I'm not utopian thinking, but I have a North Star of what direction we'd like to go, but I know we'll never get there, but we need to keep going in that direction. And so my North Star is a society of equal rights and mutual benefit where people succeed by assisting one another. I mean, that's a tough one. And everybody has the opportunity to realize their potential.
[00:06:32] And the starting point on that, as you suggest, is believing in people. And for us to get there, we have to recognize that everyone has a gift. Everyone has something to offer. And in my case, I was fortunate to find or start finding my gift at an early age. In fact, in the third grade, the teacher was putting math problems on the board. And I asked about why is she doing that? The answers are obvious. And I looked around the classroom and they weren't obvious to anybody else. Wow. Okay. I have something to offer because I didn't believe I had anything up until that point. Except for getting in trouble, I was always very good at that and still am, as we see. But unfortunately, I was at a loss on how to develop and apply that so I could contribute and believe in myself and succeed so I could believe in myself.
[00:07:29] So for nearly 20 years, I wandered around in the wilderness, mainly trying to avoid all the dirty jobs my father had me doing or minimize the pain in them. The experience I had in most of the schools as you described, so I was lost. And then finally starting as a junior in high school — and interrupt me any time.
[00:07:52] Jordan Harbinger: Sure, sure.
[00:07:53] Charles Koch: So finally, a junior in high school, I realized I was headed for a dead end. I'm going to be doing dirty jobs — I mean, dearly job doers are my hero. For example, who creates more value in society, somebody who has a PhD in ancient Babylonian history, or someone who makes your sewer?
[00:08:14] Jordan Harbinger: Yeah, that's pretty clear. And Mike Rowe, who's been on the show before, star of the show, Dirty Jobs, is a great example of why we actually need better and different types of more specialized education. I have a law degree, which comes in handy sometimes, but to be honest, on a day-to-day basis, there are probably — it doesn't quite make the top five of useful degrees that I probably need on a day daily basis. And that's saying something because the law is actually a trade. Most people don't think of it like that, but it really is. It's not quite as glamorous as making the sewer work. And honestly, it's probably less stable of a career in most cases.
[00:08:50] Charles Koch: No, we partnered with Mike Rowe as you know, and support a lot of his activities and he's been a big help to us. It really helped us understand some of these areas. So my experience was the same thing, so then my grades were good enough, so I could get into engineering school because I thought that would fit my gift for math and other abstract concepts. For science, I always did well in science or anything that was abstract. So I got three degrees in engineering and in the process, I learned, I was a lousy engineer. That I was good at all the abstractions in it and those are the courses I mainly took because I wanted to succeed, but I wasn't any good at making her operating things, which is what engineers do.
[00:09:34] So when I graduated, I went to work for what was then one of the top consulting firms in the country, Arthur D. Little in Boston. And the only place I could get hired there was in product development. And I was no good at that either. I won't go into details on all of my failures. Then, this was one of the tractions. It consulted on everything. I had an experimental playing field for me. So I got transferred to process development, which had more conceptual aspects to it. So I was a little better at that but still it wasn't what I was looking for. So I got transferred to management consulting and I got to consult — this is at age 24. I got to consult on business strategy, on business innovation. And I said, "Okay, now I know I want to be an entrepreneur." So I started looking around a number of my friends, my classmates, and others, and professors at MIT were starting businesses. Okay. So I'll find one of these that fits me and invest some money. I'll get started as an entrepreneur.
[00:10:40] In the meantime, my father called me and said, "Son, I'd like you to come back and work for me." He was a tough old Dutchman.
[00:10:48] Jordan Harbinger: Right.
[00:10:48] Charles Koch: One of his favorite sayings is you can tell the Dutch but you can't tell them much. "Thanks, Pop, but I got my career plan." And so a little while later, he called me back and he said, "Son as you know my health is poor. And so I haven't been able to really run the company. And so it's not doing well and I don't have long to live. Either you come back to run the company or I'll have to sell it in." He says, "And I'll start with a piece of the company that you can run any way you want. The only thing you need my approval on is to sell it." And he was true to his word and the company was in bad enough shape that even with my inexperience, I was able to make significant improvements, but I still had an empty feeling. I was still missing something I wasn't able to contribute the way I wanted.
[00:11:36] So I said, I got to find tools or concepts or principles that will enable me to contribute more. And so I said, "Okay, I'm going to dedicate myself to finding the principles of human progress. And I'm going to study every discipline that's relevant in history and find these principles that I can use." And I started doing that and then applying them in business. And they were immediately applicable. They immediately helped us. And so they enabled me to accomplish more than I ever dream. And I'd studied from all different perspectives, not just one viewpoint, which is the only way you really understand something if you know all the different perspectives on it. And then apply that concept to business, to openness and division of labor by comparative advantage. So we could all focus on what we do but all of these concepts started to play.
[00:12:34] And then I said, "Well, I'm applying to other aspects in my life, raising my children, my philanthropy, and I'm going to dedicate myself to helping as many people as I possibly benefit from these same principles." And essentially that's the principle of empowerment of helping people find their gifts, turn them into valued skills, then use them to succeed by contributing to others. And that's the way we built the company. And that's the way we do our philanthropy and our social change efforts.
[00:13:09] Jordan Harbinger: In the book, you mentioned that people are more able and free to act on their gifts when they're unencumbered. And when people can't contribute, society is measurably worse off. And I tend to agree with that. We tend to force the square peg through the round hole when it comes to putting people in jobs and getting an education, as we just discussed. And applying our unique — well discovering our unique gifts and then applying them for the betterment of others is really a high calling.
[00:13:32] Before we dive even further down that rabbit hole. I'm curious, I know that your father, Fred Koch, he spent time in the Soviet Union. He built refineries there. And in Germany, in the '30s, we probably don't need to review what was happening in Europe at that time. Do you think that that contributed to his and later your conclusions that very strong governments are stifling and dangerous? He kind of had a front-row seat to some, probably two of the strongest and most stifling regimes in modern history.
[00:13:57] Charles Koch: I think it was the way he — I mean, we talk about how important it is to empower somebody as to believe in that. And through all this period of being lost, I didn't think anybody believed in me, but looking back on it, he had to believe in me many years later. I have an older brother and two younger ones and so years later I said, "Pop, why were you so much tougher on me than you were my younger brothers?" He said, "Son, you plum worn me out." So that gives you an example. I mean, he had to believe there was something there. By the time I'd finished high school, I'd been in and out of eight schools. So I was a mess.
[00:14:39] Jordan Harbinger: That sounds rough.
[00:14:41] Charles Koch: So I started just to show you how he had me working in virtually all my spare time, starting at age six because he said he didn't want me to be a country club bum. And the other thing he did is whatever he asked of me were things he did himself. For example, he was big on integrity, humility, treating people with respect, being a lifelong learner. He used to say all the time, "Son, learn everything you can because you never know when it'll come in handy. And I want you to experience the glorious feeling of accomplishment," which is that's all in the book. And so he stuck with me and when I would get too far off the track, I mean, he slapped me around and brought me back. And my brothers kind of resented his tough treatment because I knew I was lousiest and needed slapping around. I mean, that's funny. So I think that's what did it, so I don't think that changed his philosophy about the role of government, but it made him, as you know, a ferocious and a communist,
[00:15:46] Brian Hooks: This idea of believing in people. We go through some of the stories in the book about the people that we work with, but even just a careful study of history, right? I mean, some of the biggest changes, the biggest improvements in our country and other countries have come from people that most others would kind of bet against. And so we go through the history of social movements in our country. You take somebody like Frederick Douglass, for instance, who is probably one of the most successful social entrepreneurs in the history of the world. And he starts from the most unimaginably, horrible circumstances that anybody can think of and all of a sudden rises out and accomplishes so much.
[00:16:22] But even in terms of the people that we work with today, You know, this notion of bottom-up solutions, when you empower people, they can accomplish incredible things. Once you start to look for those examples, it's hard not to see them.
[00:16:34] Charles Koch: Frederick Douglass is so important in this. I would give three reasons. One, he overcame the worst possible conditions. Unbelievable that he overcame that. He then didn't seek vengeance. He sought that work for a system where it eliminated these kinds of injustice, not just for black Americans, but for all people. And he wrote an autobiography that described each of the steps. For example, when he's eight, he learned that he wasn't a slave because he was inferior. It was because they were keeping him ignorant. So he taught himself to read. So he started to believe in himself. And then at 16, he had the opportunity to teach Sunday school. And secretly we're teaching the slaves to read as well. And he says, at last, I've found a way to contribute. So being enslaved, that's what he was thinking about and driving him, "I want to contribute."
[00:17:32] And then when he escaped. He was earning a living for himself and he started going to abolitionists rallies. One of them, they called on him and all the best orders where they're speaking. And when he got up to speak, he was the best of all. And so he said, "Okay, now I have a gift. I'm going to dedicate my life to this gift." And then he fought against injustice for everybody, not only to eliminate slavery but overcome the injustices in the reconstruction, injustices against women and certain immigrant groups, and so on.
[00:18:07] Jordan Harbinger: Along the lines of bottom-up, do you think that corporations should be able to put so much money into politics? Because that sounds a little bit top-down to me and maybe I'm stretching the definition. So feel free to stomp on that if it is, but it seems like hundreds of millions of dollars for lobbying for this and that, that seems top-down. I think it contributes to some people who say things like, "Oh, you got Charles Koch coming on, this is an economic royalist. He's just repackaging trickle-down economics as this bottom-up, libertarian populism. Don't fall for it." What do we say to those types of people?
[00:18:38] Brian Hooks: Well, I think we have a lot to say to that kind of criticism. And I think the people have really taken a look at the way that we engage in all of our philanthropy, all of our social change work, including the work that we do in public policy and politics. When you really look at the way that we engage, rather than kind of the way that the headlines mischaracterize it, it's absolutely consistent with what we put forward in the book. This idea that the more people that we bring in to address a problem based on their proximity to that problem, the closer than they are to what we're trying to solve, the more ideas that we can bring into the possible solution sets. So when it comes to policy and politics, for instance, you know, we get engaged to support groups that are in politics because policy matters to people's lives, right? And so everything we do is to help pass better policy that can help to empower people to succeed.
[00:19:26] The way that we do it is actually pretty unique. So it's not just one person getting engaged, running ads, and that sort of thing. We actually support groups that bring in literally millions of activists, voices into the conversation. And these are folks from all 50 states. They've all different walks of life. They've got all sorts of different experiences. And to a large extent, their voice is not going to be represented in the political conversation, but for groups like Americans for Prosperity, for instance, one of the organizations that we support. And so it's very much bringing more and more voices in helping to elevate those voices. And what we find is when you do that, you can accomplish things in politics and in public policy that a lot of people have thought were impossible.
[00:20:10] And we go into this in the book, which is, you know, for example, the story of criminal justice reform, the only reason in 2018, you think about how polarized the country is today. But it was back in December of 2018 when the First Step Act passed. First Step Act is probably the most important criminal justice reform that's passed in twenty-five years in a generation. The only reason it passed overwhelming support from both parties was because you had voices like those I just described standing up and telling both Democrats and Republicans, "Hey, do the right thing on this and we got your back."
[00:20:44] And so again, when you take a close look at the way that we've gotten engaged in public policy and the political process, as we say it's sort of empowering the people that wouldn't otherwise have a voice very much from the bottom up.
[00:20:55] Charles Koch: Our philosophy is the answer to bad speech is more speech, not try to shut down the bad speech. I mean, that's the whole concept of freedom of speech and open inquiry.
[00:21:09] Jordan Harbinger: You're listening to The Jordan Harbinger Show with our guests, Charles Koch and Brian Hooks. We'll be right back.
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[00:24:48] Jordan Harbinger: And now back to Charles Koch and Brian Hooks on The Jordan Harbinger Show.
[00:24:54] That makes sense to me, and I think probably one of the most unusual things that most people don't know when I read this, I had to like, you know, rub my eyes and read it again because I saw that you teamed up with George Soros in the last year to fund this anti-war think tank. And a lot of left media, left-wing media, is casting these evil billionaires. And then, right-wing media has got him as the evil billionaire, and I'm like, "Here they are collaborating, which by the way is not going to help you win that battle. They're just going to say, "That's the new Illuminati," or whatever. But I just thought that was kind of funny because I thought three months before it happened, there's probably online forums. Like, "These guys are enemies and they're pitted for life." "Eh, they're working together." "I knew it." I mean, I saw that kind of thing coming a mile away and I thought that was kind of interesting.
[00:25:43] Because in the past you have supported largely right-leaning party politics. And when we talked about this in our pre-chat, our sort of offline background chat, you mentioned that you chose the red team a lot in terms of party politics, and it ended up being more of the same. I think that some of the reputation that you have, or that your company has, or both is that you're this hyper-partisan philanthropist that supports the political right. It seems like — well, maybe I should ask you, has that changed, or is this a slight turn to the left? Because it looks like a radical departure from that.
[00:26:15] Charles Koch: Let me put this in perspective. I've been at these kinds of efforts for nearly 60 years now. And for the first 50, I wasn't involved in politics at all. And the reason is that it's basically win-lose, right? When you run an election, you win and the other one loses or vice versa. So it's win-lose. So it's divisive by its very nature. So the more focus we have on the political process, the less we're going to focus on believing in people and helping people. And so what I've always been working for is to emphasize people, helping people, empowering people, rather than politics. And I mean, you need politics to create better policies. We hope better or worse, whatever it's going to be. But we're obviously working for better ones that empower the people.
[00:27:12] So when we got involved in politics, that's the way it's done. Right? You pick a party and then you work with them and try to make it better. And that's what we tried to do. But that has never been my focus. As a matter of fact, today, politics is less than 10 percent of what we do. And my focus is not that at all. My focus — I'm in the philosophy department, I'm not running anything. I'm trying to come up with ideas on how to better empower people, examples of what we're doing in business that we can use. And so our main focus is on the other key institutions, as you say, the institution of education, which is fairly important, communities, businesses, what practice just is, do businesses need to follow, so they're not top-down. So they're trying to succeed by creating value for others and empowering their employees and to show people that that's, what's made us successful. So please adopt this and it's pretty important on how your employees look at all this because a majority of the people in the country work for companies. So if companies have bad practices, we're going to have a bad culture.
[00:28:27] Brian Hooks: So a lot of people are surprised when we tell them that politics has never been more than 10 percent of what we do,
[00:28:32] Jordan Harbinger: Because it's all they know.
[00:28:33] Brian Hooks: Because it's all they know, right. Look, we bear responsibility for not telling the whole story of what we've done, but the book does, I think, do a pretty good job of doing that. The way I look at it is there's about 12 chapters in the book. Only one of them addresses our role in politics and public policy. And that's about the right waiting, given everything that we do.
[00:28:52] You pick up on a really important point about our collaborations. And this is a lesson that we try to get across in the book. This notion that: Unite with anyone to do right, and with nobody to do wrong, you can accomplish a whole lot more than if you just go it alone. And so our partnership with George Soros' foundation, the Open Society Foundation on foreign policy, I think is a great example of that. You can't look at the last 25 years of US foreign policy and think, "Hey, things are going great." Probably not, but it's a hard thing to kind of change a paradigm. And get people to ask the question is there a better way? But when you bring the groups that we've supported over the years together with the groups that he supported over the years, all of a sudden people take a second look, which is great.
[00:29:33] And it's the same what we see on immigration, on criminal justice. I mean, there's a ton of examples of that.
[00:29:37] Charles Koch: You know, this isn't instant pudding. We've been working with people across the spectrum for many, many years, for example, Van Jones led the demonstration against our first event in Palm Springs.
[00:29:50] Jordan Harbinger: Right.
[00:29:51] Charles Koch: And we were total enemies and then when we got into criminal justice reform, I think we went to him, maybe he came to us, and started working together. And so I think it was last year, he and our general counsel who was our leader on these efforts were on TV. And he said, "I used to think everybody on the other side was evil and everybody on my side was good." He said, "Now, I've seen, there are good and evil people on all sides. And he said, "So it's changed my whole approach on how to get things done and who can be helpful and not." So I'm now open to work with everybody. I mean, this is huge. As we can get more and more people to start thinking this way, then we can break down this divisiveness and this antagonism toward others who disagree with us.
[00:30:41] Jordan Harbinger: We can attack problems and not people as you mentioned in the book. Speaking of which, why do you think wealthy people have such a bad reputation in America? You mentioned cronyism, protectionism — I think socialism is gaining ground right now because people say — and again, I think this is from the book — business is no longer a force for good. And it seems like you're trying to change that. I'm wondering, is it just about rejecting corporate welfare?
[00:31:07] Charles Koch: Well, no, I wouldn't say it's just about that. It's about having a top-down approach. That is if — because you're successful, you believe you have all the answers. And so not just in politics or anything, but in general, I mean, if that's the way you run your business, top-down employees, "I know best you shut up and do what you're told and you have that attitude." And then, "Okay. I'm all for my short-term profits." That's what it is rather than, "I only want to succeed through a long-term approach of creating value for others." That's what I call creating virtuous cycles of mutual benefit, which is figuring out what capabilities we have that will create value for others, starting with our customers and employees, but then also our suppliers, our communities, and society as a whole. And then continually transform our ability to do that better and better. And then empower our employees so they can self-actualize so they can become empowered.
[00:32:14] So, I mean, that's our focus, the number one focus of every supervisor is to help their employees self-actualize. And that starts with working with them to find what gifts they have, what will turn them on, and then designing a role to fit that and then giving them the authority, the tools, and the knowledge systems. So they can be effective in that and when we get that done, when we have the right supervisor with this approach, our employees are so turned on. I mean, today we're doing more of that than ever, particularly since we've got more technology to make it much easier to do that and much more efficient to delegate.
[00:32:56] And so I've got so pumped up when I come out of these meetings and hear all this. I mean, that's what keeps me going. These ideas work. Wow! And now they're working better than ever because we're learning how to apply them better every day. And we're getting that through our culture. All our leaders and supervisors at every level are working on this. So it's tremendous. So it can work everywhere. And then our hope is this will spread through businesses as they see it makes us successful
[00:33:26] Jordan Harbinger: In the book, Good Profit, which I know is not the same book as we're talking about now, but the concepts do stretch into this new work as well. Profit itself isn't the goal, right? It's the result of creating value as you just explained. And profit needs to be a side effect of value creation and create value for the customer, not just for the business itself. Bad profit — the examples you give in the book — protectionism licensing, things like cab medallions, automobile and steel tariffs.
[00:33:53] Charles Koch: Occupational licensure.
[00:33:54] Jordan Harbinger: My barber needed a license. And I said, "Oh, can't you just do that online real quick? Isn't it just about sanitizing?" He's like, "No, man. It's like 300 hours." And I thought, "If you are done with high school and you want to become a barber, you got like eight, nine months or a year, or even two of licensing, not just schooling, the licensure before you can make money." And it just seems like a racket to me. And it forces businesses to focus on wooing politicians instead of actually being more competitive and innovating. And I think that probably costs us jobs in the long term. And of course, people go, "Okay, great. You got that. But find one example of a company doing that when it's against their own interests." So I'll just throw that hot potato over to you and say, "Give us an example of opting for these principles, even where it meant hurting the profits of Koch Industries."
[00:34:38] Charles Koch: Yeah, for example, we lobbied to get — we're one of the big ethanol producers, and we lobbied to get rid of the subsidy for that, which we were successful at. We would also like to get rid of the mandate and so on, but we haven't been able to do that. And then on the tax bill, the border-adjustment tax was a key part of that. And that would have made us maybe an extra billion dollars a year or something. I mean, it would have hurt in some areas but overall, our analysis was, it would have made us a lot more money. We fought tooth and nail against that because that would be so destructive. We believe in the economy and distort the whole market system.
[00:35:21] Brian Hooks: Because the way it would have made you money was by raising prices on the consumers that are benefiting from our products. And so of course you don't want that.
[00:35:28] Charles Koch: And so that's what we want. We want to go around and create hardship for our customers. I mean, give me a break.
[00:35:34] Jordan Harbinger: Unwise.
[00:35:34] Charles Koch: How sustainable is that? That's the way you run your business to hurt your customers. You got to have a really short term. It's just kind of grabbed the money and run philosophy. We'd like to build for the long term. I mean, I've been, as I say at this for nearly 60 years, as you can tell, I'm not really in the short term, and I'm still looking at the long term, although I may not have that many years because that's what I believe. I'm kind of like Martin Luther when he was on trial. "Here I stand. I can do no other." I mean, I couldn't stand myself. If I were doing that.
[00:36:07] Jordan Harbinger: Do you believe that all market distortions are bad? Bar none, all market distortions are bad in this way.
[00:36:14] Charles Koch: Well, I mean, it depends on a lot of things. It depends on what the rules are. The markets can be inadvertently distorted. I mean, you've got to have property rights defined, so you bear the cost as well as the benefits. So it depends on what you mean. I mean, the markets aren't perfect. But most of these interventions to make them perfect over time, make them worse. I can't give you an absolute here.
[00:36:41] Jordan Harbinger: Yeah, that was an overly broad question. So you brought up a great example of you have to be able to internalize the cost as well as the benefit. A lot of people that criticized Koch Industries or you personally, which is an interesting tactic, they think you're on a quest for deregulation so that Koch Industries can pollute with reckless abandon, right? Making the poorest people in the world much worse off. And I'm sure it's not the first time you've heard criticism like this. So I wanted to give you a chance to say your piece on it because it seems a little bit like corporate welfare to externalize the costs of pollution onto the population. If a company pollutes, and then internally the benefits when there's a lack of regulation that comes with that. Does that make sense?
[00:37:20] Charles Koch: This is one of our second guiding principles is compliance and stewardship. And stewardship to us means respecting the rights of others. And so the top of our list is keeping people safe, both in and outside the company, and then practicing environmental excellence. So that's top of the list and so we were doing a lot of things to bring that about. So you know, the opposite is true because that's a key part of our philosophy of creating virtuous cycles of mutual benefit. What we do for the environment is critical to that. So we try to be better and better, better than the regulations require in fact.
[00:38:05] Brian Hooks: I think a lot of these conversations get framed in an us-versus-them way. And then people are presented with a false choice. You know, of course, people want to improve safety. Of course, we all want an improved environment. Of course, we want people to not struggle in poverty. The question is how. How do you best achieve those goals?
[00:38:22] What we try to do in the book is going through a number of examples that show that it may be counterintuitive, but this notion of trying to address them from the top down through mandates or through prescriptive processes, kind of taking the word of people who haven't actually been close to the challenge versus really going to the folks who are struggling, say with poverty, And asking them, how can we come alongside you and learn from your personal experience with a challenge, right?
[00:38:51] And empower them from the bottom up to be able to address any of these challenges. And again, when you start to look at the world with those glasses on, through that lens, you start to see solutions that are all around us but ultimately are sort of being overlooked. So, I mean, if you want to go into, I don't know where you want to go with the conversation, but to me, one of the most extreme examples of that is poverty. So you look at the top-down approach, which there's a lot of different ways too, you can look at that, but the war on poverty is a pretty good illustration of a failed top-down approach. We've been at this now for — what is it? Six decades, something like $15 trillion, maybe more has been spent on this and the poverty rate in our country hasn't budged.
[00:39:29] It's not because people don't want to address poverty. Of course, we all want to eliminate poverty. The question is how do you do it. So we have to say, Hey, continuing to try the same thing over and over again, and expecting different results is crazy. Right? That's what Einstein said.
[00:39:43] So you take a group like we talk about in the book, the Family Independence Initiative, it's this unlikely hero, right? This tiny organization is relative to all the resources that have been spent on poverty, a group out of Oakland, California. But what's their secret? Well, their secret is that they're run by people who have personally experienced poverty. Their one rule for their employees is you can't tell people in poverty what to do. You need to ask them: how can we help based on what we've got? I mean, the way they do it, it's ingenious, right? Rather than bring, you know, people like us, frankly, and to tell people what to do they connect families in poverty with other families in poverty. And they say, look, what you lack is what everybody needs to succeed. Capital, financial capital, but social capital, which is often so overlooked in these top-down approaches.
[00:40:30] And so the Family Independence Initiative puts these families together and they say, "You guys will know best how to get yourselves and your families out of poverty, but you can't do it on your own. You need support. And on average, in just a couple of years, families that go through this program, they improve their income by 27 percent. Which is enough to get them out of poverty and on trajectory to stay out of poverty. They double their savings, right? Which we know is so important to be able to—
[00:40:55] Jordan Harbinger: Right.
[00:40:55] Brian Hooks: — stay out of poverty. You compare those results. Bottom-up approach, empowering people in poverty, looking at people not as problems, but as solutions to 60 years of other ways of doing things. To me, it's hands down the better way.
[00:41:09] Charles Koch: So it's not just the money. It's mainly that they're assisting one another. So you're given the money to help them do a better job of assisting one another. And that's the whole point. I mean, that's wealth and everything. Why do you want more money? So I can help more people be empowered, both through what we're doing in the company and what we're doing through philanthropy.
[00:41:31] Jordan Harbinger: It seems that the US has headed towards a two-tiered society, or maybe we're already there. I'm not even sure — the haves and the have-nots. Do you see the growing wealth gap is a major problem due to institutional failure? Or maybe that's two questions. Do you see that as a major problem? And is it due to institutional failure or something else?
[00:41:48] Charles Koch: Well, I don't think the disparities are the problem. The problem is that the system is set up so people can succeed without contributing by the way the rules are set up. And that's what creates a lot of these disparities. Like any rule that limits competition, limits innovation, limits new entries, keep people with little or nothing from competing with you that contributes to an unjust system. So I think it's the injustice of the system. Like the studies on innovators who become very, very wealthy. The study concluded they get less than two percent of the benefit and society gets over 50 times. Don't we want more of that? But we want to encourage people to do that. We want those people to be very successful and to keep doing it, make our lives better. Please work harder, do more. So we don't want to suppress that, but we want to suppress the people doing it by gaming the system through cronyism, protectionism, all the other ways that that's done.
[00:42:59] Brian Hooks: What we write about in the book and what we see is — I mean, there are some really serious barriers that are holding people back, and it's not as simple as looking at anyone and sort of saying, "That's the cause. So let's fix it and everything will be fine," but it really is kind of a cross what we described as these key institutions in society. And so you look at education where you started off, right? The whole system, whether it was intended to or not, is basically geared to sort people right based on who's going to be able to be successful, and it's about the top 10 percent. Most of the resources, then go to that 10 percent. And then the rest of the folks, you know, we just kind of give up on them as a society. And then, so you asked the question, well, why do we have wealth inequality? Why do we have the kind of disparities that we see in a lot of dimensions? I think that's a big reason, right?
[00:43:47] But you also look at business, Charles talked a second ago about how a whole lot of businesses are not focused on empowering their employees that are managing top-down. They're trying to rig the system. I saw a recent statistic. I think it was from Gallup, but it's one of these surveys that gets done regularly. Almost 70 percent of people in the workforce say they're completely disengaged with their job. It's not fulfilling to them.
[00:44:08] Jordan Harbinger: Yikes.
[00:44:09] Brian Hooks: I mean, imagine that, right? I mean, you, you do what you love. We get to do what we love. I mean, I couldn't imagine not being able to come to work every day and say, "Hey, I'm here to contribute. I'm ready to go." Man, we got to fix that. If we fix that, you ought to be able to see people, you know, inventing people, coming up with innovations, and really kind of hitting their sweet spot based on how they have to contribute. But I think you can go through each one of these institutions to identify some of those barriers. And if we can bring people together to remove them, absolutely you're going to start to see things like this artificial wealth inequality, and a lot of the division and divisiveness that has happened in our country will get addressed.
[00:44:45] Charles Koch: So, I mean, what's a similar statistic on education, on the percentage who are disenchanted. And so don't even try to learn—
[00:44:54] Brian Hooks: It's not surprising. It's almost about the same. So if you look at — you ask kids in fifth grade and then in 12th grade. "Hey, how do you feel about — you know, are you engaged when you're learning?" In fifth grade, the majority of kids say, "Yeah, I'm pretty engaged." By 12th grade, 70 percent say they're not.
[00:45:09] Jordan Harbinger: Well, you remember 12th grade? Nobody's engaged in 12th grade. That might be a little skewed.
[00:45:15] Charles Koch: No, I was, that was the first time I was engaged because I knew I had to get out of the mess I'd made.
[00:45:21] Jordan Harbinger: Yeah. You had your father saying, "Hey, if you want to live anywhere, but the barn in the back of the house, you better do well in school."
[00:45:27] Charles Koch: He called me in one day and he says, "Either you start applying yourself or I'm not going to pay for your education anymore."
[00:45:34] Jordan Harbinger: Yeah. That'll do it.
[00:45:36] Charles Koch: My grades immediately dropped a whole point. It's just, what a coincidence.
[00:45:42] Jordan Harbinger: This is The Jordan Harbinger Show with our guests, Charles Koch and Brian Hooks. We'll be right back.
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[00:47:46] Jordan Harbinger: This episode is also sponsored in part by Better Help. You've heard me talk a lot about therapy. I usually list off all the reasons you can get it. And I talk a little bit about Better Help, but a lot of you have been asking me about it. A lot of you have been using it and to great satisfaction, I might add, I am a huge fan of therapy. I think it keeps people saying, I think that it keeps people grounded. I think it's healthy to have somebody to talk to that you're not related to, or living with or dating, or something like that. I do recommend therapy. It kept me from just walking into traffic, you know, 10 or so years ago. And I went after poking and prodding from tons of friends. So if you have any shame around it, I'm telling you to swallow that and start getting therapy. I recommend Better Help because you don't have to drive. You don't have to park. Just go and try it. If you don't think it's for you, fine. I get it. But better help is an affordable option. And our listeners get 10 percent off the first month with discount code JORDAN. If that's not a good enough reason, plus your sanity to give it a shot. I don't know what is. Get started today at better-H-E-L-P.com/jordan. Talk to a therapist online and get help.
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[00:49:21] I am curious how the principles in the book apply to your personal life, you know, openness to science, immigration. You even talk about thermodynamics. I'd love for you to share a little bit of that.
[00:49:33] Charles Koch: Yeah. We'll just take — and this is the power of these ideas. I mean, these disciplines, whether that's philosophy, economics, psychology, philosophy of science, they aren't independent. They're all interrelated so one of my favorites is the second law of thermodynamics that says that in a closed system, entropy or uselessness or chaos virtually always increases. So if you want to make progress, you want things to get better, you've got to have an open system. That doesn't just apply to physical things that apply to you as a person. You better be open to different ideas, to different people, to different points of view, to different ways of doing things. And if you're not, you're going to decline, you're going to become useless. You're going to become obsolete. And so you look at that. "Okay. That works that way."
[00:50:34] How about the division of labor by comparative advantage? Ricardo's law of comparative advantage, which is the practice of that is what started to take people out of poverty in the 18th century. Up until that it was totally top-down and there was virtually no progress in lifting people out of dire poverty. Then you take multiple intelligence theory, which is the same way. What does that tell you? That there are all these independent forms of intelligence. It means that no one is smart or dumb. We're all smart in some ways in dumb in others, and it varies. And so if you want to accomplish something, you need to figure what you're good at and then partner with people who are good at all the other things. And boy, I fit that to a T because my abilities are in a very narrow range. And there's a whole bunch of other things we need to be good at to do it.
[00:51:30] So I've succeeded when I've partnered with people who were good at everything else that needed to be done. And when I haven't, I've tried to do all myself or partnered with people who really weren't good or weren't contribution-motivated, I failed. So I've had that lesson and it kicks in the head enough times that I've absorbed it. I want to have partnered on everything I do, or I share vision and values and have complementary capabilities. And the thing I've learned about this, anything having to do with policy or politics is like a business, you need to have a vision for the business. In policy, we share the vision on this particular problem, whether that's criminal justice reform or poverty or addiction or whatever. And you may disagree with me on everything else but if you agree on that, we can work together on that.
[00:52:23] Brian Hooks: All of that from the second law of thermodynamics.
[00:52:25] Jordan Harbinger: Yeah, amazing. I only learned some science stuff when I learned that, but hey, look, it went right over my head. I was in 12th grade, so I wasn't really engaged.
[00:52:34] I read somewhere and I can't remember where it was. So if it's wrong, correct me here, but you don't necessarily consider yourself a libertarian anymore. And I think the quote was, "The government is critical, but there's much more to life than politics and policy." And I got to tell you, Charles, I probably could have told you that $44 billion ago.
[00:52:52] Charles Koch: Right. No, absolutely. No, I consider if I hate labels, but I'll use one that's closest and that is being a classical liberal. And you look up the definition of that. And that's someone who believes in equal rights and is open. And I described all the ways you need to be open. And so I'm a sponge. I'm trying to learn new things and new ways to apply them every day. Because why? Because what keeps me going and enthusiastic if I can find a way to contribute and I can see that makes people's lives better. Wow. That's exciting. I want to do more of that.
[00:53:30] It's what Maslow called synergy. That's the idea to be self-actualized. You need to have synergy and what he means is that the selfish and the unselfish converge where, when you do an unselfish act, it benefits you. And it doesn't need to be monetary. It just makes you feel better, which is after all what it's out, what's the purpose of having money is you can use it. So you feel better and I've never wanted more toys. I don't care about toys. I care about accomplishing something. Now, maybe that's hard for people to believe. But ask my kids and ask my wife.
[00:54:10] Jordan Harbinger: Well, you must have a pretty cool jet somewhere. Right?
[00:54:12] Charles Koch: Yeah. But that's a tool to help me accomplish things.
[00:54:16] Jordan Harbinger: I'm glad — thank you with that one I wasn't sure how that one was going to land.
[00:54:20] There's a principle of creative destruction that you mentioned where you're constantly replacing what you're doing with better systems and better products. And you gave a really interesting example of this on another podcast where you'd mentioned, you're not just competing on what's available today. I'm paraphrasing and I might wreck it here, but you're competing on what's available or going to be available in the future. So it has to be your job to explore what will be available in the future. Does this example make any sense to you? It was about IBM mainframes. Do you know what I'm talking about here?
[00:54:50] Charles Koch: Yeah, this is what Schumpeter — he wrote it, I think there was 42, that for business people, the ground is constantly crumbling beneath their feet. And if it was in 1942 with the rate of change today, I mean, it isn't crumbling, there are earthquakes, as we see what's happening to certain industries and certain businesses. Our philosophy for the company, for each business, each capability, each employee is — look, whatever you're doing, whatever your business units are doing, even if you're the best in the world, that isn't good enough. You have to creatively destroy that by finding a better way or maybe eliminating it. We don't need to do this step anymore because we have new technology or new methods that can bypass that and make it more efficient. And if you do that, "Oh, I might lose my job." No, if you can do that, we got a hundred other things. Go eliminate, go find a way to do it more efficiently, go find a way to apply this. It'll create more value for our customers. So that's our philosophy everywhere. And that's part of enabling each employee to self-actualize because when they find that and they're rewarded for it, man, they say, "I want to do more of that." So it's a mutual benefit.
[00:56:11] Jordan Harbinger: I know we're coming up on our time here, but what do you think is the biggest threat to America? The biggest threat to humanity right now? I know it's a broad question, but it is by design. Maybe the top three things that you think are really breathing down our neck here as a species.
[00:56:25] Charles Koch: Why don't you go first? I've been hogging.
[00:56:28] Brian Hooks: Well, you know, I think the one thing that we've learned. Or one of the big things that we've learned about 2020, right? Is that whatever we think is the challenge in front of us, we haven't seen anything yet. And so how do you address an increasingly sort of uncertain world where the pace of change has Charles said is dramatically increasing? I think the answer is that we've got to work, to empower everybody, to find the best way to contribute. I mean, the book is full of stories of Americans, both from the past and today who faced barriers that at the time looked like they were absolutely impossible to overcome. Sounds familiar right now, but the lessons that we learned from history and from so many of the people that we work with now is that there is going to be a solution, but we don't know where it's going to come from.
[00:57:21] And so as a society, if we want to address whatever the biggest challenges that's coming at us, we better be a whole lot more inclusive. And we better double down on this commitment to empower people, help them to realize their gifts because you never know who's going to be the next Frederick Douglass. Or who's going to be the next Einstein, right? And he's a patent clerk and all of a sudden, he revolutionizes the theory of physics. Or who's going to be the next Wright brothers? I mean that our history is littered with seemingly ordinary people, accomplishing extraordinary things in a way that benefits everyone. And a society if we can organize ourselves to empower people, to do that going forward, whatever the answer to that question is, whatever the biggest challenges we're going to find a way to overcome it.
[00:58:01] Jordan Harbinger: So do you think the sort of macro answer to that is unmet human potential? People in prison, people not getting educated right, people not being discovered for lack of a better word is probably the biggest one. It sounds like that's what you're saying.
[00:58:13] Brian Hooks: Oh yeah. I mean, imagine if we could bring all of that human capital onto the playing field, we could not just take what they're able to accomplish today, but really invest in them and see what's possible. You know, given that potential that's bottled up right now. And there's no telling what we could accomplish. That's for sure.
[00:58:28] Charles Koch: It's even worse than losing the contributions that all these people who are being held back, by the way, all these institutions work today by this top-down approach. This being held back and stifled causes them, as Maslow said, "By not realizing your potential, you become frustrated, you become negatively motivated," or what he called deficiency motivated. And so then you tend to be destructive and it may be just destructive to yourself by becoming addicted. It could be, you become destructive to others because you're frustrated and you're bitter. You may not even know why you're not able to fulfill your nature, your gifts. So you got to do something, so you lash out either yourself or others. So it's very poisonous to the whole economy, which is a big contributor to this whole two-tiered direction.
[00:59:26] Brian Hooks: So the book who puts forward a solution, right? Because we make this sound like it's just such a big deal, but it's never a single one of us doing what we can based on who we are to contribute. And if you add that up and actually, if you multiply that, that's ultimately how you breakthrough.
[00:59:40] Jordan Harbinger: Maslow is somebody you've mentioned several times. Is there a book that you recommend people really get into? Because most people know the hierarchy of needs, right? But we don't think, "Oh, negative versus positive motivation. That's something I should learn." Is there something we can link in the show notes where you say, "Hey, he explains all of it in this volume"?
[00:59:55] Charles Koch: I've read. I think all of his books, the one that's been most helpful, it was called Eupsychian Management. And so what does that mean? It was a thought experiment he did. He reviewed factories and how companies were managing, seeing what worked. And what he came up with from a psychologist is so similar to what I came up with, with market-based management. I mean, it was unbelievable, like synergy, which I mentioned, and now it's been reprinted as Maslow on Management and that talks about social change and he doesn't use the word social entrepreneurs, but that's what he's talking about.
[01:00:34] And he talks about people getting engaged to help improve society. And he said, one of the biggest obstacles as they say, "Well, I'm just one person. What can I do?" Well, he says, "That's all there is. We're all just one person. And if we knew to do nothing and let it go, we're going to have society deteriorate and it'll get worse for virtually everybody." So we need to get engaged and we need to get engaged with people who have different capabilities.
[01:01:06] Jordan Harbinger: Thank you very much. I know we ran out of time here and I like to use every minute of it. I think there's one question that everybody wants to know. Who's watching on YouTube. Most people are listening, but what's in the cup, Charles? What's in the cup? Light Water? Diet Dr. Pepper? What's in it?
[01:01:20] Brian Hooks: Yeah. Go tell them. Go tell them.
[01:01:21] Charles Koch: No, it's gin and tonic. No, I'm kidding. It's water.
[01:01:25] Jordan Harbinger: I was kind of hoping you loved like, you know, vanilla cherry Diet Coke or something like that.
[01:01:31] Charles Koch: No, I don't. That's too much sugar for me.
[01:01:34] Jordan Harbinger: Well, in the diet, there's no sugar, pro-tip.
[01:01:36] Charles Koch: Yeah. But then that stuff isn't that healthy either.
[01:01:39] Jordan Harbinger: Yeah, I can imagine it's a — be careful you might manufacture that and not even know it. You own a lot of companies. You got to be careful.
[01:01:45] Charles Koch: That's possible.
[01:01:48] Jordan Harbinger: Thank you so much. This has been really enlightening. There's a lot of questions I want to press for next time. Next year, I'll come down and we'll do it in-person.
[01:01:56] Charles Koch: That would be great.
[01:01:57] Jordan Harbinger: If it's possible to do that kind of thing. And I wish you luck with your book tour. And once again, thank you for your time and for your expertise.
[01:02:03] Charles Koch: Thank you.
[01:02:03] Brian Hooks: Thank you so much.
[01:02:04] Charles Koch: That was terrific. Great questions.
[01:02:09] Jordan Harbinger: I've got some thoughts on this one, but before I get into that, I wanted to give you a preview of one of my favorite stories from an earlier episode of the show. Megan Phelps-Roper, she used to belong to one of the most hateful religious cults in America, the Westboro Baptist Church. She was born into this church and she later escaped. To hear her tell the story firsthand is really incredible.
[01:02:30] Megan Phelps-Roper: I started protesting when I was five years old. But even at that first picket, there was a sign that said, "Gays are Worthy of Death." So God hates fags is what Westboro's message that we became known for. We were the good guys and everyone outside the church was evil and going to hell. And we had the only message that would bring the world any hope. We had to go and warn people. These terrible things are happening. And if you want this pain to stop, then you have to change because God isn't going to change.
[01:02:58] After the September 11 attacks, we had a sign that said, "Thank God for September 11." What were we thinking? This massive crowd comes down. We were at the corner of this intersection of these three streets. By the time they actually reach us, we're just enraged. There was no space between us and them. And it got really dicey. One of my cousins gave his science to somebody else and started standing on top of a trash can pretending like he wasn't with us. They were again, incredibly intense because obviously, the circumstances are so sobering. It brings me incredible sadness to think about now. I can't do this forever.
[01:03:35] My family, they would refuse to have any contact with me at all once I left. Somebody that we had confided in, sent a letter to my parents, and told them that we were planning to leave. And then that email came in and we left.
[01:03:51] Jordan Harbinger: For more with Megan, including the details of her harrowing experience and escape check out episode 302 of The Jordan Harbinger Show.
[01:04:02] So this is a beast of an episode, right? There's a lot I'm going to get to here, but the key point that Charles and Brian want to communicate is that we should be empowering people so they can transform themselves. And I think we can agree on that. There's a letter from his dad that he got when he was younger and inherited Koch Industries. And one of the takeaways from that was don't take counsel of your fears. I meant to include that in the conversation, but time got ahead of us as it always does. And I thought that was worth sharing. Don't take counsel of your fears. I love that. I think I could print that out and put that on my own wall.
[01:04:31] Charles is fond of saying, "Learn all you can, you never know when it'll come in handy." And again, I do admire somebody who's 85 and still plowing through books, still learning all they can and trying to get their input in the world and make their mark. In our sort of off-the-record on background conversation that we had before the show, I learned a lot about Charles Koch and Koch Industries. Namely, there are no limits on incentive pay at Koch Industries. You can actually make more than your boss if you add more value. One of the ideas behind that is incentivizing people to help others so that they actually will. And that the whole is greater than the sum of its parts. It's a virtuous cycle of mutual benefit, and there's a whole document that he sent me that I think I'm going to get permission to share. So that'll be linked in the show notes as well.
[01:05:12] We also talked about the concept of preference falsification. People are reluctant to speak up if they think few people agree with them. This is especially pertinent in today's politics. It really does inhibit progress here in the country. Many Americans actually agree on many things on both sides of the aisle, and it explains why the polls were wrong about Trump as well. People don't want to tell anyone they're voting for somebody like him, because they don't want to deal with the blowback and the drama resulting from that night. Candidly, I understand that. Who wants to sign up for a bunch of grief from other people?
[01:05:43] Some of the other interesting concepts that we discussed on background, when Charles comes up with a new idea, he will find the top three to five drivers of success for that idea. Then he finds the top five people who are experts in each of those drivers. And he expects them to find the problems and the places where those drivers can go wrong and to kind of red team, the whole idea itself. I love this. It's like come up with an idea, find the top three factors, three drivers of success, then find the top five experts in each of them, get everyone in a room and figure it out, how it can work or why it's impossible. I think that's brilliant. I think that's a great idea and probably worth doing for most big ideas.
[01:06:22] One of the reasons Koch Industries can focus long-term by the way is because they're privately held. It's not a public corporation, so they're not accountable to shareholders. They can plan and simmer and even lose money for years if they want it to, waiting for and building opportunities. And this allows them to out-compete other businesses by simply extending the timeline. Long-term thinking is in dangerously short supply here in America. And I love the idea of being able to out-compete someone by simply extending the timeline. I do that in areas of my own business that I won't get into now, but I love the idea of being able to outlast the competition.
[01:06:57] In fact, I recently ended a lawsuit that many of you knew about. And one of the ways I did this was I simply was able to generate enough money and do a lot of my own legal work. So the other side simply got tired enough that they were sick of paying six-figure legal bills when I was paying, you know, single-digit thousand dollar bills every single month. The biggest advantage I had was that I had all the time in the world and I was able to create more runway faster than the competition.
[01:07:23] Some other thoughts I had here, Koch Industries has lobbied a lot in the past to get lower or get rid of environmental regulations and limit things like the EPA. Now, I'm all for getting rid of excess regulation, but the cost of protecting the environment is borne by everyone. And that's why I asked about that for those who are wondering. They paid hundreds of millions of dollars in fines in the '90s for polluting. I'm not going to do this episode without throwing that in there. Look, I had a great time talking with these guys, but I don't want anybody to think that I'm ignoring that. That's why I asked him if he saw pollution by companies as problematic in the United States, or if he saw environmental regulations more as a hurdle or an obstruction to doing business. And that's why I also asked about the idea that this might be an externality that's being forced on the public. Now, that's a whole show in itself, but at least we got to touch on it.
[01:08:10] He recommended a couple of books, one, which is Kaufman's book Transcend. We will link to that in the show notes. We will also link to Stand Together. It's an organization that tries to unite people behind policies instead of parties. Nationalism and party politics are the wrong answer to the right question. And we want to attack problems and not people. And I strongly agree with that, especially right now in this country. I do believe that when institutions are performing properly, they empower people. And when they are not performing properly, they create barriers that inhibit people's potential. There's a lot more I could say about this. I really hope you did enjoy the show. I also strongly believe in the bottom-up philosophy. That's why I stopped working for corporate finance and started educating people through this podcast that you're listening to right now and other initiatives. It's just a better and more powerful way to unite people and help ensure brighter futures for the country and everyone in it.
[01:09:02] Again, thank you for listening. Links in the show notes. Please do use the links on the website. If you buy anything from our guests here, it does help support the show. Worksheets for the episode or in the show notes. Transcripts for the episode are in the show notes. There's a video of this interview going up on our YouTube channel at jordanharbinger.com/youtube. I'm at @JordanHarbinger on both Twitter and Instagram or you can just hit me on LinkedIn.
[01:09:23] I'm teaching you how to connect with great people and manage relationships, using systems and tiny habits over at our Six-Minute Networking course, that's totally free. It's over at jordanharbinger.com/course. Make sure you're digging the well before you get thirsty.
[01:09:36] This show is created in association with PodcastOne. My amazing team includes Jen Harbinger, Jase Sanderson, Robert Fogarty, Ian Baird, Millie Ocampo, Josh Ballard, and Gabe Mizrahi. Remember, we rise by lifting others. The fee for the show is that you share it with friends when you find something useful or interesting. If you know somebody who's interested in this sort of top-down libertarian thinking business, or just wants to hear from a billionaire, share this episode with them. Hopefully, you find something great in every episode of this show, please do share the show with those you care about. In the meantime, do your best to apply what you hear on the show, so you can live what you listen, and we'll see you next time.
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