Christopher Leonard's book Kochland is a remarkable piece of journalism that digs deep into the secretive lives of the Koch brothers. It's a corporate biography of Koch Industries — from its first busted union to its worldwide domination — and a biography of Charles Koch and a map of the labyrinthine political action organization founded by the Kochs. If you'd like to understand why we're in the mess that we're in, you can't really find a better guide than Kochland. It outlines the corporate and political abuses that created our modern world. I interviewed Leonard onstage at Town Hall early last month, coincidentally just a couple of weeks after David Koch died. What follows is an edited transcript of our conversation.
Thank you for writing this book. I really enjoyed it. It's a really interesting way of looking at a lot of the problems that are coming to a head in America right now. I’m very interested in how you decide you want to devote a whole book and the better part of a decade of your life to this subject.
The most important thing is not knowing what you're getting into at the beginning. I started in late 2011. I've been a business reporter for 20 years now, and at that time I had a lot of pretty profound concerns that were really bothering me — stuff I wanted to write about, stuff I wanted to do and explore. I had this a-ha moment that Koch Industries was the perfect canvas to paint on, through which I could explore all of these things. I realized early on that I could put my head in this for what I thought was going to be three years, because the company is so diversified and so widespread.
First of all, this corporation is enormous, right? It's gigantic. Its annual sales are bigger than that of Facebook, Goldman Sachs, and US Steel combined. But what really draws me to it is that this company specializes in the kinds of businesses we need to survive, but that we don't like directly interact with everyday. There's no Koch brand name on this stuff, but — not to sound hyperbolic — it is all around us. Koch makes the fuel we use to drive everywhere we go. They work on the pipeline systems and natural gas systems that deliver a lot of the electricity we use. They make the carpeting material and the synthetic fibers in our clothing. They make sensors in our phones. They make nitrogen fertilizer, which we don't think we buy, but it's literally the bedrock of our food system.
So the company’s hugely embedded in our entire economic system. And so what that means when you write about it is you're writing about blue-collar manufacturing workers on the factory floor, you're writing about high-flying finance, trading derivatives and commodities and the whole Wall Street thing that has become so important in America, you're writing about corporate lobbyists who are shaping our public policy—all within the framework of this one company.
One more thing that I didn't even realize at the beginning was the other thing that made this company such a great subject was the person at the very top, Charles Koch, who’s been literally the unquestionable authority over this organization for 50 years. Charles Koch became CEO when Lyndon Johnson was president. I don't know if any other CEO in America has had the job that long. He has this incredibly rigid, very extreme worldview — I think ‘extreme’ is an okay word to use. He'd probably use it himself. And he represents one extreme pole in this huge and bitter debate we're having in our country right now, about what role government can play. He believes we need to have this free-market utopian libertarian thing, and he spent his whole life trying to reshape America to be in that image. So it really crystallizes this debate we're having in the country.
Charles Koch is a private person, and writing about him must've been a challenge. Did that contribute to the time that the book took to write? Because you paint a pretty full portrait of somebody who is not a very open person.
Yeah, that definitely contributed to it. It was like crawling over glass — I'm not even going to lie. The company is privately held, so they don't have to disclose financial records or much of anything. And then they have a deep baked-in culture of secrecy. It's an extremely insular organization. That's where the word “Kochland” first came from. The first time I went, in 2013, I could drive right up to their headquarters. After that they renovated the campus, and part of the renovation was they added a 10-foot-tall wall around the north side. So the next time I went in, it was literally like entering a fortress. It was so telling about how insular and self-contained this place is. People don't want to talk about it and people don't want to talk about Charles Koch without his permission.
So, yes, it took years of flying to Wichita and knocking on people's doors. It took two years to convince one person to go on the record in the book. It took a lot longer than I thought. But, you know, as a reporter, that, to me. is really a story worth telling — it’s not the stuff that is publicly flaunted. I'm not saying that everything the public relations industry puts out there is not true, but we are so inundated with the story that people want to tell us: messaging, messaging, messaging all the time. It was really gratifying to tell a story that is being intentionally held secret.
And if I could add one quick thing to talk about the secrecy: It's not all nefarious James Bond villain-type secrecy. The book opens in 1981 when these bankers from Morgan Stanley fly to Wichita and they try to convince Charles Koch to take his company public. He would have gotten a $23 million bonus that night if he did it, which is like $60 million today. And he sent them packing. He turned them down flat. They couldn't believe it. There were a lot of reasons, but one of the things that caught my eye is he told these bankers, ‘if we go public, people are gonna learn how much money our commodities are making. And if they know how much money our traders are making, they're going to stop doing business with us.’ And that was so illuminating to me about why this company is so private and secretive. Their strategic DNA, and the way they make money, and the way they succeed, is by knowing more about the world than anybody else knows, and exploiting their knowledge and acting faster than other people can act. And when that's a strategy you have, you don't want people to know what you know and you don't want people to know what you're about to do. So yeah, the secrecy is deeply embedded in the whole culture.
Obviously the secrecy is his success as a businessman. But it seems like as much of a free marketeer as he is, as a libertarian, he seems like the kind of person who would be a big believer in shareholder value as a driving force for the free market. So it seems almost sort of hypocritical to me for him to keep his business private. Am I reading his libertarianism wrong?
He really is a big believer in shareholder value. And the thing is, there are two shareholders. David and Charles Koch owned 80 percent of this enterprise, and Charles Koch drilled into his people: ‘What you need to be thinking about is return on investment, return to shareholders’ — meaning David and Charles. He does believe in that.
And I'll tell you, you're pointing at a really interesting element of libertarianism, I think: when you hear the word libertarian, you think transparency, competition, markets, democracy, freedom, voting. But it's more complex than that. Charles Koch was born in a hyper-political family. His Dad, Fred Koch, was one of the cofounders of the John Birch Society, and that's a secret right-wing organization that believed the federal government was infiltrated by communists and that it a Trojan horse of tyranny.
That's the political conversation at the Koch dinner table, right? And so he’s got four sons that all seem to have absorbed that. But then Charles, as he grows older, he goes to college, he gets multiple engineering degrees from MIT. He’s a smart guy and he starts reading these Austrian economists like Ludwig von Mises and Hayek, and he starts thinking, ‘I have discovered the blueprint of how human societies ought to work.’ Or not just how they ought to work, but how they do actually work.
So Charles Koch believes in this very pure market system that can't be tampered with by government. That means it is wrong for voters to pass a program like Social Security that takes money from productive citizens like Charles Koch and gives it to unproductive citizens like Chris Leonard. because what you're doing is you're taking capital from the sources that generate it and you're giving it to non-generating forces. So the whole picture of libertarianism isn't quite as neat and pretty as everybody has the right to vote and everything needs to be transparent. I think the central thrust is markets need to be allowed to operate. Corporations need to be allowed to operate in an unfettered way.
David Koch wasn't the brains behind the operation, but he passed away a few weeks ago. That was obviously momentous. Could you talk a little bit about what you think that might mean for Kochland, for Koch Industries?
Okay. So we're here on a Friday night. I'm just going to be brutally honest with everybody: David Koch was not strategically important to Koch Industries or to the political network. As I mentioned, I flew to Wichita and was reporting on this for years, and I got these former people who built the Koch system to talk to me in their living rooms, in their basements, and we talked for hours. David Koch's name doesn't come up when you talk to these people. It really is all about Charles Koch.
There were four sons. Two of them leave the business in this huge contentious thing. And then David and Charles come to a truce. They split the shares 50/50. It was probably the most consequential decision David Koch ever made in his life — to hitch his wagon to Charles. And then David Koch went and lived the more public life. He went to New York City. He has his name on museum wings, he gives the speeches at Americans for Prosperity, their political group, he gives speeches at events. Charles Koch is the one who stayed back home in Wichita and just diligently, quietly, patiently built this massive corporate empire.
I guess all I would say is that David Koch's passing was super-sad for his loved ones and for his family, and yet it won't have a strategic or operational impact on the corporation or the political network.
This might sound like pop psychology, but I'm trying to get into where Charles Koch is coming from, here. When David Koch died, there was a fair amount of a celebration on Twitter from the left. And it caused me to wonder if Charles Koch realizes that people will do that when he dies eventually. I guess I'm wondering if Charles Koch thinks of what other people think of him. Is he aware of the fact that a lot of people in this room don't like him? And, does that matter?
He is aware that a lot of people in this room don't like him.
I mean, I'm making an assumption that people in this room don’t like him.
Let's make that assumption. Any room I talk in, that’s fair to say.
I'm not kidding: I think he feels sorry for people who dislike him. He is not a man plagued by self-doubt. He really thinks he has figured it out. I interviewed people who worked with them for decades — and I'm thinking of this guy, Brad Hall, who was a senior executive. He went to shake his head at me because I had these poisonous socialist ideas like that the New Deal was a good thing. He would just, say ‘God, Chris, they really poisoned your brain and elementary school.’
So I think within the system, inside Koch Industries, Charles Koch is seen as a hero. He stood up and put his head above the trash. He stuck his neck out. He tried to advocate for views and principles that the people in that organization really believe in. And he took flack and he took heat and he took attacks. And I will say, I talk a lot about that wall they built around campus as this kind of crazy metaphor for how insular they're becoming, but they face some intense death threats—vitriol, anger. It's a very real thing. But I don't think that it makes him doubt himself.
There are a lot of jaw-dropping sentences in this book, but there were, uh, three sentences in this book that floored me, so I'm just going to read the three sentences for you: 'When they were children, Bill Koch hit his twin brother David in the head with a polo mallet, leaving a permanent scar just behind David's ear. Later, Bill stabbed David Coke in the back with an African sword from their father's collection at the family compound, leaving another scar. David forgave his twin brother for both attacks.' So my question is: What the hell?
There were four Koch brothers and we mentioned the dad, Fred. Charles Koch describes his father in these euphemistic terms. He was larger-than-life, overbearing. The guy drove his sons intensely. He made them literally box with each other, fight with each other. And you saw very fierce competition between these brothers: you had Freddie Koch, who was the oldest, and he was just out from the beginning: ‘I don't want anything to do with this. You people are crazy. I'm out of here.’ He went to New York very early, never came back.
Then he had Charles, who dad sucked in to take over the business, basically. And then you had these twins, David and Bill. Bill was always just a walking psychotherapy session all the time — talking about how horrible his father was, how much he hates his brothers. He's been attacking his brothers since he was a kid. Those are anecdotes from David and Bill about the attacks, the physical attacks on David Koch.
Bill Koch waged a war against David and Charles for 20 years. He tried to get Charles fired. Bill tried to take over the company. He could never accept Charles’s authority. He sued them. He employed armies of lawyers. He employed detectives to dig through Charles Koch's trash. He employed people to pose as reporters. He tried to plant terrible stories about Charles in the press. There’s some deep, deep psychological stuff here.
And I think it comes back to a domineering father making the children compete. And I don’t want to get into pop psychology, either. Most of this book is about the decline of labor unions and things like that. But there's a scene at the end in which the question is: why does Charles Koch work so hard? He's 83, he still gets to the office before the sun comes up. How much money is enough? What drives this guy?
In my mind, an important scene at the end of the book is that you've got this bronze bust of Fred Koch outside Charles Koch's office. And every day when Charles Koch walks into the office, he walks past it. And now at the age of 83, Charles Koch has essentially surpassed his father in every field. His dad printed these old pamphlets; Charles Koch has one of the most influential political networks in the world. His dad built a business that was kind of a hodgepodge of businesses; Charles Koch unified it, blew it up, turned it into a corporate Goliath. I think that it’s incredibly significant that, that he has essentially surpassed as father. I think that was what drove a lot of the psychodrama that you just described as well.
So why didn't Koch Industries invest in alternative energy at some point rather than fight so hard to keep the fossil fuel industry in a stranglehold? At some point, doesn't it make better business sense to diversify and branch out into these up-and-coming fields?
No, no, no. And I've asked myself that question a lot. They are just sitting on all this cash. They have all this money. Why aren't they just pivoting into wind and solar?
So, momentum matters a lot. Charles Koch took over the company in 1967 when he was 33 years old, and the most important asset that he inherited was an enormous crude oil gathering system. Koch at the time was the largest gatherer of crude oil in the United States. Critically, they owned a huge stake in an oil refinery up in Minnesota, and Charles Koch’s first move as CEO was to purchase that entire refinery.
And it sounds silly to talk about one oil refinery, but this is the Pine Bend oil refinery in suburban Minneapolis. And it's amazing how much money you can make by owning one oil refinery. The economics of the oil refining business is astounding and crazy to me, and it’s such a big story about regulatory dysfunction in the United States — but let's leave that to the side for the second. He bought that oil refinery that generated billions in profits for them over the years. They buy another oil refinery. They own fossil fuel pipelines. They own natural gas pipelines. They own natural gas refineries.
So let's get up to the year 2009, when Barack Obama is president and a Democratic Congress is talking about regulating greenhouse gas emissions. What does that mean for a company like Koch that owns all of these massive actions? Well, here's what it means. The company has billions of dollars sunk into the physical infrastructure of our fossil fuel segment — the refineries, the pipelines, the shipping channels around the world where it's buying and selling leases for super tankers of oil. All of it.
That's some investment. There’s billions in this physical infrastructure. Then you've got to account against that: the flows of crude oil that will go through this infrastructure every year for the next decade, two decades, and three decades. That's a lot of money. A lot of money. Now let's think about what happens if we pass a law that caps greenhouse gas emissions, and demand for fossil fuels starts to go down and alternative sources of energy like solar and wind rise. All of a sudden the value of those assets you own is going to go down. The cost is truly in the trillions. You lose trillions by writing down the value of those assets and by losing that future revenue. There’s money on the table here that's difficult for normal people to conceive. And I think that that's one of the reasons why they have fought so vigorously to keep the fossil fuel system alive.
And I mean, they fight vigorously. They have fought to derail greenhouse gas emission rules for sure, but they have also fought on the state level, quite ingeniously I believe, to thwart renewable energy programs.
Koch Industries is out here today and spending a lot of money on political ads and think tanks. When it comes to renewable energies, they say this is crony capitalism. The corrupt Obama wants to steer money to these inefficient industries like solar and wind. Meanwhile, they celebrate the story of fracking, of fractionated drilling, that has given us all these natural gas crude oil supplies.
There's a chapter in the book that blows my mind about how Koch got in front of the fracking revolution down in Texas. It’s just amazing. They built a pipeline superhighway to take all this new fracked crude oil from Texas to a refinery. Fracking was a ward of the state for decades — Fracking only happened because the federal government gave billions in tax subsidies. It funded the basic research to figure out the technology to frack over decades. It funded university centers to figure out how to frack, and how to make fracking cheaper. And then the private sector people came in on the very tail end of that and kind of commercialized it.
So we didn't hear these terrible complaints about crony capitalism and industrial policy for all those decades. But now that we're trying to generate for the first time actual competition — actual real competition in the energy sector — in other words, giving fossil fuels a competitor? They're working to quash that effort all around the country.