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

Such as barber shops.

Yeah. Barber shops, interior decorators, yoga instructors, hair braiders. In one community—I forget where it was— you had to study hair dressing for two years and it costs thousands of dollars. It’s ridiculous. It’s all cronyism because the people doing the business want to keep out all these eager young people, so they can charge a higher price. Besides destroying opportunity for the disadvantaged, it raises the prices of all these services. So it hurts everybody, particularly the least well off.

Another is to reform (which is really tough) and supplement the education system. That’s what we’re trying to do with Youth Entrepreneurs and our support for the United Negro College Fund. We’re working with various people who have been organizing and know how to get people active.

How would you advise an entrepreneur who might read Good Profit or read this article and decide they’re going to drink the market-based management Kool-Aid. What are the biggest obstacles in their companies that they’re going to need to be prepared for when they try to implement the system?

The first thing is: Physician, heal thy self. The tendency with any of this, as with any management system, is to make a cookbook out of it, to have a process: ‘I’m going to have a checklist.’ That’s the way we started here. What you find is that then people become good at talking about it, but not really implementing it. You’ve got to go beyond just the words and the procedures. You’ve got to internalize the fundamental principles. What are these fundamental principles and mental models to internalize them? And then think, ‘Okay. How do I apply these, not as [an intellectual exercise], but as a way to help me create more value?’

From your seat as the chairman and CEO of the company, how do you manage the balance between your “North Star”–your guiding principles as a person and a business leader–and how you’re perceived, whether it’s here in Wichita or around the country?

It isn’t a problem, because I’ve been committed to these values for over 50 years. As I say, they transformed my life, so they are my life. No one’s going to push me away from that. One of my favorite quotes is from Frederick Douglass: Stand by those principles, be true to them on all occasions, in all places, against all foes, and at whatever cost. Just like Douglass said, I’d rather die for something than live for nothing.