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TYLER COWEN: Hello, everyone, and welcome back to Conversations with Tyler.
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Today I’m chatting with Chase Koch.
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He is the lead guitarist of a band known as 2ŁØT.
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He plays major roles in Koch Disruptive Technologies and the foundation Stand Together.
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He and his father, Charles Koch, have a new book out, which I was happy to blurb.
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It is called Becoming a Principle-Driven Leader: 41 Principles to Build an Enduring Business. Chase, welcome.
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CHASE KOCH: Thanks for having me on, Tyler. It’s an honor.
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COWEN: Now, early on in the book, you tell a story of you being 10 and your father lecturing you about Hayek, Maslow, Schumpeter, Aristotle, and others.
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You’ve absorbed a lot of those lectures, but what was it from those lectures that did not stick with you?
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You either rejected it or you’ve still been ignoring it.
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KOCH: Yes, I definitely rejected it when I was 10 years old, I think like most 10-year-olds would.
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It was more than a lecture, just to put people in the room with me and my father and my sister.
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These were Sunday philosophy lessons, sometimes economics lessons.
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They were actually books on tape that he would play, whether it was Milton Friedman, or Hayek, or choose your philosopher.
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Every 10 minutes, he would stop the tape and then quiz us with questions to see if we were paying attention.
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My sister Elizabeth, she knew the answer. She was right in there.
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I was usually either half asleep or not paying attention.
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It wasn’t really until later on in life, call it my late 20s, that the principles really hit me.
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All the things that he’d been trying to teach me hit me at a visceral level.
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It was from me experiencing them myself.
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I’ll give you just one example when these principles really came to life for me.
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I was running our fertilizer international business, and we were trying to expand all over the world.
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Brazil was one of the most important import markets.
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We had a large trading business, and I was trying to expand it.
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We were opening up a new terminal to bring nitrogen fertilizers in with large ships and break bulk 30,000 tons to get to farmers.
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There was a new high-speed conveyor belt and a storage terminal and everything.
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The bureaucracy, the red tape, even the corruption that I, as a young business leader, felt, and what we thought would take under a year to build and get in market, took us over five.
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Just feeling that, I was like, “Ah, this is what my father has been telling me since I was 10 years old.
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We don’t want our country to go down this path.
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Protectionism, not thinking about things from a mutual benefit lens, barriers in business, holding people back.
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” All the things that he was teaching me came flooding to the front of my brain, and I was like, “I got it.
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” That was just one of many examples on why I became so passionate about the principles that my father was trying to teach me since I was a little kid.
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COWEN: There must be something from those books on tape that you absorbed the least.
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Do you wake up in the morning and say, “Ah, today, still, A does equal A.
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Dad was right about Aristotle,” or did that just still like, “Ah, I don’t need this so much. I know A equals A.
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” KOCH: It’s interesting, Tyler.
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I would say, he looks at everything through the lens of principles.
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Ever since I was a kid, whether it’s how he raised Elizabeth and raised me, how he treats my mother, how he does business, the things he’s trying to change in our country with all of our efforts and Stand Together to help people improve their lives, those principles, I’m 100 percent aligned on with him.
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There’s not something I could sit here and tell you, “I’m just so polar opposite my father on that.
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” What I will tell you is how I express them is different.
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He also taught me this, the principle of comparative advantage, which I think, of the 41 principles in the book, is maybe one of the most powerful.
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As you know, the principle of comparative advantage is really focusing on where—you can look at it from an individual standpoint.
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You can look at it on a country’s comparative advantage and what they make and produce and at what cost.
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Look at it from a personal level: What my comparative advantage is, is what is my gift.
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What is my superpower relative to everyone else on the team?
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If you look at it from a business standpoint, what I could be doing versus all my other alternatives, what I focus on.
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Also, whoever else is on the team trying to go build a business or achieve a vision, what I could be doing, relative to them and relative to their comparative advantages.
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My comparative advantage, compared to my father, is completely different.
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My father, his comparative advantage is abstract concepts, because he’d studied philosophy his entire life.
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He studied the philosophers that you mentioned, Hayek, von Mises, Milton Friedman.
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The list goes on and on, Joseph Schumpeter.
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He also studied Lenin and Marx and applied the scientific method to understand the opposite of what he believed, to refine his own views in terms of how to build a business, how the world works.
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My comparative advantage is more around that I’ve discovered over time through lots of failures, and I talk about this in the book.
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My comparative advantage is much different.
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I think I got more my mom’s comparative advantage around working with people and understanding people and understanding interpersonal skills and intrapersonal skills.
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What I’ve learned through a lot of failure is that focus on that, and don’t try to be something that you’re not.
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I think that’s where my father and I would diverge.
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We have the same principles, but we express them much differently in business and with the social change efforts that we have.
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COWEN: Other than your mom, dad, and sister, are there other relatives who influenced you earlier on? KOCH: Absolutely.
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I spent a lot of time with my Uncle David as well, who sadly passed in 2019.
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What he did for the company and just watching him in the boardroom and watching his leadership with my father to build a company that has grown 9,000-fold since the early ’60s.
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Watching his leadership there, that had a profound effect on me.
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Also, I’d say the stories of my grandfather.
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I never met my grandfather, but how my father has passed on what he learned from his father.
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A lot of this is in the book, but I’ll just share one little example with you.
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When my father and his older brother, Fred, were three months old, Fred Koch, my grandfather, wrote a letter that said something like this.
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It was the intent of when he passed away, they would open up this letter and read it. This was dated 1936.
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Three months after my father was born.
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It said something like this.
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“When I pass, you will inherit what seems to be a large sum of money.
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You can do one of two things with it.
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You can either squander it and live an unhappy life, or you can use it for good and apply yourself and apply your gifts and feel the glorious feeling of accomplishment.
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I know you won’t let me down.
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” That was kind of the message.
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A little bit of a guilt trip there for him, too.
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Obviously, that had a profound effect on my father because that’s the way he’s lived his life.
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He’s two doors down from me right now, almost 91 years old and still grinding it out because he wants to add value.
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He’s still co-CEO of Koch.
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People ask him all the time, “Why do you still do this?
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Why aren’t you laying on a beach somewhere?
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” He’s like, “What, do you want me to die? This is how I live.
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I want to feel that glorious feeling of accomplishment.
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” He’s passed that down to me.
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I wish I had met my grandfather.
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He passed before I was born.
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A lot of stories like that have really had a huge influence on me.
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COWEN: Now, you were a very good tennis player when you were young.
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Obviously, you have a good physique for that.
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Mentally, what do you think it is that made you so good?
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KOCH: I don’t have a good physique anymore.
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I had shoulder surgery, so I’m not playing tennis anymore.
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I think my parents wanted both my sister and I to really apply ourselves.
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Whether it’s on the academic side or on the sports side, they said, “Really find your gift early in life.
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” I tried a lot of different sports, and I frankly sucked at most of them, but tennis was one of those things I had good eye-hand coordination.
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They were like, “That’s it.
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If you’re passionate about it, you need to really invest the time in it. ” I did.
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I became nationally ranked when I was 12 years old.
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I was top 100 in the country.
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By the time I was 15, 16, and I had all these new freedoms in my life, and later curfew and all that, I had no interest in continuing to invest in tennis.
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I wanted to party with my friends.
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That’s why I started throwing tennis matches.
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My mother came back and told my father, like, “This kid’s going off the rails.
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What are we going to do with him?
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” He pulled me into his room and said, “You either give 100 percent on the tennis court, or you’re going to get a job.
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You’re not going to be a country club bum.
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” I said, “Fine, get me a job.
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” Overnight, I went from being, frankly, a tennis country club rich kid to shoveling cow shit and digging post holes 12 hours later because he sent me to a feed yard.
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I always tell people, even though I really despised what he did at the time, that might have saved my life.
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Being in the position I was in with the resources that my family had, and going down the path of trying to feel what my grandfather said, is the glorious feeling of accomplishment, instead of going down the rich kid path that doesn’t apply themselves.
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COWEN: If we think of the three major tennis players of the previous generation, there’s Rafa, Federer, Novak, which of the three do you feel closest to in terms of either principles or maybe just aesthetics?
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Which of those— KOCH: Oh, man. Wow.
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COWEN: —three resonates with you? KOCH: What a question.
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I think I have a little bit of recency bias, Tyler, because I just watched the documentary last week, Rafa. Have you seen that?
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COWEN: No, but it’s on my list to watch. I’m keen to see it.
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KOCH: Oh, you’ve got to watch it.
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I think it brought tears to my eyes probably four or five different times because I grew up watching him.
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I like all of them for different reasons, but Rafa Nadal, just his grit and what he overcame.
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I’m a little bit of a stoic at heart.
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I read all the stoic philosophy.
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I’m a big fan of Ryan Holiday.
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One of the books that had a huge influence on me was The Obstacle Is the Way.
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When you look at Rafa’s life and the injuries and the things that he had to fight through to become the best in the world, it’s just an incredible hero’s journey story.
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Also, what a gentleman he was as well, and how he treats other people.
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He’s not this guy that, because he’s number one in the world, he thinks he’s above everyone.
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The way he treated his girlfriend, his wife, the people around him, his coaches, other players, I think he’s a model for tennis.
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COWEN: Now, to go back in time, 1992, the Barcelona Olympics, you have a chance to meet and spend some time with the NBA members of the Dream Team, right? KOCH: Yes, that’s right.
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COWEN: Who is it you admired the most and why? KOCH: Oh, wow.
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Boy, you’re taking me back here.
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1992, I’ve never been on a trip like that.
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I’ve been to two or three different Olympics.
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Going when I was 14 years old, experiencing that three-week journey with my father, and we accidentally stayed at the same hotel as the ’92 Dream Team.
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I got to at least say hello to some of the players.
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I don’t know why my brain keeps going to Charles Barkley.
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COWEN: Because he’s so smart? He puts things so well? He speaks so well?
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KOCH: His courage to say it like it is.
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He wasn’t the best basketball player of all of them, but I always admire him.
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They called him the round mound of rebound. I remember that. He hated that nickname. I always liked him.
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I remember my father and I had an interaction with him on the elevator.
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My dad was like, “I’ve always admired you because you always tell it like it is.
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” He goes, “Well, you have to tell it like it is because the press is never going to let the truth get in the way of a good story.
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” Just seeing him now with Shaq and Kenny on their NBA show, there’s nothing better.
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COWEN: That’s a great show, isn’t it? KOCH: It’s incredible. I hope they keep going.
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COWEN: I’m not sure Shaq is always quite up to the discussion.
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KOCH: Yes, but there’s nothing better than the Shaq-Charles arguments, and they start going at it.
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That’s the best TV you can get, in my opinion.
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I’m a basketball guy, being from Kansas, being a basketball kid. I love that stuff.
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COWEN: Were you surprised by the Knicks winning the title this year? KOCH: I was. I’m friends with R. C.
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Buford, who’s the GM of the San Antonio Spurs, because he’s from Wichita originally.
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I’ve known him for decades.
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Of course, I want to support my friend. I like the Spurs.
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I thought they had more talent. I think they’re young.
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I think they have the culture.
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I think they have the organization and the team.
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They have the values and principles.
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I’ve compared a lot of notes with what R. C.
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did with Popovich over the years and how they won so many championships.
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They’re a culture-first organization.
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They don’t put up with prima donnas.
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That’s exactly how we think about talent at Koch, and how we’ve built one of the largest private companies in the country is through a differentiated talent model.
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Even though they lost this year, I think they are set up so well because of the youth of the team, but also just their overall mindset and their principle and values-driven approach.
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COWEN: Do they need to jettison Fox?
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He was, what, 3 for 15 in the final— KOCH: Oh, boy.
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COWEN: —game and made a lot of other mistakes. Can they even trade him? KOCH: Yes.
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I would say, is he willing to learn? That’d be my question.
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Just like we talk about in the book, all of our failures.
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I’ve had plenty of failures.
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My father’s had plenty of failures in business.
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Do you learn through values and principles to dig yourself out of the ditch, or do you just say, “Oh, I’m perfect, and I’m right, and there’s nothing I did that was wrong and it was someone else’s fault?
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” If that’s the case, yes, I would say they need to get rid of him.
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If he can learn from it, maybe he can be a great team player going forward.
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COWEN: In the world of music, are you happy with Spotify, or do you agree with the critics who think it sucked too much of the capital out of the sector?
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KOCH: Oh, wow, that’s a good question.
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With Spotify, I think the consumer captures all the value. I love it as a platform. It knows me.
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It knows what I like, what kind of music I like. It feeds me.
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It’s very user-friendly, but the artist doesn’t capture any value. I play in a band.
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We’re only three or four years old, but the checks that we get for something like 5 million listens over time, I put myself in other bands’ shoes, that that is their living.
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It’s hard to reconcile the value creation relative to the value capture.
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What it’s causing the industry to do and artists to do is figure out new methods of monetizing their talent and their value. They’ve got to tour.
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They’ve got to sell merch.
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They’ve got to associate themselves with brands.
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It’s just a totally different model disrupted by these DSPs, for sure.
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COWEN: As a boomer, I have the sense that from the years, say 1964 to 1973, music was very, very original. It changed every year.
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Often, you can tell what individual year a piece of music came from when you hear it.
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Now, I often hear pieces, and I don’t know if it came out yesterday or 20 years ago.
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Do you disagree with that impression?
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KOCH: I don’t disagree with it.
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I think that makes sense.
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I will say that given the technology that’s available, the perfect processing of a song that you listen to now and how every artist has that technology at their fingertips and they can record it at home now almost on a phone with high quality, I think that’s very different than listening to an old 1970s Led Zeppelin album, where you feel that you can tell that was in the studio and the grit of the song and the album.
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I think that’s different.
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I just think there’s been so much innovation in the space that there’s a good and a bad to it.
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I think anyone can sound polished and perfect with the technology that we have now, but sometimes you like that old grit of a song from Pink Floyd, or Led Zeppelin, or Grateful Dead, or whatever the band is.
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COWEN: You were age 13, and you heard the Pink Floyd album, The Wall, and it just floored you, right?
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Is there anything in music now that you think can do the same for today’s 13-year-olds?
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KOCH: Oh, boy, that’s a good question.
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It’s hard to put myself in a 13-year-old’s shoes.
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I have three kids, and my oldest just turned 14. I don’t know.
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All I can speak to is my own experience in that I hope kids find the music that transforms them because music is a feeling.
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What you’re talking about is my experience.
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I think I was 11 actually when my sister played Pink Floyd The Wall, and it was the David Gilmour guitar solo from “Comfortably Numb.
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” It hit me so viscerally that that was my hook into music and sunk its teeth into me, and I never let go.
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Music isn’t for everyone, but whether it’s art or reading or dancing, I’d encourage anyone to find that thing because while we all have our work and we all have what we’re doing, I think everyone needs that one thing to help them self-actualize and live the happiest life possible.
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For me, music has done that not only because I love it and just experiencing it and going to a live show, but what I’ve learned from going to so many concerts from so many different bands and even DJs over the years is the power of music to unify people.
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It’s the common language that we all have globally.
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Frankly, that’s why I founded Stand Together Music by basically leveraging the power of music to unify people, and then our Stand Together platform that works on issues like poverty, criminal justice, mental health, transforming education.
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The power of music and artists that have really big followings that want to get engaged but don’t have a way to really drive change.
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That’s where we come alongside them and help them push the easy button because we have that platform.
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I know that wasn’t your original question, but that’s what excites me the most about music and why music is a huge part of my life.
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Not only, yes, I play in a band, but we can drive change with it, too. It’s very exciting.
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COWEN: “Money” was the song on that album that really grabbed me when I was about 12.
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I heard that I thought, “Wow, I’ve never heard anything like this before.
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” Now, this summer, you followed around Dave Matthews Band.
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What did you learn from them?
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KOCH: Well, I didn’t really follow them around.
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I would say it was the jam band community more broadly.
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I loved Phish, Widespread Panic, String Cheese Incident.
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There was some Dave Matthews in there as well.
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I think it’s the fact that you go to the shows with a jam band—Grateful Dead, they’re the ones that pioneered this, right?
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You have no idea what you’re going to get.
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The element of surprise at a live show.
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I didn’t really always listen to them on the radio.
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I didn’t buy them for their albums.
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It was more of the community aspect of it and the fact that everyone was there because they didn’t know what they were going to get, and these fabulous musicians were going to put on a great show.
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Then the friendships that come from that community, that I still have long-term friendships from back in my early ’20s that we all get together.
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Back to where I was saying before the power of music to unify people, that’s what the jam band community does.
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That’s why I still love it. COWEN: N. W. A. , are they good? I like them. KOCH: I had my phases.
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My first business, Tyler, was when I was 15 years old and one of my best friends to this day, Askia Ahmad, he was wiring up car stereos and building custom boom boxes and all that.
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We basically built a business out of my parents’ garage because they had all the tools and materials and everything.
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Like, “Let’s build a business out of here.
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My parents hopefully will pay for the machinery, and then we can sell these boom boxes to our friends at high prices and capture a big margin.
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” Through that, I learned about the whole gangster rap.
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Your listeners may be surprised, but it started with me, Public Enemy, N. W. A.
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, Eazy-E, of course— COWEN: It’s so good. KOCH: Dre. COWEN: Snoop. KOCH: Snoop.
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COWEN: You know Snoop, right?
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KOCH: It’s so good, so good. Yes.
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COWEN: What’s Snoop like? KOCH: Snoop? Okay.
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This goes back to what I was mentioning on the power of music to unify people.
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So I’ve been with Stand Together.
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For the listeners that don’t know, it’ll give context to your question.
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Stand Together is an organization that has really a community of like-minded leaders that all believe in one thing, in the power of human potential, and that every human has a gift.
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We all know that there’s so many barriers in society that are holding people back, whether it’s barriers in education, barriers in regulation, so you can’t start a business, barriers in our criminal justice system, you name it.
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What Stand Together does is we have basically a comprehensive strategy that addresses everything from education to policy to bottom-up empowerment in communities to drive real social change.
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I’ve been a part of this for as long as I can remember.
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My father’s been working on social change for 60 years, and now I’m in a position where I’m co-chairing it with him.
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My passion for music, as you can see from your last line of questioning, with Stand Together and that whole community, we never tapped into culture.
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When I say culture and what the next generation pays attention to—sports, music, YouTube, entertainment, creators, media.
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During COVID, I had this idea that we’ve never tapped into music to drive social change. Now is the time. Why?
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Because artists aren’t on tour. They want to help.
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Everyone’s going through this terrible pandemic.
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How can we leverage the power of music to help people?
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I founded this concept, Stand Together, Jam Together, where we got on Zoom and we got the whole Stand Together community all piling in.
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Everyone was in their homes, they couldn’t do anything.
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I got some of my friends that were artists to come on.
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It was Matt Sorum from Guns N’ Roses, Michael Kang from String Cheese Incident.
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We had some of the Blues Traveler guys.
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Then we had a few experiments.
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Then the third show, I had a friend, Pastor Omar Jahwar, that was very close with Snoop.
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Pastor Omar, we had worked with him on trying to disrupt gang violence through a group called Urban Specialists based in Dallas, Texas. He got Snoop on.
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I knew Snoop was big on criminal justice reform.
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This was right after all the George Floyd stuff happened.
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It was really a moment that people wanted to air things out and talk about the injustices of our criminal justice system.
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I had my father on the show interview Snoop Dogg on basically everything, the impact of the war on drugs and basically the criminal justice system, and how our approach is lock them up and throw away the key, don’t give people second chances.
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That was really how Stand Together Music was born, is through Stand Together, Jam Together, an online Zoom platform.
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All of a sudden, we realized, “Wow, we have something that artists want.
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They want the ability to drive social change and be able to push the easy button.
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” For Snoop, it was criminal justice.
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For Matt Sorum, it was addiction with The Phoenix and what we’re doing there.
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We’ve created a movement called One Million Strong, where we’ve had more than a million people that have transformed their lives with The Phoenix. Anyway, I could go on.
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I’m very passionate about this.
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It’s very exciting what we started with folks like Snoop and where it’s headed now.
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We have meaningful movements, great partners like Live Nation, AEG.
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We’re at all the festivals, Coachella, Stagecoach, the Breakaway festivals, where we’re getting to more people at scale through music with these ideas on how we help people.
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COWEN: For your own group, 2ŁØT, if I look on Spotify, the song “Come Together” is much more popular than the next most popular song. Why is that? Is it your best song?
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KOCH: If you asked the five bandmates, we’d all have a different answer to that. I loved that one.
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I helped co-produce that one, which was very exciting.
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It’s one of those, it’s hard to articulate.
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We have no idea when we put a song out, what’s going to hit and what’s not.
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I just think it’s in that electronic jam hybrid vibe that gets people dancing, but also has instrumentation to it.
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It’s got a little funk to it as well.
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It’s really a cross-genre one.
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The other one, I would say, that it ties to the principles and ties to the book is the song “Entropy. ” How do I say it?
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It’s album title song of our very first record that we put out two years ago, and 2ŁØT, you mentioned the band’s name.
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2 L-O-T is short for the second law of thermodynamics, which is the law of entropy.
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We put the band together because the band members were all going through something.
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We were all overcoming our own entropy.
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Our lead singer’s father had just passed away a few months before.
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Our drummer’s father, who I mentioned a minute ago, who is the founder of Urban Specialists, Omar II, we call him Two, his father passed away from COVID in his late ’40s.
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He was a close friend of mine.
30:28
Two’s father passed away, and I had just gone through a divorce.
30:38
We called it 2ŁØT because we were overcoming entropy in our own lives.
30:42
We said, “Can we build a band that has excellent music and is hybrid, soundscaping from EDM and jam band and all the influences from the band.
30:50
Then help other people overcome entropy in their own lives through the stories of a song like ‘Entropy’ that’s on our first record?
30:56
” Also, when we have the stage, we can showcase groups like The Phoenix with the platform that we have and help drive awareness to organizations like that.
31:10
It’s been a really fun project with those guys.
31:16
COWEN: Some of your song titles, like “Masquerade” or “I Hurt Myself Again,” they seem to reflect some inner sense of vulnerability that to me comes through in the music as well.
31:25
That’s quite interesting. KOCH: Oh, thank you. COWEN: Yes. KOCH: Thank you, Tyler. Thank you.
31:28
The music’s only good if you’re really speaking from the heart on it. The listeners get it.
31:33
They know when you’re faking it, or you’re just trying to copy something else.
31:38
We’re just trying to make the most authentic stuff we can.
31:42
COWEN: Which musical genre do you feel, if you had to say, is the most either classical liberal or libertarian or in accord with your principles?
31:48
Some people say Country and Western. Do you have a view?
31:54
Can you even generalize in that way?
31:59
KOCH: Oh, that’s such an interesting question.
31:59
I don’t think it’s one genre.
31:59
Again, 2ŁØT and the guys that we’ve pulled together, we all have different backgrounds. Two is from funk, pop.
32:12
He grew up playing drums in the church.
32:12
He was Chance the Rapper’s drummer for a bit when he was 18 years old, so he’s got rap influence.
32:16
Our bassist has influence from funk and R&B.
32:24
Our lead singer, the same. He can play any genre.
32:24
Our pianist, synthesizer player, Sage, has jazz background.
32:34
I come from the jam band community.
32:34
Literally, almost every genre is represented.
32:39
I think the magic is where it all meets. COWEN: That’s great.
32:45
What is MrBeast like, and what are his principles?
32:49
KOCH: That’s a great question.
32:49
Just to give your audience context, back to our approach with Stand Together and really trying to help people drive change by really tapping into culture, there’s no bigger culture carrier or influencer than MrBeast.
33:08
He’s the number one YouTuber in the world.
33:15
I think he just hit half a billion subscribers.
33:15
That was on YouTube, but if you look at it across everything, he’s more than a billion now.
33:23
It’s hard to even wrap your head around.
33:29
The reason that I developed a relationship with Jimmy is because of our values alignment.
33:36
One of the principles that we talk about in the book, Tyler, is preferred partnerships.
33:36
We believe that a preferred partnership, three things have to be present, for a long-term mutually beneficial partnership, this applies to everything in life, whether it’s your spouse, whether it’s a supplier, a customer, a social change partner, this applies to everyone and everything.
33:57
You have to have an aligned vision with where you’re going with that partnership, a clear North Star.
34:08
Number two, you got to have aligned values.
34:08
How you capture opportunities, how you solve problems, can you work together, can you engage in a challenge process to get to a better answer.
34:17
Humility, respect, integrity, all these principles, that’s number two.
34:22
Number three is complementary capabilities.
34:22
Both parties bring something very unique to the table and different to the table because when that happens, you have real synergy.
34:33
That’s what makes it a sticky partnership and long term.
34:38
With that context, that is what our partnership with Jimmy Donaldson and his team has been.
34:38
We started by experimenting on some videos because his whole thing is making kindness go viral.
34:53
That’s where he started with basically helping other people and demonstrating to his followers that it’s cool to go out and help people that are in need.
34:58
You can do that in a million different ways.
35:05
That’s the spirit of Stand Together as well, is that all we’re trying to do is help people remove barriers in their lives.
35:12
There’s so many different barriers across all of our institutions.
35:19
A partnership with Jimmy, he sees what we have with the Stand Together platform. We see what he has.
35:24
We’re aligned on vision, aligned on values.
35:24
When you combine those two platforms with messaging and helping kids understand these principles, we think we can really drive some meaningful change. He’s a great human.
35:36
I was with him two weekends ago while he was filming the third Beast Games for Amazon, just to see what he does and how he does it is really remarkable.
35:52
COWEN: Some basic questions about Koch Industries and also Koch Disruptive Technologies.
35:52
At this point, roughly what percentage of the business is still energy-related?
36:03
KOCH: I’m glad you asked that question because it’s a misperception.
36:03
I think part of that is because Koch is private.
36:09
We’ve always been private, and we plan to stay private.
36:09
Koch is not an old industrial company anymore. We’re a tech company.
36:16
We’ve invested, over the last, I would say, close to 10 years, $50 billion in tech.
36:26
That’s through companies like Infor, which is ERP software that we acquired over time that brought on more than 30,000 software engineers to help the rest of Koch really think about technology through a different lens.
36:47
Molex was also a game-changer for us.
36:47
Molex makes connectors, whether it’s your iPhone, medical devices, what lights up this room, data centers.
36:56
I think that was 2013 that we acquired Molex.
37:08
That was basically getting us into this IoT world where everything was starting to be connected.
37:14
You could create so much more value if you could get data off machines, and products, and plants, and processes.
37:19
When we acquired that, it transformed our knowledge around what you could do with data, but you need the hardware to make that work too.
37:34
The first thing I would say is that Koch’s a tech company now.
37:34
For those, even old industrial companies that aren’t transforming themselves with technology, they’re going to be dinosaurs really quick.
37:43
That’s the principle of creative destruction from Joseph Schumpeter. We believe it. We live it.
37:50
It’s not perfect, but we try to inspire that principle in all 130,000 employees in 60 countries.
37:58
Creatively destroy what has made us successful in the past and make it better every day, whether it’s your individual job and what you focus on or experimenting with new technologies.
38:15
Back to your question on energy, 4 percent of the overall capital consumed at Koch is in refining, which is basically where my grandfather started the company.
38:23
I think that surprises a lot of people because I think a lot of people are still stuck in this, “Well, you’re this energy company. ” No, we’re not.
38:30
We touch the majority of the economy now, and we’re in everything from forest products, consumer products, software, as I described, glass manufacturing, to energy and fertilizers as well.
38:46
COWEN: What have you learned from Marc Andreessen, speaking of partnerships? KOCH: Marc is amazing.
38:49
I remember when I started Koch Disruptive Technologies, that was in 2017.
39:02
Marc was one of my first mentors.
39:02
I had actually fired myself from being CEO of Koch Fertilizer because I’d spent 10 years in that business, and I had so many great opportunities and different roles, I got to the point where my boss at the time had said, “You’re ready, you need to be CEO, I’m moving on to a different role.
39:24
” I realized that being a CEO operating in 30 countries and 5,000, 6,000 employees, it wasn’t my comparative advantage, back to that key principle that we described earlier.
39:38
Where my heart was, was in technology and innovation.
39:38
I wanted to work on the next thing, not optimizing and operating the existing business.
39:53
That’s when I had the idea of building Koch Disruptive Technologies from scratch and getting us in the tech game like we’d never been in before, and invest in technologies that were very early.
40:05
Koch could look around corners and do a more effective job of driving creative destruction.
40:10
Marc, back to your point, was one of those key mentors.
40:10
He was one of the first people I sat down with in Silicon Valley.
40:16
We had had a prior relationship with him, but I hadn’t really spent a lot of time with him.
40:22
I spent an hour with him just walking through all his learnings and how he built Andreessen Horowitz.
40:33
One of the smartest guys in the game, results speak for themselves.
40:33
Just how he looks at technology and how he thinks about betting on founders and the values alignment, and what he sees in the pattern analysis, given all of his history, to make the right decision based on the quality of the founder.
40:51
Learned a lot and I modeled a lot with KDT after what I learned from Marc, and I would say from Ben as well, and become friends with them both.
41:04
COWEN: Do you think the principles of market-based management work especially well in the Midwest and Canada, or is it completely culturally neutral?
41:13
KOCH: There’s a reason we stayed in Wichita, Kansas, in the Midwest.
41:19
COWEN: How would you articulate that reason?
41:22
KOCH: I would say talent and values.
41:22
I call it access to the farm team.
41:22
This is our whole talent vision for Koch.
41:32
Now, case in point, we operate, as I mentioned, in 60 countries, and I believe we’re in all 50 states.
41:39
I would say how we deliberately think about talent, it’s we want to hire kids that are contribution motivated.
41:47
I think too often you see in our culture that you have people, or in kids that are more deficiency motivated, if not destructively motivated.
42:06
There’s a continuum there.
42:06
Contribution motivated all the way to destructively motivated.
42:12
On the contribution motivated side, take the positive.
42:18
The reason why I say we want to hire the farm team is kids, whether they grew up on a farm or not, that doesn’t matter, but it’s the mindset.
42:24
The mindset of grit and work ethic, and wanting to come in and make a contribution, as opposed to deficiency motivated where you come in with a victim mindset or you come in with a mindset of, “I went to this fancy school. Look at my resume. I had a 4.
42:44
0, and I’m entitled to some role, some title, and some salary,” when you haven’t earned it yet.
42:54
We want the contribution-motivated kids.
42:54
Let me give you one example, Tyler.
43:01
We have our CIO today at Koch, over all of Koch Inc. , has no college degree.
43:01
His first access to Koch was stripping lines in the parking lot.
43:12
He just wanted to get in the building.
43:21
This was back when we were way more stringent and way more process-driven on talent, which was the wrong way to approach it, just based on resumes and GPA 20-plus years ago.
43:29
Somehow, he found a way in Koch.
43:36
He proved himself that he knew a lot about technology.
43:36
He was helping us a lot with data science in the early days.
43:43
Then he saw the cyber wave coming and all the cyber risk that Koch had, and all the attacks we were getting, and he built a capability around that.
43:55
He became CISO, head of our cybersecurity capability, built that, and then a number of different roles, but is now CIO of Koch. No college degree.
44:03
His name is Jarrod Benson.
44:03
Jarrod is, I’d say, that’s what we want.
44:12
We want someone that’s come in and wants their role so badly, and they come in with fire in their belly, just wanting to make a contribution. Look where he is today.
44:22
COWEN: How has Wichita most changed since you grew up there?
44:27
KOCH: That’s interesting. It keeps growing.
44:27
There’s more and more businesses here.
44:37
There’s something in the water here, Tyler.
44:37
I think it ties back to access to the farm team and values.
44:42
There’s so many principled entrepreneurs here, and so many great businesses have been built in Wichita.
44:47
What I would say how it’s changed is that the people have stayed the same and the value system has stayed the same.
44:55
I have so many friends that left.
45:01
They went to college, or they wanted to go to the big city.
45:07
Almost all of them have come back, and it’s for the same reason that I described.
45:12
How it’s going to change, I have a specific project I’m working on downtown.
45:12
We talked about my passion for music and the ability to unify people.
45:20
I’m building around this idea of bringing people together through music.
45:27
I’ve helped build festivals here the last couple summers.
45:32
We have another one coming up in September called Somewhere Fest, where we basically mix great music with social change and bring all that together into one concept.
45:44
I’m building long-term assets here because I think we’ve had a gap in Wichita around music.
45:49
I’m building an indoor venue that I think fits that gap with a number of other assets around that for housing, working with Wichita State on a number of things downtown.
45:55
I think you’ll see Wichita continue to evolve and hopefully attract more and more of those people that I described.
46:12
COWEN: You founded a school that is located on the grounds of Wichita State.
46:15
Do I understand that properly? KOCH: Yes.
46:18
I would say my ex-wife founded that.
46:18
I can’t remember exactly what year it was, but it’s a school called Wonder.
46:25
My kids still go there today.
46:25
It’s really this principle that we really support across Stand Together.
46:33
That’s this idea of where education is going, and what’s helping kids the most is not a one-size-fits-all approach, the teach-to-test model that Tyler, you, and I probably grew up in, with the teacher at the front of the classroom talking at kids.
46:58
This is more of a model, and I think where most of education is going, project-based learning. The kids have agency.
47:03
The kids are the customer, not the teacher.
47:10
It’s more of a guided system where each kid has a different gift.
47:10
You help guide them and find their gift earlier in life than they otherwise would.
47:16
They’re leveraging things like Claude Code.
47:23
My son can run circles around me with Claude Code or what he’s building, but it’s because he has the freedom at school to try these different things on his own.
47:28
No one’s telling him what to do.
47:34
He and his friends are getting together and saying, “Hey, we can go build stuff.
47:37
We can build video games. We can build apps.
47:37
” What I’m most excited about what we’re working on with Stand Together is around education.
47:49
We are in the middle of one of the biggest movements as a country, I think, that we’ve ever seen.
47:55
If you look pre-COVID at the research, and Stand Together has done all this research, only 20 percent of families were open to their kids going to a nontraditional school.
48:02
If you look at over the last year, we’ve measured that same question, and it’s north of 70 percent, I think closer to 80 percent.
48:15
In terms of the biggest opportunity for what we can do to transform education, it’s shifting from that one-size-fits-all approach to one where it’s individualized education.
48:26
As you know better than anyone, we now have the technology to do it.
48:32
Alpha School is a great example of that.
48:32
Khan Academy is a great example of that.
48:32
We have a VELA Fund concept where, with the Walton family, where we’re writing very fast checks to any parent, any teacher, any entrepreneur that wants to transform education so they can go build it.
48:52
With that model, we’ve built over 5,000 schools over the last five years.
48:57
COWEN: If you were to explain to an outsider, in terms of fundamentals, how is Kansas different from Nebraska, how would you put it? KOCH: Oh, my gosh.
49:05
In my tennis days, I toured Nebraska quite a bit, but it’s been a while since I’ve been back there.
49:13
I wouldn’t be the best person to give you— COWEN: That’s endogenous, right?
49:18
You don’t have to feel you need to go back. KOCH: Okay, that’s fair.
49:22
For the Midwest, Kansas is home.
49:22
I’d shout from the rooftops at how great this state is.
49:31
I spend a lot of time on the road with my role.
49:31
I’m all about finding the new technologies, building new origination and partnerships.
49:36
I’m on the East Coast, West Coast.
49:41
You see the trend, right?
49:41
You see people leaving the coast wanting something different, whether it’s because they’re taxed too much, or the regulations are too high, the cost of living is too.
49:52
They’re finding markets like Kansas.
50:00
Wall Street Journal did a write-up on Wichita three weeks ago about how attractive it is from a cost-of-living standpoint and how more and more people are encouraging people to look at markets, mid-sized cities, and markets like Wichita, Kansas.
50:14
COWEN: What’s physically the most beautiful thing about Wichita weather?
50:22
KOCH: For this summer, it’s been one of the mildest summers so far.
50:22
It was in the 60s the other day.
50:30
I would say we have an amazing pocket in the fall, which is there’s no other place you’d want to be than Wichita.
50:39
Then we have another month and a half in spring that’s remarkable.
50:45
The thing that people knock on Kansas is the wind because it’s flat.
50:45
You can stand on a can and see a long way when you’re in Kansas.
50:53
I’m obviously very proud to be from Kansas and still live here.
51:02
COWEN: I think your lightning storms are quite beautiful, and because it’s flat, you can see them very clearly.
51:07
It’s the hot summer months that, for me, are the most attractive about Wichita. KOCH: Agreed. COWEN: You mentioned AI.
51:13
How is it in either your personal life or work life? How do you use AI?
51:21
KOCH: As I told you, he just turned 14 last week.
51:21
My oldest son is teaching me how to code.
51:21
Never would I have imagined that I could code.
51:32
I was using Claude the last year or so.
51:32
When he introduced me to Claude Code, the ability to become a super coder in about 30 or 45 minutes of someone showing you how to use it, what’s amazing now, the first little project I worked on was my son saw I had a bunch of Excel spreadsheets for my exercises and my stretches that I do.
51:58
He’s like, “What is this?
52:03
” He’s like, “Why don’t you have this to where you have checklists and an app and you can have analysis and charts?
52:07
” This is my son telling me this.
52:07
I was like, “Then build it for me.
52:14
” He whipped it together in about an hour or two.
52:14
Now I have an app on my phone.
52:20
It’s one of the top apps I use to hold myself accountable.
52:20
So something as simple as that.
52:24
Then, when I saw the power of it, I’m working on my own operating system.
52:33
And I can talk about what the company is doing with it as well, but you asked me personally, what am I doing?
52:36
I’m building my own operating system.
52:36
I fed it, “Here’s my roles and my responsibilities for Koch as a board leader, as an investment decision-maker, and being on the investment committee, but also with my role as origination in partnerships and finding the next great opportunity.
52:59
” Then Stand Together, all the things I’m doing there, I fed that document in, and I said, “How can Claude help me become 100X more effective and efficient?
53:05
What engines do I need to build to make me a better decision maker across all these disparate roles?
53:13
” Then instead of me saying, “I do a lot of origination.
53:18
Who are the people that I need to have access to, where I can create mutually beneficial opportunities with?
53:24
” I just said, instead of me coming up with the engine, Claude came up with all of it. It gave me five engines.
53:36
I have it actually right here.
53:36
Let me pull it up—five engines that I use to just operate my day.
53:52
It’s everything from origination.
53:52
It analyzes the quarterly business reviews for all the business, helps me ask better questions.
54:00
It recommends strategies to me.
54:00
It literally is 100X to 1,000X in terms of what it can do, and that’s anyone.
54:09
It doesn’t matter what role you have.
54:09
If you’re head of sales, if you’re a salesperson, if you’re an admin, whatever role it is, can supercharge whatever gift you have.
54:20
That’s what we’re trying to do across the company is help people understand that and encourage people to use things like Claude and ChatGPT.
54:32
COWEN: Across the company and your affiliates, what do you do to incentivize your workers, managers to do something with this?
54:41
KOCH: It starts with leadership.
54:41
One of the key principles that we have in the book, Tyler, is bottom-up versus top-down.
54:47
One of the ways I describe principle-based management and what is different about Koch is asking yourself the question, if you run an organization, what if you had a culture where everyone knew what to do without being told? It’s a big question.
55:05
I’m not saying we have that at Koch, but it is a vision for us.
55:14
What that principle is, is bottom-up empowerment as opposed to top-down control and dependency on the smartest guy in the room.
55:28
It’s really all about empowering people with principles, but to your point, also empowering people with technology and empowering people with tools.
55:33
The incentive is, it just makes them more effective.
55:41
I think there’s a natural motivation there for any employee to say, “Do I want to do my job more effectively? Yes.
55:47
Are there tools out there that can help me with that? Of course.
55:47
” A role as a supervisor is to encourage and empower these people with principles.
55:53
Are you driving creative destruction of your own role?
55:59
Are you driving creative destruction of your own business?
56:05
Are you practicing experimental discovery with technology?
56:05
That’s another one of our principles.
56:14
They’re questions, they’re not, “Go do this.
56:14
” I think that’s what’s very different about a bottom-up approach as opposed to running an organization from the top down.
56:24
COWEN: Now, we live in a great country.
56:24
As you know, Kansas is a great state.
56:27
We have other great states.
56:27
What’s the most fundamental reason for trying to understand why so many of our political candidates are so terribly bad?
56:39
KOCH: That is a great question.
56:39
I wish I knew the answer to that question.
56:39
I think we need more people that have been successful in business and that really understand the real world to engage in politics.
56:59
I would say, Tyler, for me personally, I have never been one to get really excited about politics and engage in politics.
57:09
My focus is really more on all the community things that we’re talking about, transforming education, culture. Politics is critical.
57:16
Our focus around politics is around encouraging principle-driven policies.
57:25
It’s policy versus politics.
57:32
If we can get away from Republican versus Democrat and apply the principle of openness and work together more, and have politicians that have that mindset.
57:41
My father taught me about Frederick Douglass, and that’s one of his, and frankly mine, most inspirational leaders, because he taught everyone to work with anyone to do right.
57:57
We don’t see much of that today in politics.
58:03
It’s Republican versus Democrat mudslinging.
58:11
If we could work together, like what we’re doing, what we did on criminal justice reform, we worked with Van Jones as an example.
58:16
Van disagrees with us on probably seven or eight out of 10 things, but we saw the one thing we could agree on, and we saw a problem around criminal justice system, and we came together, and we helped drive change in that.
58:26
We’re also doing the same in transforming education, working with anyone to do right.
58:31
We’ve helped pass school reform in 33 states now, which going back to what I think is the biggest opportunity to transform education and one of the biggest movements.
58:46
That’s one of the reasons it’s happening, because people are working together because they see how broken the education system is.
58:56
I can’t speak to a specific politician or this and that.
58:56
It’s not really my focus, but I can speak to what I feel like we need to do at the principle level. COWEN: Last question.
59:05
Obviously, you’re very busy, including being a father.
59:08
Is there a place you’ve never been, and you think of going, traveling to, and what would that place be, and why does it so intrigue you?
59:19
KOCH: That’s a good question.
59:19
With my roles across Koch, I’ve been to a lot of places around the world.
59:26
I’ve seen most of the world.
59:26
As I mentioned, I spent a lot of time in Brazil.
59:26
I’ve been all over Europe.
59:31
I’ve built businesses there. I spent time in Asia.
59:31
God, where do I want to go?
59:43
I’ll tell you where I’m going this summer that I’ve never been.
59:43
Croatia, just because I’ve heard it is so spectacularly beautiful.
59:48
After this book tour, over the last four to five weeks, I’m going to need an opportunity to recharge the batteries.
59:55
That’s where we’re going this summer. I’ll tell you how it is.
1:00:03
I’ve heard amazing things about it.
1:00:03
The culture, the people, and the beauty of it.
1:00:09
We’re going to spend a week there, and I’ll let you know how it goes.
1:00:13
COWEN: I’ve loved my trips there, and it has arguably the most beautiful people in the world. KOCH: Oh, wonderful.
1:00:18
COWEN: Chase Koch, thank you very much.
1:00:21
KOCH: Tyler, thanks for the opportunity.
1:00:21
It’s great to see you, and great to be on. Thanks a lot.
1:00:25
COWEN: Again, everyone, to repeat, Charles and Chase Koch have a new book out, Becoming a Principle-Driven Leader.
1:00:31
KOCH: Hey, Tyler, if I could say one more thing. COWEN: Sure.
1:00:34
KOCH: We didn’t think about this just as a book.
1:00:34
We think about it as a platform for principles.
1:00:38
One of the things that we built is an app that your audience can download on any of the app stores, whether it’s the Apple App Store or Google Play.
1:00:45
It’s called Principle Companion.
1:00:52
What it is, is one field, just like ChatGPT, solve your problem with principles now.
1:01:00
With engaging with this in five minutes on a specific problem that you have today, whether it’s in business, whether it’s family problems, whether it’s sports team problems, it’ll coach you through with the principles that many of them I described on this podcast.
1:01:19
I think it’s another way for people to engage with something that they’re dealing with right now.
1:01:23
I’d encourage downloading Principle Companion as well.
1:01:23
Thanks for the opportunity.
1:01:30
COWEN: I’ll add there’s a QR code in the book.
1:01:30
I also received my copy of 41 cards for the 41 principles.
1:01:35
Here are principle leadership questions in a little red box. KOCH: Amazing.
1:01:41
COWEN: Chase, thanks again.
1:01:42
KOCH: Thanks again, Tyler. I really appreciate you.