Lunch with the FT: Charles Koch

Eleven o’clock is not my definition of lunchtime but that is when Charles Koch makes his daily descent to Café Koch, the staff canteen in the headquarters of his multi-billion-dollar industrial empire in Wichita, Kansas, so that is when I find myself queueing up for a square polystyrene box containing one of the day’s specials.

Koch may run the second-largest private company in the US, with interests spanning oil refining, chemicals, electronics and consumer products, and have used his $43bn fortune to become one of the most potent power-brokers in the Republican party, but he is not one for long, lavish lunches. “I don’t ever go out,” he says, explaining how his routine has been designed with maximum efficiency in mind, something that has been even more important recently because the 80-year-old is recovering from foot surgery that has made getting around more time-consuming.

We had been chatting amiably in the elevator down from his office about his wife’s “Nurse Ratched” attitude to helping him in and out of the shower with his foot in a cast when, suddenly, on hitting the canteen, he was off, speeding to the counter at a rate quite startling for a man using a walking frame.

“It gets real crowded and I don’t like to waste a minute,” he says, when we are back in sync. “I’ve got a lot to do, so I come down right at the start. Either there’s no line, or I will go to the least occupied line. That’s how I am about everything. For example, it takes me eight minutes to get to work and I play books on tape in those eight minutes because there’s so much to learn and so little time. So, you see what a nerd I am.”

“Nerd” may not be a word that springs to many people’s minds when they think of Charles Koch. There’s nothing threatening about a nerd. Not that there is anything obviously threatening about a grandfather in Midwestern business-casual, sitting down to eat a pulled-pork sandwich out of a box. But this is the point. Koch would like us to get to know him. Or, more accurately, he has been persuaded that staying silent is counterproductive both politically and, increasingly, for his business.

Koch Industries is a corporation with $115bn in annual revenues built on the back of transporting and refining crude oil, and its drive to limit environmental regulation and disrupt policies aimed at dealing with global warming is widely seen as self-serving. Koch’s absolutist free-market ideology runs deep, however: he insists he is just as opposed to “corporate welfare” for Koch Industries as he is for others.

At his annual performance review — everyone at the company gets a grilling to discuss how much value they have created; the boss included — Koch agreed that he ought to be more public. “I was told I needed to get out and present who we are and what we stand for,” he says.

“We’re being attacked every day by blogs, other newspapers, media, people in government, and they were totally perverting what we do and why we do it. We have had other people answering it,” he says of the criticism, “but I’m the evil guy, so I need to come out and show who I am, like it or not.”

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“Café Koch was rated in the top 10 restaurants in Wichita, by the Wichita Business Journal. I’m not kidding,” Koch declares as we sit down.

Indeed, he is not. The reviewer gushed that locals should suck up to any Koch Industries employees they know and beg for an invite. Not that it is very easy to gain access: the Koch Industries campus has just installed security gates for fear of protesters or worse; and visitors must now scan an emailed QR code to gain entry. Koch himself says he has received death threats. He adds that the criticism “goes with the territory”.

We’re being attacked every day by blogs, media, people in government, and they were totally perverting what we do and why we do it

While Charles and his younger sibling, David, feature as boo-hiss villains in Democratic candidate speeches, their activities concern those of all political hues who fear the unchecked power of private wealth to influence the US electoral system. The Koch brothers have pushed for and used new freedoms such as those opened up by the 2010 Citizens United Supreme Court decision, which removed limits on corporate political spending, to fundraise at large scale and in relative obscurity. Their network of organisations — a panoply of think tanks, campaign groups, voter registration and opposition research arms as well as political action committees — employs 1,200 people in 107 offices nationwide, about three and a half times the current staff of the Republican National Committee, according to an analysis by the politics news outlet Politico.

Koch’s staff have told him they expect to marshal close to $900m from conservative donors. The money will be spent trying to influence this year’s elections in favour of rightwing ideas; around a third of it on directly funding political campaigns against Democratic candidates.

With the field crowded and voting still a way off, Koch has declined several times to endorse a Republican primary candidate or even to provide much of a commentary on the race. But with a certain other billionaire businessman riding high in the polls, it is impossible to skirt the issue of The Donald.

I ask about the rhetorical turn the race has taken when it comes to dealing with Islamist terror, and about Trump’s assertion that the US could require all Muslims in the country to register with the government.

“Well, then you destroy our free society,” Koch says of the idea. “Who is it that said, ‘If you want to defend your liberty, the first thing you’ve got to do is defend the liberty of people you like the least’?”

He then expounds on the war on terror. “We have been doing this for a dozen years. We invaded Afghanistan. We invaded Iraq. Has that made us safer? Has that made the world safer? It seems like we’re more worried about it now than we were then, so we need to examine these strategies.”

It’s a view that also contrasts with that of another Republican frontrunner; Ted Cruz’s plan to carpet-bomb Isis strongholds is anathema to Koch. “I’ve studied revolutionaries a lot,” he says. “Mao said that the people are the sea in which the revolutionary swims. Not that we don’t need to defend ourselves and have better intelligence and all that, but how do we create an unfriendly sea for the terrorists in the Muslim communities? We haven’t done a good job of that.” With about 1.6bn Muslims worldwide “in country after country. What,” he asks, “are we going to do: go bomb each one of them?”

These particular views could almost have come from the mouth of Bernie Sanders, the socialist challenger to Hillary Clinton for the Democratic nomination and a regular basher of the Kochs.

Although Koch now calls himself a “classical liberal” — citing William Gladstone as a political hero for opposing Corn Law trade tariffs and political patronage in 19th-century Britain — today’s libertarian Republicans and leftish Democrats may find intriguing common causes. The Kochs have also financed efforts — to roll back harsh sentencing laws, reduce the US’s prison population (the highest in the world) and make it easier for felons to be reintegrated into society — more commonly associated with Democrats.

We dig into our food. I chose the tilapia over the catfish. Buried under a crust of mild spices, it may as well not be fish at all, but the whole is delicious. The accompanying broccoli is too mushy but the flavour has not been boiled away. The fries are cold and chewy. Koch describes his pulled-pork sandwich as “skimpy” but leaves his sweet potato fries almost untouched.

“Usually I have a little more but I need to stop eating as much because I can’t work out as much with a bad hoof here,” he says, pointing to his foot. “I still work out with my weights and then I do leg exercises, but I can’t put much weight on that. I have ankle weights so my legs don’t totally wither.”

Where the Kochs and the left are never likely to see eye to eye is on the environment. Over lunch, Koch positions himself not as a denier of climate change but rather as sceptical that it justifies drastic government intervention. “Over the past 135 years, the ground temperature has warmed — there’s some debate on this — around eight-tenths of a degree centigrade. In the atmosphere [the temperature change] has been slightly less, but not enough to argue much about. A big driver is most likely man-generated CO2, but what we see is that this increase is much less than has been projected. So, the indications are that the temperature isn’t as sensitive to increases in CO2 concentration as was thought. I don’t see the evidence that there’s an immediate catastrophe or even one in the future.”

The level of climate change, says Koch, does not justify penalising the use of cheap fossil fuels or subsidising alternative energy companies. Tax breaks and other incentives to use solar panels, he explains, cut the cost of energy for homeowners who can afford to install them, at the expense of higher bills for the rest.

“It’s the poor people subsidising the rich people, which is what happens with this corporate welfare everywhere.”

Through our conversation, there seems to be no issue to which smaller government, freer markets and unfettered competition is not the solution. “Our worst example in this country is the way we’ve treated Native Americans,” he says at one point. “A great portion of the property of the American Indians is held in trust by the Bureau of Indian Affairs. They are not allowed to control their own.” Citing the high rate of unemployment among Native Americans, he says, “This is what this whole philosophy of control and dependency does. How do you have a life of meaning? It’s hopeless. So, you’re, oh well, they’re a bunch of alcoholics.* Well, no kidding.”

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Koch’s latest book, Good Profit, is partly an attempt to show that competition and markets can be applied within a company, too. Under Koch Industries’ “market-based management”, employees are graded on how much value they create, while central functions such as human resources and accounting must compete for business in an internal market. The book has an undercurrent of disappointment that underlings have so much trouble implementing the ideas in practice, and I sense the same frustration that the world at large has not been seized by the obvious rightness of laissez-faire capitalism.

Is Koch’s monomania hereditary? His father, Fred, became a virulent anti-communist after his experience building refineries in the Soviet Union in the early days of his business career. He saw conspiracies everywhere and raged against the “crucifixion” of Senator Joe McCarthy. Of his four sons, only David and Charles have worked to exert the influence he also dreamt of having on the political climate.

Their brothers have largely channelled their fortunes elsewhere: Freddie, the eldest, into the arts, and Bill into a victorious America’s Cup effort. The legal feud between the two pairs of brothers — following a 1983 deal to buy Bill and Freddie out of the company for $1.1bn — is one of the most epic in business history; it was settled finally in 2001 on undisclosed terms.

It is not clear that Charles Koch’s two children — Elizabeth, a writer and publisher in New York, and Chase, an executive in the agricultural arm of Koch Industries — have any interest in taking up a political mantle, despite his efforts to school them as children.

“On Sunday evenings after dinner we’d go back in my library and I’d play tapes about Aristotle or Maslow or Milton Friedman or Hayek,” he says. “I’d only play it for 10 minutes and then we’d discuss it. Elizabeth was on to this stuff even back then but Chase wasn’t. He’d fall asleep in the middle but then, in the discussion, he couldn’t get away with that. It’s amazing the amount they absorbed.”

The company was nearly torn apart in the feud over the distribution of Fred Koch’s wealth, but Charles and David prevailed in keeping it together and investing in growing it. He hints that a similar arrangement might be achieved, less fractiously, in the next generation.

“As interest in a business is passed down, and more and more people have ownership who aren’t directly committed to building the business but more interested in taking money out of it, then you get in this syndrome of killing the goose that laid the golden egg. When my father died we could have liquidated and . . . no one would have a fraction of a thousandth of what they have today.

“If we had a thousand prominent stockholders, then it would be different,” he goes on, warming to his theme. “We’d have a problem. You need a way to keep narrowing that down and so we’ve done it in this next generation. It’s going to be up to them what they do for the next, so I can’t guarantee that. We have two little grandsons but I don’t know what they’ll be like. I think they’ll probably be wonderful, but I can’t guarantee it.”

Café Koch — brightly lit, spacious and boasting a huge TV wall at one end showing a half-dozen different news channels — is filling up as we come to the end of our meal. Partly because of the palaver involved in getting back in line, I make no suggestion of pudding and neither does Koch. He usually skips dessert anyway, he says, indulging instead with a chocolate bar later, after dinner.

An employee is summoned to help him back up to his office but, before we get up to go, I ask again about politics. He says he is “disappointed” by the current crop of Republican presidential candidates, and resigned to having to support one with whom he agrees on only some issues. “It is hard for me to get a high level of enthusiasm because the things I’m passionate about and I think this country urgently needs aren’t being addressed.”

The Kochs’ political machine has presented all the candidates with a list of issues it wants on the agenda but, says Koch, “it doesn’t seem to faze them much. You’d think we could have more influence.”

So does the man that the left believes has too much influence in politics believe he in fact has too little? “I’m pleased that I can still speak and I’m pleased that it isn’t worse,” he says. “They haven’t nationalised all the industries like happened in the UK when the Fabians took over.”

I ask him to put his businessman’s hat on and to tell me whether he thinks his political spending is generating a positive return on investment. “I’m not confident,” he says. “I’d say there are some benefits. Ask me in 10 years.”

Stephen Foley is the FT’s US investment correspondent

Illustration by James Ferguson

* In a comment about alcoholism among Native Americans, Mr Koch was referring to the views of others rather than his own. The quote has been amended.