Business Model Spotlight: Koch Industries Chairman and CEO Charles G. Koch

But you knew that was the standard, at least.

Oh yeah, I knew it. Those are all things you learn when you have a job to do; whereas, if you don’t have that, you don’t learn those key values and discipline. People say, ‘Oh, this is a dead-end job, don’t get that.’ Well, the real dead-end is being unemployed, because you never learn these lessons and develop these habits. The studies show, by the time you’re 30-something or 40, if you don’t have them, your odds of being successful are just about nil.

I have the letter that my father wrote to me and my older brother, that I found in the safety deposit box after he died. The main thing is he wanted us to experience the glorious feeling of accomplishment. That’s what I think people forget in a company, or anywhere; that people have to have meaning in life. The best meaning is helping others improve their lives. Doing so benefits you and them; it’s a system of mutual benefit.

So we’ve got to spread this idea of what we call principled entrepreneurship: to succeed by helping others improve their lives. The more good you do for others, the better you feel about yourself. That’s what I call a transformation. Once somebody gets that idea, it’s transforming. Okay, so that was the first thing: learning to work. Next, you don’t preach anything to your kids that you’re not willing to live by, because your kids can spot hypocrisy about a million miles away.

Then I’d say the next thing–and I have no idea how to teach this, but I think in my case it was critical: I always wanted to be different. I asked my father, I said, ‘Pop, why were you so much tougher on me than my younger brothers?’ And he said, ‘Son, you plum wore me out.’ Because I was ornery, always trying to do something different. I didn’t want to be like the other kids. I didn’t want to go run with them. I have no idea why, but I think that’s critical to be a successful entrepreneur. You want to go figure out something that others aren’t providing, or provide it in a different way.

As you say in your book, everybody has their codes and values. It’s one thing to have a business model and a code of conduct; it’s another thing to figure out how to integrate that into your organization top down. What does an entrepreneur need to focus on in order to implement market-based management of his or her business?

Okay, the first thing I believe, is to not start out with: ‘Okay, how do I make the most money?’ If you start with that–’Boy, I want to maximize profits’ –that may work on one deal.  But if you want to be successful over a long period of time, you need to start with: ‘How do I create the most value for others? How do I help other people improve their lives?’

We have ten guiding principles made up of three parts. The first part [is comprised of] the first two principles: integrity and compliance. I would put keeping people safe and protecting the environment in there.