How We Grew Koch Industries to $150 Billion Without Going Public: Charles & Chase Koch

Key Takeaway

Focus on being capability-bounded, not industry-bounded. Ask: What capabilities have you proven you can add value with? Then point those capabilities at new industries through experimental discovery. Don't try to conquer the world at once—experiment, test customer response, pivot when needed, and collect new capabilities along the way. This approach transforms how you think about growth and prevents costly strategic mistakes.

Episode Overview

Charles and Chase Koch share the untold story of Koch Industries' evolution from a small crude oil gathering company to one of the world's most profitable private businesses. They reveal their principle-based management philosophy, the critical role of creative destruction and experimental discovery, lessons from major failures, and how they successfully transformed acquired companies like Georgia-Pacific by empowering employees and flipping traditional top-down management on its head.

Full Transcript

Transcript of How We Grew Koch Industries to $150 Billion Without Going Public: Charles & Chase Koch from All-In Podcast. Auto-generated from episode audio; may contain minor errors.

What an honor to be here. Thank you for hosting us, Forbes. And welcome. This will be put out as the all-in interview. So, I'm really excited to share this conversation with everyone on the world on the internet and to get some time with Charles Ko, Chase Ko. Chase and I have known each other since 2013. Yep. Yep. Yep. When we overlapped in the agriculture industry, got to know each other. We've been business partners. And Charles and I have gotten to know each other a few times over the years.

But I'm really excited for this conversation tonight. So, Charles, thank you for being here. Thanks for having us. It's an honor. Every few years, a new ad channel opens before the market catches on. That's axon.ai right now. The AI ad platform behind one of the biggest runs in tech with access to over a billion daily active users. Full screen video ads in mobile games watched for a median of 35 seconds. Businesses are profitably spending hundreds of thousands of dollars a day on it. And most advertisers don't even know it exists yet.

The window is open at axon.ai/allin. In Silicon Valley, entrepreneurs and even mature company CEOs always like to learn about the story of other businesses and the success of those businesses. And I've always felt like Coke Industries was that untold story. Uh probably the most profitable private family-owned business in the world. Maybe I'm off on a couple points, but certainly up there. and one of the most impressive business stories because of the evolution of the business, which I'm hopeful we can hear a little bit about how that evolution came to be tonight.

And just for some statistics, if CO were publicly traded, the revenue would put it easily in the top 25 of the Fortune 500. It's a family-owned business based out of Witchah. Founded in 1940 by Fred Ko with businesses ranging from energy, agriculture, chemicals, building products, consumer products, even cloud computing and a very active minority investment portfolio with 120,000 plus employees. That statistic might be off across 60 countries. very unique operating model which we'll get into today including principles around disruptive innovation of the business reinvesting 90% of profits in new businesses and growth meritocratic values and I'm hopeful that tonight we can take an opportunity to hear about the evolution of the business and talk about some of those principles and maybe we can get started Charles if you could give us a sense of the scale of the business what are the business lines that you operate today and and maybe you know provide a little more color to those highle statistics I shared today.

I can go back through some of the history and the failures and successes, but uh I I'll go through what we've grown since the early 1960s. And then we had uh 30 thou three 300 employees. Now we have more than 130,000. 130,000. 130,000. and uh in in 60 countries and uh we have uh increased in value 9,000 times over that period. that period. that period. When did you join the business? In 1961 full-time I'd been working Well, my father uh we lived on a farm and and he told me at age six he didn't want me to be a country club bum.

So made me work in all my spare time which I hated and and so I was always in trouble and uh and so he was kind of tough on me rightfully so. And and thank God he did. Years later I I asked him, "Pop, why were you so much tougher on me than you were on my younger brothers?" And he said, "Son, you plumb me out when you came into the business. What was the scope of the business? What was the business operating? We we had two main businesses.

One was uh to uh uh design and make uh fractionating trays. That is that they separate liquids by differences in boiling points. And then the our largest business was a crude oil gathering system in in Oklahoma. And and so so my father uh and I I was uh I had finished just a few years earlier finished MIT and I was uh working for Arthur D. Little then a leading consulting firm and and I was and and you'll think this is a joke at age 25 I was doing managing cons management consulting.

mean that I have to laugh at absurdity of that but I but they were paying me for it believe it or not. So my father called me and he said son said son said son uh I want you to come back and join the business and as tough as he had been on me and as I say rightly so uh I declined. So he called me a few weeks later and he said, "Son, either you come back to run the company or I'm going to have to sell it because my health is bad and the companies aren't doing well and uh and I don't have long to live." to live." to live." Uh so I agreed because because because uh I well for for a number of reasons.

one. The first one is uh I got three degrees at MIT and engineering and I sucked as an engineer. I mean, get that. And what? So, how'd you get through MIT? Because I was real good at the math and the science and the theory. And I was no good at making or operating things. operating things. operating things. So, I figured out pretty quickly that I wasn't going to make it as an engineer. So I need to be an entrepreneur and uh and because I was good at principles and that's why we led.

So I was always looking for principles that would help me uh contribute and and succeed and and and that's what uh that's what transformed our our company. So you you come into the business couple hundred employees you said at the time 300 employees employees employees and how did you think was the mandate to grow the business? Was it just to keep it stable? it stable? it stable? No, it was it was Could I take a few minutes and go through those first two business? business? business?

Okay, sounds great. Yeah. Okay. The first one was uh uh making fractionating trays, designing those. Uh we had a president then who who was uh was one of our principles. You don't want to be a negative is top down and obsessed with controlling everybody. So he would send out a memos every week demanding they on what they spent, how did you spend it on, what did you do, what did you do this right? So they were frust matter of fact they started ignoring him and then the whole culture was protectionist that is when you s when they sold the internals for fractionating tower uh they wouldn't tell them the design and well we need to know the design so we can correct it.

No, they wouldn't give it to them. And then and then what's even worse to to satisfy the European market, they didn't even build a plant there. They uh they had multiple subcontractors subcontractors subcontractors do parts of a tray and then bring them all together and assemble with another contractor. Now, you can imagine how that was for speed and cost. So we were losing our ass if you excuse the expression. expression. expression. And so I changed the the management and changed the philosophy. Okay, the first thing we're going to focus on is creating value for our customers.

And then then the second thing we're going to empower our employees so they want to to to do this. And the third thing we're going to be do a plant we're going to build a plant in Italy to satisfy the European market. we're going to do it all ourselves and uh and so we got became profitable and uh and uh and uh and and then we started adding uh related products and and I I'll get to that later but uh and and and so we started growing.

Can I ask a question? Yeah. You come in at 25 plus or minus a little bit and you see the problems at the business. It's not profitable. It's not being well managed and you overturn the management team. How did you have the confidence at this age coming with the experience you had to take that level of action that quickly? Well, I it was life or death. And my father said, "You can run this business any way you want. The only thing you need me of my approval on is to sell." That's the way he talked me into coming back after I said I didn't want to uh or I wasn't going to.

And then and then in 1970, what really helped is my brother, younger brother David David David uh uh joined the business and then and then he continued that growth. And then you're now running a profitable operation. You've got a European business. And at that point did you start to think about expanding into other products and other Well, that's it. And this is so I was learning all these different principles principles principles and I and what I saw we were doing not here not just here but in other things is we were building capabilities that is I looked at it we need to be capability bounded not industrybounded not industrybounded not industrybounded like okay you could say uh to a certain extent because we were in crew oil gathering we're in the oil industry oh that means Everybody was saying you need to be an integrated oil company.

You need to be in everything. And I was applying divisional labor by comparative advantage. No, you need to be in the part of it of the of the industry in the part of the value chain where you can create more value than others. Otherwise, you're going to fail. And that's what we're seeing happening now. There's more specialization by comparative advantage. And so that's what so so I I I started this created this principle called uh uh uh creating virtuous cycles of mutual benefit. And what that led us to do is to to to start this uh neverending cycle of of uh of growth uh innovation, success and failures.

and failures that when we did it right that we learned from and made us better and taught us better how to apply principles to create value and we're still going through that. We have a lot of failures and that's when you when you apply creative destruction in your new things. If you're not failing at everything, you're not doing anything new. Where did you learn that lesson? So, what was the first major failure that you know they always say you got to plan until you get punched in the face.

What was the first punch in the face? Well, I had a bunch of them with uh with uh w with with that company. It was called Coke Engineering then. And like like I said, okay, we're when we got into refining, we created petroleum coke. So I said, well, let's come up with a a way to to use that as base to make activated carbon. And that was a fair we spent a fair amount of money on that. And I just we had a whole bunch of those and we've had we've had many more.

How did you make the decision to shut it down or walk away some point? A lot of entrepreneurs have this problem. They they build something, they're too in love with it and they don't know when to say enough is enough. Yeah. Well, that's when enough is enough. When we lose our ass enough. No, it's it's when we decide we don't have the capability to create superior value for our customers and that we're going to be rewarded for. And sometimes it can be the structure of a of a business like uh like uh like uh like the company that Case founded Coke disruptive technology insight tech.

It's been it it does tremendous things but it it is a structure that makes it hard to make it profitable. And so so that's the other thing is so so that's another these are principles that we've learned. Okay, we didn't apply that. What were the principles that we didn't apply that caused us to fail? That's what I mean we learned from failure. So the businesses we're you ask the businesses we're in now and Jason there's coke people here. You you all can catch me up if I the ones I miss.

But uh we have uh uh engineered projects, engineering construction. We have uh uh we build uh solar plants. We have commodity uh trading and and distribution. distribution. distribution. Uh we have uh fertilizers. We have refined products. We have chemicals and polymers. We have glass. We have uh uh uh forest and consumer products. We have four different uh investment firms with different comparative advantages. Uh and we we have electrical products and we we have uh software uh systems uh uh for management. Dave, let me just hit one point something.

No, you got it. You did a great job. great job. great job. Um I mean basically like um eight eight wholly owned um business unit platforms that he described and then four investment um uh different businesses. But I just wanted to kind of really drill a point home because when I when I came out and when I started um really hanging out with you and the whole tech community and trying to like build that network, a lot of people had the same question that you did about who is Coke?

What are you guys all about? you know, I know it's a large private business, but being in Witchto, Kansas, we don't know that much about it. I think this point that is so different about Coke um versus almost any other company out there is what my father said on um being capability bounded, not industry bounded. And you know, how do you get from a small crude oil gathering company in southern Oklahoma to all of those businesses that he described? And there's I mean the principles obviously throughout which we'll be talking about um in this discussion but one of the absolute core differences is that whole approach to capabilities and um I would encourage anyone that's in a business and trying to scale think about it from that lens.

What capabilities have I demonstrated that I can add value to customers and then um point it at new industries where I can experiment. This is one of our um one of our principles as well. experimental discovery, not trying to do everything at once and trying to conquer the world, but experiment and test. Does the customer value my product or not? Um, and then along the way, you know, those those core capabilities for us started off as operations, logistics, trading in the very early days of KO, that's what we demonstrated we we were good at.

We were getting great customer feedback. But then when we had the capability approach to say okay we started in energy we started in crude oil gathering pipelines and refineries can we point those same capabilities into natural gas can we point those into chemicals let's experiment there can we point those into fertilizers because then we learned about natural gas and then then the Georgia Pacific uh opportunity comes along and it's like hey these are wood products it doesn't seem similar to these other um businesses, but it's the same core capabilities.

We buy Georgia Pacific and along the way it was somewhat of a happy accident that we started learning learning about consumer products and branding. So branding became a new capability for KO through acquisition, but it started with where do we think we can add value and do a good job on that and collect new capabilities along the way. So, I think that's like a really simple way to think about Coke and it's o over the course of time like how we're different. One other thing I'll mention too um because I I've been asked many times it's like well so is it sort of like um you know a Birkshshire Haway where you have all these different businesses and conglomerate and um I would say no.

I mean obviously Warren Buffett and his team have done an unbelievable job operating the business the way they have but we think about our business very differently instead of operating them all as independent businesses and almost like in silos um think about it as a republic of science. We're not a conglomerate. We're an integrated set of capabilities. Is it fair to say that you wouldn't consider an acquisition or a new business line if there wasn't some relatedness to an existing competency at the company? the company?

the company? It depends. I mean, as you see when you read the book, we went through uh one chapter on creative destruction and uh and what Champer called all the different ways to do that and one is to create a new management approach. Okay, that's our biggest one. So the question is when we bought Molex makes electrical connectors which has done fantastic and at first it wasn't doing great. So we said we think if we can get them to apply these principles it will turn them around and and we didn't we and the problem when we do that they they they tendency is to learn the lingo and so you can call everything by these by these names and you still do what you always did and that's what was going on there.

And so finally we got in. No, we we had changed the management and and once we did that and and and uh and and and they started applying these principles, they took off and now they're knocking it out of the park. But let let me go back to failures. I because I'm I mean we're understating our our our great strength in failures. And that is I I'll give you our worst failures and what caused it. And it caused us by by violating the principle the principle the principle of of of hiring people first on values and second on talent.

And and what I've for years I told our people, look, if you want to hire somebody with bad values cuz you like them or something, hire them slow and stupid and so we can catch them real quick and get them the hell out. Maybe get them to go to work for our competitors or something. Maybe help them get a job. But anyway, that was huge. And then we made that even worse by uh by taking people who were ter had terrible values and made them leaders and and so what we call that is is rather than we want everybody in the company to be contribution motivated that I want to succeed by by contributing.

I want to be rewarded for my contributions, not for anything else. And the value I create for our customers or for the future. And and so they would some of these people were destructively motivated. What they wanted was power or control and and they would hide their failures and uh and make up their successes. And so I'll give you two examples. One goes back to 1973. You remember the war in the Middle East and everything. And they had gotten us into all kinds of wild reckless trade.

So that could have bankrupted the c the company. And then later because I mean much later shows you shows you shows you that u that repetition penetrates even the dullest of mind. So I needed this to happen a bunch of times. So finally, okay, I got it. God, don't okay, I got it. God, don't punish me anymore, please, for my stupid mistakes. So So this was we we did it about the same time, our a group. We are we put leaders in who were destructively motivated.

And in refining, we we we got in a leader and they were destroying those businesses and uh and and so it it didn't almost bankrupt, but it almost wiped out all of KO's earnings in the in the late uh 1990s. 1990s. 1990s. You you'll appreciate. So, does that give you a flavor? Yeah. So, you'll appreciate this being an a guy. To go a little deeper on what happened in the late '9s um in our a business, we uh we called it the strategy the gas to bread spread.

So, we wanted to basically be in every element of the value chain all the way from pulling the natural gas out of the ground, converting it into fertilizer, making the nitrogen products to grow the crops that would ultimately um then end up on the grocery store shelves and being bread. we got in pizza crust, all this crazy stuff. When you look back on like what the hell are you doing, right? But um it was it was what he was saying is like um like leadership thinking about we can do anything and about we can do anything and if we like basically kind of control the the entire value chain like we can be make that successful completely violates probably all 41 principles in in the book, right?

experimental discovery, knowing where your capabilities are, right people, um, right roles, and so the we yeah, we called it the gas to bread spread. Some people called the as to bread spread, too. Um, so, and there's another one in there, integrity, integrity, integrity, because when they knew there were losses in some of these and then they wouldn't tell us, they wanted to go ahead anyway. We had a we had a deal within that, you know, like purina dog food. So one of the thing one of the things that was acquired was the large animal um uh feed mainly hog.

mainly hog. mainly hog. Yeah. So hog hog feed and um did no diligence and this is one of our principles. Apply the scientific method. So disprove your hypothesis as much as you you try to prove it. And um and so we we closed that acquisition and within days we found out that we had hundreds of millions of out- of-the- money um hog contracts because we didn't didn't even look at the contracts. So I mean that's when I think this is really important for founders that want to grow right you have this growth at all cost mindset and you start not like asking why not and this is the kind of trouble that you get get yourself in.

So let's go back to the management piece. How do you take these principles which you've applied successfully to I would use the term iterate because for me like failure is all about iteration to success and finding paths that work, finding businesses that work and ultimately finding people that work. But how do you drive that culture that represents the principles? Because you could create a book and give it to all your employees and say, "Guys, here's 41 principles. We've sat down. We've thought about it. We've written them.

They're going to work." Yeah. but to actually live them to realize them to hold people not just responsible but accountable to them. How do you how did you do that as you develop these over the decades? Because at first uh we tried to get them do it through sheep dipping that is you take everybody in you give them a big seminar now go do this and uh from Palani we if you want to read a book that's hard to read I mean if you want really hard one you can read human action this is even harder called personal knowledge personal knowledge personal knowledge by Michael Palan who was a a chemist and and then became a philosopher and uh and uh and uh and and he goes through what it takes to to to develop personal knowledge.

It's it's you have to rewire your brain to have it work differently, right? You have a habit. So, you don't need to think about it. And then if you want to change like, do I brush my teeth first or do I comb my hair first? No, I want to start combing my hair first. And all of a sudden you're back brushing your teeth first and you because you're not thinking about it. And so because your brain gets I mean you know your body let's say you're you're a weightlifter and you want to be a marathoner.

Okay it's going to take work with intensity over time to change your body. Well your brain's part of your body. So you've got to do the same thing. So we said, "Okay, we've got to start with, okay, let's find a group that's really interested in this. They're struggling. They're having problems and here are the principles and we'll coach them. We'll help them start doing it." And if they work with intensity on it, and then they succeed, then we don't need ship dipping because then the other uh businesses and capability says, "Gosh, I'd like to do that." So you don't need to call them in.

Then then we have more demand for people who can help them. And the hardest thing is to have our people in strategy or or our principalbased management group who are really good at helping them. And boy, they're in they're in more demand than anybody. So the best thing is success will drive social mimicry. You'll see other That's it. Here's another um like take on what he's saying um that I think like really connects about culture to your question and that is like the essence of like principalbased management and all the principles in this book as well is like what if you could um have a business and a culture small, medium or large where everyone knew what to do without being told.

And so that's like hard to get your head around, right? Because I think most businesses come at it from top down. There's the iconic leader that's the smartest guy in the room building the strategy and then telling everyone what to do. And so I think one of the most important principles in this that we tell a lot of stories around is to flip that on its head. And it's about bottom-up empowerment with principles and empowering your your talent, your team, your leaders with these principles. So, so that then you use the collective knowledge of everyone, not a couple smart guys at the top of the company.

company. company. Most people in most enterprises that aren't owner operators don't want to fail. They want to keep their job. They want to move up the ladder by being repeatedly successful. And if you want to create a culture of creative destruction, if you want to create a culture of failing and learning from failure, it's very hard to get individuals who live on an income on a salary to do that because if they make a mistake, if they fail and then they fail again and they fail again, I'm worried about losing my job.

So what you typically see in most scaled organizations is middle management and even senior management when founders or owners don't operate it anymore saying, "I'm going to take the less risky path. I'm going to do the less creatively destructive thing. I'm going to do the thing that's least likely to fail because I don't want to lose my job. I want to keep my job, get my bonus, move on to year two and go home to my kids and my wife and take care of the family or whatever the the family situation is.

And that's my objective. But see, and that's and that's that that approach creates perverse incentives. And so we we try to align our incentives that we want to reward people according to their overall contribution to KO's future. future. future. So for example, if they have an experiment and that doesn't mean doing this thing in a where you buy all these hogs and you lose hundreds of millions of dollars over what that's not an experiment. It's an experiment. A a a a good experiment is where the value you you what you learn from this is higher value from this failure than the cost of the experiment the experiment the experiment and and so when we do that and we're we're evaluating what the person you are building capability for the future.

That's why we're so we we put so much emphasis on are you building capability and capability part of it is the culture and what Chase did with with KO Labs when he started Coke disruptive he said Ko Labs I want every business to be a laboratory for what we find both to help us source us source us source these these opportunities these tech opportunities opportunities opportunities and and then we'll that we'll we'll if they're just trying some, we'll try it out in that business. And being in all these different businesses that that touch almost every part of the economy, it gives us a big advantage in that.

So, but that affected the whole culture. I mean, on your business, don't you want to be part of Coke Labs? We're we're an experimental discovery group. We're just not a bunch of grunts here grinding stuff out. stuff out. stuff out. Yeah. I think um the KDT example is a really good one because you asked about motivating and like what if you fail and then what if you get fired and and all that. Um we we tried to basically take a little bit of the Silicon Valley approach and bring the you know of experimental discovery.

You learn more and you you pivot and learn have a failure but then now I know what I don't want to do. I'm going to pivot my strategy to what may be working. I'm going to keep trying. As long as you don't go sink the company with some massive bet, right? And I think um KDT was a a great experience like I call um you know when when we did that um when when we made that those first investments you know this in venture um you're the the losers fall out first and the winners take a hell of a lot longer to to uh materialize.

So if we would have just judged it based on, okay guys, you got three or four years to figure this out, we would have shut down KDT because we you had the but but it was that experimental discovery principle and mindset that we applied to it. And oh by the way, we were learn we were learning so much as Coke from seeing the technologies that were coming around the corner that might disrupt our core business. And so we value that learning and we rewarded the people that were bringing that knowledge in.

If you just look at it on the bottom line basis in the first couple years, you said just shut this down, right? But then over time like all these different things and that and then the returns are starting to come because we thought long term about it. But it all came from that experimental discovery one principle and then creative destructions like if we're not in the game on technology and we don't see what's coming, something's going to happen. Especially with how fast uh techn is moving today, the u some of our businesses are going to become dinosaurs.

How much of that risk were you willing to take and did you take on acquisitions? So, doing homegrown experiments on new business ideas and strategies and products can be lower cost. But if you're going to do an acquisition, do you have less room for fail? fail? fail? Well, how about this? We were a much smaller company and we bought Georgia Pacific for 20 billion. Well, can just tell us what Georgia Pacific is for those who don't know. It's a wood products company and it's got two uh big um pieces to it.

Building products and consumer products. Well, it's got it's got a third one, but Yeah. Yeah. Yeah. Okay. I'm I'm generalizing, but go ahead. Sorry. No, no, I'll shut up. Shut up. Shut up, you old guy. No, no, no. Um, but but anyway, but on on that one. So, when did you buy it and how big of a betting the company move was that? 2005. 2005. 2005. Well, that was Yeah, we were much smaller in 2005. I can't remember how much smaller but it was a lot smaller.

It was a massive bed. How'd it come up? Okay, we were looking applying this virtual cycles of mutual benefit. We were saying okay what's uh one of these uh these cycles are chemical process industries and and wood creating the pulp and stuff was matter of fact we found in my my my father's thesis father's thesis father's thesis he he he did a a study in Maine on this very thing on pulping I mean I found it later but that that did his MIT thesis. Yeah. Yeah.

Yeah. Wow. Wow. Wow. So, we said, "Okay, let's look at the Oh, and they were they were saying they need to spin off some of those pars the pulping part." pulping part." pulping part." And we said, "Okay, let's buy that." And we bought that as an experiment and we did real well with it. And so we said, "Wow, they they have other because that was a commodity business and they were trying to get their price to earnings ratio. It was like six and if they became more of a consumer products, they could get it up to nine.

So we proposed we met with them and and proposed that uh we uh uh we buy the the uh the commodity part and we'll pay them a high enough price that then they can be all consumer products and get their price. and we showed them all the economics and they said that's fine but we'll be cons sued for constructive fraud because we we all have this all these lawsuits against us and and uh and so we can't do it but we like the value and so we went home and says well okay what if we just offered the whole thing and the a couple of them were getting ready to retire and the senior officers so they were really liking it and and they were kicked out of all the board meetings from then on.

But anyway, so we we sold them and that was a time when money was tight and stuff so nobody came in and and topped us. I'll give you just one funny story. We sent one of our people in to be the CEO, Joe Mohler, who had been president of a company and uh and and and he They had it was totally top down bureaucratic. bureaucratic. bureaucratic. They were in Atlanta they had this 51story building. Was it 51? You can correct me. correct me. correct me. That's right.

Yeah, you got it. I help you. and and they had a private elevator to get up there and you didn't have to wear a coat and tie but if if you came up to visit all the management was on this 51st floor and you had to put on a coat and tie and get permission to come up there and so Joe immediately kicked them all out. Well, we fired a bunch of them and then set the remaining ones down to work with their groups and on the regular floor and then turned and then regular floor and then turned it all into offices.

I mean into meeting rooms open to anybody and so that I mean you asked about how you get culture change. A lot of it is signals like that particularly when a bunch of them get fired for being so bureaucratic and hierarch. Would you say that that business unit operates like the rest of KO industries today? Oh, absolutely. Oh, absolutely. Oh, absolutely. For how long? I mean, I I'll just say like that is such a rare and difficult thing to pull off. I mean, there's just countless stories of acquisitions where the acquirer thinks that they have culture, thinks that they know how to transfer culture, and literally no one seems to be able to do it.

This was one of the insights from Warren Buffett is you find great managers. You let them continue to operate as owners of that business and they get some profit share or whatnot and they've got a durable moat so he can make a long-term investment and he just leaves them and that's see that wouldn't work for us the stuff we bought. Well, let let me give give another one if I could that's was even more difficult and that is uh uh sadly my my father died not too long after I came with the company in 1967 and we had owned an interest in a small refinery in Minnesota and uh and so but two years later we were able to buy it and And it was not being operated very well because the management had let the union control how it was run.

And so it was run very inefficiently. And so the first thing we tried to do is change the work rules. So they went out on strike. on strike. on strike. And uh by the way that was at the start of my honeymoon. Thanks a lot guys. And it was violent. I mean, they they ran a switch engine and tried to knock down one of our units. They shot high power rifles in there and they blocked the gates. I mean, it was impossible to get in there.

We had to take helicopter. But we we were successful in operating without the union workers for nine months, bringing people in from other plants. and it operated better than they did. So, finally we got the work rules changed and then we uh then we said, "Okay, we're going to empower the employees. We're going to change the culture." Now, you think at Georgia Pacific it was tough. This was much tougher than that. And and so we we we worked and worked on it to try to make their jobs better, get their opinions, get them to work as teams, get them to come up with innovations.

And when they did, we reward them and we got the union to to agree with that and and like like one they said a group of them said, "God, we're buying all these spare parts we need. uh we can if you if you'll build a machine shop we can do it cheaper and faster and they did and then other things they saved ton of money for us made things more efficient and now the culture there is fantastic you I mean I mean we're talking about we're not talking about witchah we're talking about Minnesota about Minnesota about Minnesota so I mean we're so proud of what they've done and it just uh it still blows me away how how much they've taken these principles to heart and using them to make that place.

So it's so we've increased the capacity tenfold and it's one of the best refineries in the country. the country. the country. Bob, wouldn't you say that? Um I mean the common theme on all of these because we have the same story on Molex, you know, sim similar but different than Georgia Pacific. This was a a technology company, a a connector and cabling and connector company, one of the largest in the world. Um that makes products in your iPhone and medtec products, your automobile. And um when we bought that in 2013, it was a a paradigm that needed to be changed.

You you described Georgia Pacific top down versus bottom up. There was a lot of that too, but it was topline thinking versus bottom line thinking. It was all about revenue growth, right? this is a technology company and it was also a public company for 30 plus years as well because what the market rewarded them for for for and so like the whole the stock price stock price stock price the public versus private uh discussion is interesting here and it just what we've learned is it takes a hell of a lot longer than you think to change the culture and almost in every case I mean pop tell me if you agree with this but in almost every case it requires changing leadership that has the paradigm of bottomup empowerment and that learns and applies the principles.

Almost every time when we fail, it comes down to ignoring the principles. You can and that's what the the book is about. You can kind of reverse engineer these stories like well we missed that principle, we missed this principle. Um but it comes down to talent and the right people with the right mindset. And I want to share just one story with you that really um shows like how we apply this at COPE. Um he talked about our talent vision being um you start with um basically culture first, you know, skills second, values first, skills second.

I always add a third dimension to that as well. Values first, skills second, credentials last. And that is a very different mindset than than most companies because most companies, I think, look at it and say, I want I want the guys, you know, that have the 40 from the Ivy League school and all that. And there are some incredibly smart obviously folks from that. But by by our um experience and also is one of the reasons why we stayed in Witchaw, Kansas is that we can basically hire the farm team, right?

Kids that have grown up on the farm that have that contribution motivated mindset that work their tails off and want to come in to make a contribution as opposed to coming in expecting all this stuff and coming in with more of an entitlement mindset. So we um case in point, our CIO today, his name is Jared Benson. Um he start his first interaction with KO was based striping lines in our parking lot. So no college degree whatsoever, but he found his way into Coke because he demonstrated that hey, he knows a little bit about data science and he could help us.

This is about 20 years ago. And then ultimately he came in, he proved himself. He was running circles around a lot of the team and like just you know contribution motive mindset um adding value. He saw the cyber security risk and that wave coming built a whole capability to protect us from cyber attacks and then now he's CIO of the company guy with no college degree. So I mean that kind of mindset in terms of our talent vision and like that values first and someone that just wants to come in and they they just love the job and they want to make a difference.

Do you actually codify these principles and everyone at the company has a handbook that lists them out and then they're part of the assessment process for quarterly or annual reviews with people? people? people? Yeah, I mean obviously there's the book and he's this is his fifth book. It's my first but but so um good profit science of success we have it's my best book because of hey Brian the one we did is pretty good too too too hooks won't like that right right right um but yeah no there is a there's a discipline right and and really it comes down to the leaders taking it seriously and there the leader first responsibility is to help their people okay I'm going to put my analyst hat on for a second and I'm going to say My observation would I would create a theory.

We could test the theory right now that being in Witchah being founder or owner operated and you know having this ability to be isolated from a monoculture. I just feel like Silicon Valley a lot of companies replicate each other. You have to kind of there's this term that's being used a lot now over socialization. You have to operate like everyone around you or you're not part of the you have to fund raise in the right way and do these deals. You have to hire people this way.

You have to do this sort of vesting schedule, this sort of equity. Everyone's the same. And if you don't, you're kind of a weirdo. But by being in Witchah, you don't really have that problem. You can think your own way. You can challenge yourselves. You can debate. You can come up with your own principles without feeling like everyone else is conforming to the groups around you. But they can because they're a bunch in Silicon Valley that are that are a challenge. Yeah. Yeah. Yeah. So they're not all that way.

They're not all. Yeah. And this this But is is it is it always been a competitive advantage? I mean, did you ever think to move the headquarters to New York City or No, but the main thing the We've We've never thought of that, but but what we've uh Sorry about that. I mean, there are advantages of being in New York City. I mean, you have a great mayor now, so we're good to go. But anyway, so we we that's a compet competitive advantage of us. That'll be a But but this is No, but the main the main threat we've had is we we had songs that wanted to go p take us public and I said it' be over my dead body and some of them thought that would be a good idea good idea good idea just like they're thinking that about Trump.

with a lot of people thought still think about I get a lot of nice notices of my imminent death and and they say okay your brother died we hope it was I know this is painful but I hope it was slow and painful and I hope Charles is even worse that's the kind of crap we get u but anyway what the the biggest is the uh push has been for us to go public God will be worth so much and stuff and but it and I I think our view we never could have accomplished what we've have first of all we never have would have built a principalbased framework and then we we never would have been able to pull off this uh capability bounded versus industrybounded industrybounded industrybounded because then I mean people don't understand it.

Now, if you're Buffett and you've sold that long, then people Okay, but but he wasn't trying to integrate them the way we do. No one would believe it. And and so what the what and and and that's because uh you've got to you got to have a story that people the analysts can understand. Otherwise, we would like Georgia Pacific, we would have a low price earnings ratio. And so being private, being in Witchah, competitive advantages, what about being owner operated or founder operated? There's this argument that the the the best Silicon Valley companies are those who are founderled for as long as possible because the founders are willing to destroy the business creatively.

They're willing to think about what's over the hill, make the tough decisions, reinvent the company, hire and fire as needed, be willing to take the short-term financial loss for the long term. Have you been able to get that to distill down into the organization? Because that's the thing that most public companies that are not owner operated deal with and struggle with is managers that are short-term incentivized and and aren't and can't take the big risks and the the risks of failure that that you're able to embrace.

to embrace. to embrace. No, but I I think it depends on the values of the owners. If uh I'd like one of our principles is that any good partnership of any kind whether it's marriage, friend, employee, partner requires three things. It requires shared vision, shared values and having complimentary capabilities that you use to to make each other better. And if you miss any one of those, you're not going to have a lasting good partnership. And so I I remember I was I was to the YPO group in Witchaw.

I was presenting this is like 20 years ago presenting what we were doing and why. And one of them said, "Well, how do you get that to work in a private company?" private company?" private company?" And and I answered, "Well, no, it's easier than in a public company, just like I did." And then I I thought who it was and he was talking about his father. His father was a total dictator and no way he could apply any of these principles in that. So it all the ma matters who the owners are and what their values are.

Can a public CEO that doesn't have a big ownership stake in the company adopt these principles and transform the culture of that company? If you can get a if you can sell it like Buffett has but I mean he wasn't doing these principle but he had a different principle and that is I'm going to buy companies not going to take top price but what meaning what's meaningful to them is they run it so I'm going to buy it and let them run it and so that was his his value that he sold that made him tremendous well that the other one was buy insurance companies so you'd have a lot liquidity to go do all these things and those two things are what made him successful.

successful. successful. Right. Chase, I want to just go back to your getting involved in the business. We didn't get into that, but how did you get started at Coke? How and were you always a believer in the principles from a young age? Were you around the organization around your kid? I'm a chip off the old block. It took me a while to come around. No, this is the most remarkable transformation. We've been talking about them all even. This is the primo. Here we go. Unbelievable. Unbelievable.

Unbelievable. Do I get to tell my story? From the absolute bottom to the absolute top. top. top. He'll correct. He'll correct. He'll correct. No, he's blown beyond me. He's doing things I wouldn't even dream of or have the capability to do. So, he'll correct he'll correct me 10 times as I tell the story. But, um, well, cuz you're too damn humble. Um, so I didn't start when I was six. I started when I was 15, so he cut me some slack, but it's because I was a pretty competitive tennis player.

And so he was nationally ranked. See the humility ranked. That's first first time. Um so um but at 15 I got burned out, you know, tennis like typical story where I wanted to hang out with my friends. I wanted to have a good time. I was tired of playing six hours a day. So I I started throwing tennis matches intentionally to get out of it, out of these tournaments. So, I go home and party with my friends and and he uh he said, "Look, your attitude is terrible.

You can either um give 100% on the tennis court and apply yourself or I'm going to get you a job." I said, "I'm sick of tennis. I'm done with it." And uh so I had his my the job was figured out the next morning for me. Yeah. But interrupt again because this is important. He thought he would get a nice cushy job in Witchah so he go out and party with his friends at night. Yeah. Yeah. Yeah. Well, you know, I'm I may be old and slow, but I'm not that slow.

Yeah, he was kicked out of a number of school. school. school. I was born at night, but not last night. But yeah, so probably a a parallel story movie that could be made. Yeah. No, seriously, there there really is. is. is. But basically, all my was packed for me. Yeah. Yeah. Yeah. And it was thrown in the back of a truck and 6 hours later I showed up at a at a feed yard and I lived in a single wide trailer. the whole summer with with my boss.

I slept on the floor, worked seven days a week, and uh just shoveled cow shed and dug post holes. And so that was my forgot about that. Let's keep it. Let's keep it manageable here. So, um, so anyway, um, but the the the interesting part of that story, even though I went from literally being like, uh, you know, kind of country club rich kid to to doing that within 24 hours, it was an absolute transformation for me that the fact that he kind of he made me do that and I chose, but I didn't know what I was exactly, you know, choosing.

Um, but by after, you know, I was a month or two into this job, I started like actually feeling like better my better about myself, you know, I was like I hadn't really made a contribution up until that point in life. And then I'm actually I'm working with a team. I'm getting paid minimum wage. I'm working my tail off. I'm adding value even though it may be like just menial work. Um and this is I go back to um a letter that his father um you know wrote to him and the and his other three brothers.

brothers. brothers. No, no, my my older brother. Your older brother cuz I was 3 months old when you wrote it. it. it. This letter about basically like when I pass on um you're going to get what seems to be a large sum of money. Um I hope you don't squander it. I hope you don't use it for but I hope you actually apply yourself because I want you to feel the glorious feeling of accomplishment accomplishment accomplishment and um it's this it's a really amazing letter. He has it hung in his office.

Um but uh I you know that was the first time I felt that even though it was working at a feedard I was like this feels good actually. You know I could have gone down the path of of you know just kind of staying on the tennis circuit. I have no idea where I'd end up in life had I had I not gone down that path. And so I basically worked every summer for Coke from that summer on. I worked in a gas liquids plant. I worked in our refineries um all the way through junior year in college.

I always had a Coke, you know, kind of summer job. But um another So that was an absolute like transformation for me in my life. Let me I give you one more credit here. See what he he has great humor which is great but and that is Chase has I I have this gift for abstractions. He's he's like his mother. He has a gift for people. He understands people and can relate to them and he can go around like like she can or Sterling Barner who was our president in the early days who by the way uh was born.

His father had ran mules in an oil field camp. And he was born in a tent and there damn near died. died. died. Uh never went to college. And and he could whoever he met with wanted to do business with us. And that's the way Chase is. He goes around meets these people and all of a sudden they're friends and they want to do business. And that's true for stand together too. Go people you think oh they don't they don't want these these capitalists or these free enterprise people to do business with them and and and he gets them on our side and shows them the value of these principles.

Well let me let me make is that fair um with whatever you said. No, I mean that's my job that that's what I do uh now you origination and partnerships and about the time I met you that's when I started you know getting into technology and trying to build a new community so that we could get access to the most disruptive um founders. Um, but one quick story I want to tell because I think it would be helpful for for your audience as well that we haven't touched on yet is the principle of comparative advantage because another meaningful like total shift in my job at KO and my role at KO, but also in my my personal life um was when I was running the A business.

This was this was later on. We talked about the late 90s, the the gas to bread spread and all that. This is a separate business uh with Coke fertilizer. I spent 10 years in that business really understanding the operations of a business. I worked in sales and and in marketing and um the accounting, the finance, like every piece of it, the trading and um I ran a lot of the smaller business units, but at one point my boss at the time wanted to add a whole natural gas trading business to it.

So, he's like, "Hey, I got a want to put a parent company called A and Energy Solutions, and I want you I'm going to throw you the keys to the fertilizer business. you're ready to run it. And so I was promoted to president of Coke Fertilizer at that time. And about 9 months in, I realized that I was not the guy for the job. And I walked in my boss my boss's office and fired myself. And the humiliating, right? It's like especially being the boss's son and like thinking about, oh my god, I'm a failure.

You know, I could I couldn't make this work. The business was still doing fine, but I wasn't doing a good job as a leader. and I knew there was someone else that had the comparative advantage to be a great operator CEO, you know, president um type role. And so I learned through all that, you call it a failure in in that job that um that I wasn't an operator and I wasn't a good optimization type leader and I was a builder. Like all I wanted to do was go work on the innovation stuff.

That was about the time I met you and I learned about climate corp and all that. I just wanted to go focus on that and and go build the stuff, you know, this whole idea of creative destruction that would disrupt the core business that I was running. And so that whole thing around like understanding your comparative advantage, what you're good at and what you're not relative to others that could be doing that job was a huge deal. And like my hope was that that was a little bit of an example for other like KO leaders as well.

It's like if you're not in the right job, like you know, you don't have to like fire yourself, but um but figure out where what your power alley really is and where you can contribute and and um and add the most value. So that experience for me, what was amazing if you look at like what happened after that, we we got a great president to continue to transform the fertilizer business. It's one of our most exciting businesses today and we keep we keep growing um with it.

So that that did better than it would have done had I stayed in the role. But then all of this led to Coke disruptive technologies which we talked about which is a totally you know an innovation platform for KO to to see around corners. So like that one move made one large business much better and and also created a whole new thing right and so like I always think about it's like we have 130,000 employees what if that one principle comparative advantage what if everyone like deeply understood that and and redesign their role to where they are truly like in their power alley and what what would what are the results of the business if we could do that you're never you're never going to be perfect but that's the vision that we have and how we how we how we organiz organiz organiz thinking about individuals how do I self-actualize how do I find my path of purpose happiness success in life by leveraging these sorts of principles in a world that feels radically transforming and continuously constrained.

I don't have infinite flexibility. I'm not on the board of Coke. I'm not on the board of my my company that I'm employed by. How do I find a path in this world? Because I do think many people today are struggling for that sense of purpose, for that sense of identity, for that sense of realizing their their their potential and feeling fulfillment in work today. Well, that's I I mean that's critical and that's that's every all the we we have what have what have what 20ome thousand supervisors in the company and so this is one of their top jobs is is making sure that that each employee is in the right role.

for example, they're working hard and trying and part of the work they're doing well in and others not. Well, rather than beating up, you got to keep doing better. Like, like there's certain things if you told me I had to do, I mean, I'm I'm I'm good at at concepts and logic and math and to go do something else that's quite different. I mean, I'd be a total failure. and you could you could whip me till I was a grease spot on the floor and I I couldn't do better.

And so that's the role of the supervisors to not go tell them, okay, your role is to go do this and they're just trying harder and harder and so you're making them miserable and so they hate you, they hate the company. And so that's that's the way you empower them. That's what what Maslo said. If he said that that if everyone has capability and and if if you don't develop it and apply it in a way that creates value for others, you will be you you may be successful monetarily or in some way, but you'll be deeply unhappy your whole life because you won't be fulfilling your nature.

Your nature. And I know what mine is. I know what makes people say, "You're 90. Why don't you go out, lie on the beach? I said, "What? You want me to die? I'd be dead in in a a week." week." week." It's not your nature. No, it's not my nature. My nature is to is to I have this gift. And a lot of our people here may say, "Yeah, you damn right. You use it too damn much." So, what keeps most people from realizing their gift?

their gift? their gift? Well, I I think part of it is an education system. So, the schools need to be set up. Okay, we're going to help you find your gift and what you're passionate about and and and and what is motivating to you. So the whole system demotivates you and that's what the way businesses are managed demotivate our whole deal. That's why we we have five dimensions in the in the way we apply this. The first is vision. You got to get the right vision like capabilities of creating value for others.

Uh then then it's virtue and talents. We we've talked about that. Then it's knowledge. That's republic of sh of science. Uh creative destruction. All those things. And then the the final one is motivation. motivation. motivation. And so that's what we need to do. And like Joe Lamont has created the schools. He says it's 90% or 80% motivation. And so you have games, you have other things that the kids can do that they learn from and enjoy doing. They want to do more. And that's I mean I raised our kids with these principles and I made them do it.

So I was piss poor at applying the my principles in in teaching them this and he's doing it. He makes a game out of it. He has them reading the book and parts of it and then they have competition on who can do it better and who's who's living up to this better, who's applying this principle better and they're loving it. Yeah. I'm not uh having my kids uh listen to books on tape from Milton Friedman when they're 10 years old. No, Aristotle Aristotle. There was there were plenty of them.

Um but um but let let me just make you listen you were told or suggested or encouraged to listen to Aristotle on tape as tape as tape as Yeah. Yeah. Yeah. No, he wasn't encouraged. No, we'd go Sunday evenings. Sunday evenings. Sunday evenings. I got to take a note for my Elizabeth and and Chase and I would go into my library and I would play these tape. I'd only play it for 10 minutes because I knew Chase's attention span little Elizabeth was on it. Boy, she was on it.

She ran circles around. She was getting straight A's and everything. And Chase would fall asleep. And then then after 10 minutes, I'd wake him up and Okay. What what was his point here? here? here? Is a test every 15 minutes and then and then you may have seen on on where was it? Well, you talked about uh about you we we worked together to do your error term paper. Yes. Yes. Yes. And why don't you tell that story? Okay. Well, I mean, we had a it was like a fifth grade paper.

Like, choose your philosopher, write about it. You know, it's got to be 500 words or whatever. So, I came I was like, I don't know like what philosopher am I going to write about. And so, he's like, you're going to write about Aristotle and we're going to work together on it. But, I learned a hell of a lot about Aristotle in in fifth grade. And um I turned in the paper and um the professor um had a lot of red ink all over it and said, "F, you did not write this.

And I'm And so I'm like, "Oh god, you know, this is so embarrassing." And so I took it back to him and I told him, I said, "Pop, um, we got an F on our paper." paper." paper." And And And I know, you said, "You got an F." Yeah. And, um, so, and then I didn't think he was going to pick up the phone and call the the teacher. So he said, um, you know, Dr. Cohen, I'll never forget this. I was hiding under the table during this phone call.

He said, "Dr. Cohen, um, you know, I helped my son write this paper and he learned a lot from it and yet, you know, do you not want me to help my son? Do you not want any parents to help their kids like learn? And and um, he said, you know, I think you have a point, uh, Mr. Coke. And so the next day, the next day I come back and it had 99 written on the top. See, I made a contribution. Let me let me let me go back.

It's a great story. I know. But um let me go back to something I think you were getting at um around how do you remove more barriers for more people? Um and this is really kind of the stand together story. He mentioned education. I just want to use one example of how important we feel like transforming education is. And we also feel like it's a movement with tremendous opportunity right now. And so um our vision for education is to go from a teachto test model teacher at the front of the classroom teach you know talking at kids to one that's individualized education because we all as we we talked about we all learn differently.

differently. differently. Everyone learns differently. Yeah. And our kid all of our kids learn learn differently as well. So um we did the research at Stand Together and prior to co um and Stand Together just Oh yeah. Sorry. Stand. So stand together for those that don't know this is really um you know comes from my father's efforts on social change which he's been working on for for 60 years and stand together in 2003 was created that really um I think we had the insight of we can do a lot more together versus do it alone.

If we operate in philanthropy and social change in silos, we're just not going to get the leverage to drive the change that we want to. Um, and so Stand Together is made up of, you know, close to a thousand business leaders. It's it's just like the name describes. It's a community of business leaders that align on vision and values on where we want to see the country. And it's really around this this this pretty simple idea that every human has a gift, but there's so many barriers across all of our institutions.

um education, uh you know, broken education system, a broken criminal justice system, um bad policy holding people back so you can't chase the American dream and build a business. All of these things, right? So, we're very broad in terms of the issues that we focus on, but education is one of the biggest ones. And so, I described the vision of where where we're trying to help take it and be a catalyst for change. And one of the things that you know we do a lot of research on where public opinion is and uh prior to COVID roughly 20% of families were open to a new model of education very low right and then everyone saw during co how screwed up the system was and they saw their kids come home they had learned a hell of a lot more on YouTube learning than they actually did in the classroom.

So after um after COVID three or four years later, you look at that same data and it's 70 to 80% families are open to a completely, you know, to transform the education system because everyone now understands that it's just broken. So, um, where we're supporting, we have these amazing preferred partnerships as my father described, whether it's Joe Limont with what he's doing at the Alpha School, like closing the motivation gap and meeting kids where there are and bringing like gamification and like the principles of Fortnite into education in a way that kids are like he's taking kids that are failing students to top of the class in 3 months because meeting them where they're at.

meeting them where they they're at and solving the motivation gap and like making learning fun and cool, right? Sal Khan did the same. He's a huge partner with Khan Academy. And a really interesting one uh that we uh we partnered with the Walton family on is the Veila Fund basically applying venture capital uh to education entrepreneurs. So coming out of co there were um thousands of pissed-off parents and teachers that were just fed up with the system like I'm just going to create my own school.

You know these small micro schools and so with a relatively modest amount of money um over the last five six years we've helped create and seed over 5,000 schools. So what's happening is there's this huge movement where people see is like my kids are learning the the um the skills of what the the future is going to be like not this teachest model where you don't know how to interact with people the reality is it's projectbased learning they need to have exposure to these AI models you don't ban them you empower them with these models right and um so so we're it's one of the most exciting movements that I think stand together is really leading on and uh yeah, we we need more partners that are are willing to to to get behind this.

I want to go back though, Charles. This work at Stand Together is like taken off. I know a lot of people that are engaging with you, Chase, on this work and everything you say is so sensible and we're all it's also it always feels so obvious. Can we go back to the work you've done historically in social change and what you got right, what you got wrong? Because the the narrow view of the word coke comes from a broad public perception of political activity that I think's been amplified and the narrative's been written for you.

And I don't think I've personally seen a lot of conversation publicly from you about what you did when how you were thinking about social change. Maybe you can go back to the origins of the work you started to engage in in trying to drive social change and over time what you got right, what you got wrong. Well, it started with these these principles. I mean the to me they're the principles of human progress. But rather than than than than as Frederick Douglas say, I'll work with anyone to do right, no one to do wrong.

I I I was only working with uh the people who believed to in all of these these these and and so we were limited. I mean with work I work with the limit libertarian party and that got so narrow and and then they started fighting over who has bigger greater more purity in these principles to get in exactly like and one brilliant guy but but totally this way he says I I he said my libertarian is this plum line anybody disagrees I he purged so it's almost like the communist party doing the same thing that Lynn did and they and They admired Lyn.

Yeah, he had the right strategy. Well, no, you can't go murder anybody that does like so it doesn't work for liberty. It works for totalitarianism. for totalitarianism. for totalitarianism. And so when and then and then I started reading uh Maslo uh uh usakian management and his strategy and then Victor Frankle is the one that really got me going. And Victor Frankl uh this tremendous insight. He says the the problem today is ever more people have the means to live and no meaning to live for. So if you can't find a path to a life of meaning meaning meaning which comes from as I said from uh finding your gift and using it to succeed by helping others succeed in a way that gives your life meaning life meaning life meaning then you you have two choices.

You can either choose either choose either choose to go for power or you can go for pleasure. And and you see this today and you see this through the the history of the world. So if you if you choose power, then you're always going to want you become addicted to power. I want more power. I need more power. And we've seen that in, as I said, in our businesses, but you damn sure see that in politicians and you see that in all the dictators in the world.

Then if you say if you if you've given up and you say, well, uh, I've given up. I'm going to to go for p for pleasure. and you and you d you you you dedicate yourself to to pleasure pleasure pleasure uh without considering the long-term qu consequences consequences consequences then then then you have uh you're going to experience failure. failure. failure. You're also have a tendency to become addicted to an addict to become suicidal and to even engage in crime. And we see both of these today.

So the problem today is when you have a world that is based on power and pleasure, it's a slippery slope slope to totalitarianism, totalitarianism, totalitarianism, authoritarianism, and socialism. And that's that's what we're saying today. today. today. So, so that's the solution is to help people find their gift and a way to apply it that enables them to succeed by helping others succeed. And so what does that mean? That means we need to all of us more fully live up to the promise in the Declaration of Independence Independence Independence to better apply these principles of human progress.

human progress. human progress. And then the other thing that I screwed up on is is uh for the first I've been at this more than 60 years and for the first 50 I avoided pol politics or major party politics. I mean being in the Libertarian party there was no thought of winning. The the only reason I got into that is well this is a time people are listening they're interested in politics so we'll engage in that because people are talking so we'll throw that in the hopper in hopes it takes on.

Well the way we did it it didn't take on at all. It blew up in our face. So then but we decided we needed to get in because we desperately needed some principalbased policies. Look at all the policies that we have today. They're destructive. They're leading to more and more power and pleasure, socialism and authoritarianism. authoritarianism. authoritarianism. And and the mistake we made or I made is trying to do it through one party. You can't do that. So now we we follow Frederick Douglas's advice to work with anyone to do right and no one to do wrong.

Where are we in the cycle? So there's a rising rising rising number of political leaders around the country. Initially it was in local elections and now it's on kind of the national stage declaring themselves socialist or some form of socialism. Are we kind of on an upswing and upswing? What we is there a social I thought hell was down not up so where are we? I think we continue this about we're going to hell in a basket. It's what it's what Thomas Jefferson he had slaves but what he said about about about slavery.

He says if if if God is just, I despair for the future of our country. That's kind of where I am. If God is just, I despair for the future of the country. the people we're electing both Republicans and Democrats. and Democrats. and Democrats. I mean, and the the mistreatment you I mean, you look at at at at what's being done. I mean, occupational lensure, lensure, lensure, the way they're the the the the way they're treating illegal immigrants, you name it, across the board. and the socialists, the way they're they're treating all the the crime, all of that is uh is uh is uh it's what we we've got to elect people who have some principles beyond power and pleasure.

What are your principles for changing people's minds? people's minds? people's minds? My it's it's what Chase says. We find them where we are just like we have in the company and we show them this doesn't get results. Now if you're if you're a dedicated communist if you're like like Trosky is if we can get rid of private property we'll get a we'll get rid of greed and then every ma every man will be a gerta and a beethoven and we will uh or we will be able to create ever ready warehouses of all the goods and everybody can go in because out of their goodwill.

They'll be making all this stuff. If people still have those fantasies, it's never worked in history. And so, And so, And so, but it's different this time. Yeah. Yeah. Yeah. Yeah. That's Well, that's right. And so, that's what we're trying to do at Stand Together. And Together. And Together. And Dave, what what we've learned on this is that you to change minds and change paradigms, you show versus tell. And um go back to what we were talking about before bottom up empowerment as opposed to top down control.

I mean I think that's like a overarching umbrella principle on all of these. So our whole thing with stand together and that's I think why it's growing exponentially is we have stories of PE we believe in people. We don't need top down to come in and tell people how to to solve problems. That's the That's the book that Brian Hooks and I wrote which we just uh we we have a new edition based on the 250 and we got Martin Luther King III wrote a forward to it and and that's that's another book besides this one.

If you're interested in these the very these ideas we're talking about on social change there's much more in that on than than this book on that. Although we have quite a bit on this book, we have one one of the key concepts in that is um if you believe that people aren't the problems to be solved, the people that are in the problem, they're the ones with the best ideas and they're the source of the solution. That's a totally different mindset, right? And I mean that's what Stand Together does.

We talk about venture capital a lot. We bet on people that have found something that works. Um just give a quick example, Scott Strode from the Phoenix. We found Scott. Um, his story is amazing. About eight years ago where he battled addiction most of his life. He had a mentor that put him in in the gym and got him in boxing gloves and like exercise was the thing that helped him kick addiction. And what he did, he's like, "Well, if this helps me, I think I can help other people with this this same concept." He built a gym called the Phoenix.

Combined the power of community with others that are struggling with the same thing. same thing. same thing. um you know multiplied by the power of um of exercise and he was getting insane results like relapse rates that were below 10%. So what we do is like instead of like some top- down program to handle addiction, go bet on Scott. And that's what we've done the last seven or eight years is we've gone from he had a couple gyms in Colorado when we met him, you know, impacting a couple thousand people.

He just hit a million people basically overcoming addiction in this last year. That's a movement, right? And I mean that's a key difference I think of Stand Together is like how do you do what you're talking about at scale and help people change paradigms? You show them with stories like Scott that let's be let's believe in the people and let's bet on them to transform society for addiction and crime that resonates wholeheartedly. Let me ask about the economic condition of America. Kids are graduating college. They got hundreds of thousands of dollars in student loan debt.

No one can afford to go to the doctor. Grocery bills are too high. People are worried about paying for their next grocery bill. You look at the polling data, the survey data, the average American is really struggling. I think more than half of Americans, 60 plus% maybe 63% have negative equity. They have more debt than they have assets and everything's getting more expensive and no one's moving up the e economic ladder. There's no mobility anymore. People are really struggling. And then they're looking on TV and they're seeing spaceships launching up to space, holding flowers out the window, smiling and laughing.

And it's a really dark time. And it really leads people down this path of I need the government to help me. I need support. I need help. I need to elect the people that will fix this for me. How do we address the economic crisis that's facing the average person in America? The lack of economic mobility, the principles around these distraught situations, fantastic. But this fundamental economic crisis that we're facing, facing, facing, that's a damn good question. It's it's like here's the question. Okay, the eggs have have been scrambled.

It's your job to unscramble them, right? right? right? So, that's the problem. Once you create these uh entitlements, I mean, you almost can never get rid of them. I you you almost need well may maybe uh maybe Argentina if he can pull off what he's doing because they were in worse shape. worse shape. worse shape. But they went through it. Yeah, Yeah, Yeah, we haven't got through it. Well, maybe we will getting there. Well, let me ask a question. Does capitalism work long term? And let me give you a an argument why it might not.

The success at Koch Industries is built on an algorithm, your principles, and you've been able to adapt that algorithm, and as a result, scale your business, generate cash, reinvest that cash, generate more cash, reinvest that cash, and so on, and you've scaled 9,000x. You've built a compounding advantage in your business. As is the case with all successful capitalists, you build a compounding advantage. The problem with compounding in any system is it eventually eats all of the whatever is in the system or it makes it hard for others to compete in that system or participate effectively in that system.

And that's the argument that's being made today against capitalism. How do we counter that idea and share that capitalism should be more accessible to all that everyone can participate and everyone can benefit that it doesn't end up in this monopolistic end state where no one Well, it starts from removing the barriers. barriers. barriers. That's what I said. You you've we've got to work for a system where we remove the barriers that are holding people back from realizing their potential, finding their gifts, realizing their potential and succeeding by contributing.

by contributing. by contributing. Okay. So I mean I mean so we we should start like occupational licensing all of this. There are hundreds of hundreds as you know of occupations where they make it so tough all the local people who are in that business make it impossible for anybody who starts with nothing to to do it. And then and then the way we're treating illegal immigrants, the one here working and contributing, we harass them and are going to kick them out. No, we ought to welcome them and kick some of the others, the bad ones out.

But uh I mean so some of this is is basic and then we we we've got to reward people who want to contribute. That's why we keep you've got to get people to be contribution motivated. Then you're going to have a life of meaning and and that's what Vic Victor Frankle was trying to tell us. And if we don't we're we're going to fail. And we're failing because we're taking away the chance for most people to have a life of meaning because we're setting up all these obstacles obstacles obstacles and and I'm not picking on one party or the other.

They're both doing it and then set up all these tariffs which undermine the divisional labor by comparative advantage which makes everything more expensive. So it's just I mean everywhere you look it's a it's a tragedy. There's a debate happening at this moment on AI regulating AI. How does AI become an enabler of self-actualization, giving every individual the capacity to develop themselves, accelerate and succeed versus making a fewer number of people even more wealthy and taking jobs away from the masses? What's your view on where AI is taking us?

Well, it's it depends on how it's done. I mean that's why we back Cosmos who is who is doing backing people who do AI based on these principles of market-based management based on these these principles of human progress and uh and and why don't you tell everybody what you've done in the in the book with AI AI AI there I mean just one principle on like our approach to AI is just simple concept of permissionless innovation open I mean the cost of AI to get it in people's hands is dropping it just to an incredibly cheap level that hopefully everyone can have access to that and then combine that with their gifts to unlock their potential and learn 1000x faster.

That's I mean from an AI standpoint that's that's that's our mindset on it. But and that's what we're doing internally at KO as well. Like I think one of the most exciting innovations that we have is all around human empowerment back to bottomup empowerment with principles. So, not only are we, you know, trying to make sure that we have the right supervisors that are helping people, you know, understand their principles so they can apply them. Um, you know, with the book, we've created an app. Um, I sent it to you, Dave.

I don't know if you you played with it or not, but it's called, uh, Principal Companion. You can download it in the app store. And, um, it's really taking off within Coke because it's just another way to engage with principles in a very simple way and meeting people where they are. um whether it's chat GPT or Claude and solving a problem in 5 to 10 minutes that otherwise would have taken a long time. We're basically powering it with the principles that are in the book to like any problem.

So it's one field, you know, whatever your problem is in business and philanthropy and if you run a sports team or you're having problems with your kids, it helps you with that, right? And so that I think that's just one example of how we're trying to like really drive human human human and it doesn't give you an you can't say well I got this problem what's the answer no it asks you questions okay okay given that have you thought about this have you thought about that so it's a Socratic method and we know what happened to Socrates so yeah okay yeah okay yeah okay so listen we're going to need to wrap in a minute but before we do Chase you know what was the experience like writing the book with your What's it like working with your dad and and and biggest lesson lessons learned from your dad?

Yeah, dad? Yeah, dad? Yeah, I want to give you a chance. Absolutely incredible. I'd say it's probably the most important project that I've ever worked on. Um, getting invited into writing this book and I've said to many people, um, I've learned more in the last 18 months than I probably have the last 18 years, just because when you write something, as you know, the the the depth of learning and going back into the details of the stories, figuring out how to tell that story in a book in a way that connects with as many people as possible.

Um, I always say like you really don't know something until you have to teach it. And writing a book is a form of like trying to to teach others with it. So my depth of learning because I got to be right, you know, be alongside this guy and and there was many others across KO that that contributed to this to this book as well. But um learned a tremendous amount. Um the other thing of just doing this with him, um he applied the principles to the bookw writing process, right?

So it's like everything and it's he's so consistent it almost like drives you nuts, right? In terms of of applying principles to everything, but principles like openness, creative, he's written, this is his fifth book. This is my first, but he wanted to drive creative destruction of his first four, right? And so I think bringing me in to it, just bringing a fresh perspective, bringing technology to it and uh telling stories in a different way. Um that's an open mindset. He could have eas the boss. I've done this before.

What the hell do you know? You know, um but he he had that mindset to it and you know applied the principles to it. But I will say he's such a stickler with words and um you should talk to my mother about this and how it drives her effing nuts. Um but so I got I got kind of a an 18-month window on what it's like to be mom maybe. Um but um but the you know we had one chapter in there on on stewardship and I think we were on we were on version 27 of it or something like that.

like that. like that. Yeah, I rewrote it of I like pop 15 times myself. You are not applying the principle of marginal analysis. marginal analysis. marginal analysis. Version 26 was pretty damn good and so and so and so so anyway we but we had a lot of fun with it and yeah of course there was tension in terms of how you you'd write something or whatever but overall most important project I've ever worked on. Yeah. Now words have meaning. I mean people say the proof is in the pudding.

No, the proof of the pudding is in the eating. eating. eating. For God's sake, that means nothing. The proof is in the pudding. Yeah. Yeah. Yeah. What? You stuck your foot in it? Yeah. Yeah. Yeah. He corrects the coke leader on that in about every meeting we're in. So, Oh, and then and then I used to give grammar lessons in our discovery board. What's it like working with Chase? What's it been like writing the book? It's I mean he is I thought he'd help some with the book and he would get us a a a perspect different perspective on how to reach young people and do some things and and improve it from his p perspective but he's taken it to a whole level like bringing in AI and have AI as the as a principal companion to the book and all of these that are way beyond me.

So he's taken the as he has in everything taken it to a whole level beyond where I am. You've uh written a lot of books. You've built an unbelievable business, one of the greatest on earth. You've engaged in extraordinary social and civic engagement. What do you want the legacy to be? to be? to be? I want us I want our country to more fully live up to the promise in the Declaration of Independence. Charles Ko. Chase Coke. Thank you. Stay safe.