292. Why Hate the Koch Brothers? (Part 1)

Charles Koch, the mega-billionaire CEO of Koch Industries and half of the infamous political machine, sees himself as a classical liberal. So why do most Democrats hate him so much? In a rare series of interviews, he explains his political awakening, his management philosophy and why he supports legislation that goes against his self-interest.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Stephen J. Dubner?

  Freakonomics Radio is sponsored by Southern New Hampshire University. The best investments are the ones you make in yourself, and no one knows that better than Southern New Hampshire University. With more than 200 online degree programs, no set class times, and low online tuition, Southern New Hampshire University is built to fit your life today and set you up for success tomorrow. Education is an investment. Why not make it a smart one? Apply for free at SNHU.edu/freakonomics. Freakonomics Radio is sponsored by PNC Bank. Boring. Great word, bad rep. Yet, time and time again, here at Freakonomics, we find that when something culture-changing

• 0:42Stephen J. Dubner?

  happens, boring things like calculations and careful planning are usually behind it. Which begs the question, why not apply it to other aspects of life? Like banking, for example? Well, PNC Bank did, since its inception, proving time and again that the best banking strategy isn't the exciting type, but the steady, reliable, definitely not YOLO type. PNC Bank: brilliantly boring since 1865. Brilliantly boring since 1865 is a registered mark of the PNC Financial Services Group, Inc. PNC Bank, National Association, Member FDIC. Freakonomics Radio is sponsored by Amica. You know what they say, if you want to go fast, go alone.

• 1:25Stephen J. Dubner?

  If you want to go far, go together. So, go with Amica and get coverage from a mutual insurer that's built for their customers, one that looks after what's important to you together. Auto, home, life, and more, coverage that fits your unique needs. Amica helps you protect what matters most. Visit amica.com and get a quote today.

• 1:53Stephen J. Dubner?

  Freakonomics Radio is sponsored by ChatGPT. ChatGPT Work is a new way to work in ChatGPT. ChatGPT Work can pull info from across your apps and connect to your tools to help you create finished work. You can even automate work in ChatGPT with the Scheduled Tasks feature, and the whole time, you stay in control. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com by selecting Work Mode, available on Plus and Pro plans.

• 2:28Stephen J. Dubner?

  Freakonomics Radio is supported by IBM. By the end of this podcast, nearly 10,000 new malware variants will have launched. Now AI can help protect your data from threats, wherever it lives, with IBM Security. Let's put smart to work. Learn more at ibm.com/smart. Freakonomics Radio is supported by ZipRecruiter. Hiring? ZipRecruiter has revolutionized how you do it. Their technology identifies people with the right experience and invites them to apply to your job. They find great candidates for you. Try it for free today at ziprecruiter.com/freak. ZipRecruiter, the smartest way to hire.

• 3:08Stephen J. Dubner?

  If I asked you to name a very famous, generally down-to-earth Midwestern billionaire, that's easy, right?

• 3:15Speaker 01

  So would you please give a very warm welcome to the Oracle of Omaha, Warren Buffett?

• 3:21Stephen J. Dubner?

  No, not that famous Midwestern billionaire. This one.

• 3:25Speaker 02

  My name is Charles Koch, and I'm chairman and CEO of Koch Industries.

• 3:30Stephen J. Dubner?

  He's also one half of the controversial entity known as the Koch Brothers.

• 3:35Speaker 02

  The Koch Brothers are trying to buy America.

• 3:36Speaker 03

  They are the Koch Brothers, helping to lead the war, in my view, against working families in this country.

• 3:43Stephen J. Dubner?

  He must have seen this coming, right?

• 3:45Speaker 02

  Look, I knew it would be nasty and unpleasant. I didn't know it would be this dishonest.

• 3:51Stephen J. Dubner?

  Charles Koch isn't much of a media fixture, but over the course of several weeks, he sat down with Freakonomics Radio for a series of conversations. He discussed- What his critics say about him.

• 4:01Speaker 02

  Most of the facts that I'm familiar with are wrong.

• 4:04Stephen J. Dubner?

  How he first came to see modern politics as corrupt.

• 4:08Speaker 02

  My first real brush with this was, I think, in 1972, when Nixon was campaigning.

• 4:15Stephen J. Dubner?

  And why he's so worried about America's future.

• 4:19Speaker 02

  We're increasingly headed, under both Republicans and Democrats, toward a system of control, dependency, and cronyism that's pitting individuals and groups against each other and destroying opportunity and progress.

• 4:33Stephen J. Dubner?

  He talked about the political issues of the day.

• 4:35Speaker 02

  I would let anybody in who will make the country better and no one who will make that worse. And that would be the same thing of people who are here illegally.

• 4:47Speaker 02

  I'm not in favor of people doing drugs. On the other hand, extreme criminalization hasn't worked. Obviously, if the temperature continues to go up at some point, it can be harmful or even very harmful.

• 5:03Stephen J. Dubner?

  We ask the questions we know you're thinking. Now, the public line on you, however, is that, well, everything that Charles Koch or the Koch Brothers advocate, societally or politically, is just an effort to protect or extend their business interests. So make your best case how and why that's not so.

• 5:27Speaker 02

  We opposed extenders, the tax bill, which are tax exemptions, and we make a lot of money from those. We opposed this border adjustment fee that would make us over $1 billion a year. You want me to go on?

• 5:44Stephen J. Dubner?

  We hear praise from some unlikely quarters.

• 5:47Speaker 04

  You've got the NAACP and the Koch Brothers.

• 5:55Speaker 04

  No, you gotta give them credit. You gotta call it like you see it.

• 6:01Stephen J. Dubner?

  And we get to what kind of person Charles Koch really is. I have to say, and I say this with the utmost respect, you're a total nerd, aren't you?

• 6:09Speaker 02

  No, I'm a fun-loving guy. Hey, I was a rugby player. Are you kidding me?

• 6:23Speaker 05

  From WNYC Studios, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner.

• 6:42Stephen J. Dubner?

  Charles Koch lives in Wichita, Kansas, which is where he grew up. He's got a wife, many years, two grown kids, a daughter who's a writer and book publisher, and a son in Wichita who runs the Koch Industries fertilizer business. Charles Koch was born in 1935, the second of four boys. His brother David lives in New York. He's also involved in Koch Industries, though less so than Charles. And he's the other half of the so-called Koch Brothers' political funding machine. The other two brothers aren't involved in the political network or Koch Industries, a reflection of decades of legal combat. If you like really nasty family feuds that last for decades and involve billion-dollar

• 7:24Stephen J. Dubner?

  settlements, you might want to read a book called Sons of Wichita: How the Koch Brothers Became America's Most Powerful and Private Dynasty. Koch Industries today, meanwhile, is the second-largest private firm in the United States after Cargill. It was started by Charles Koch's father as an oil and engineering firm. Now, it's one of the biggest industrial conglomerates in the world with 120,000 employees. It deals in everything from chemicals and electronics to paper products and textiles. Some of its best-known brands: Georgia Pacific, Lycra, and Stainmaster Carpeting. Its annual revenues are estimated at about $100 billion.

• 8:06Stephen J. Dubner?

  Charles and David Koch are estimated to be worth nearly $50 billion apiece.

• 8:13Stephen J. Dubner?

  Charles, in case you're wondering, has no interest in retiring.

• 8:16Speaker 02

  If I did that, I'd be dead in six months.

• 8:19Stephen J. Dubner?

  So briefly, tell me what you actually do in a given day.

• 8:24Speaker 02

  Well, I get to work at 7 or a little before, and I meet with customers, I meet with employees, I go over projects, opportunities, and problems, and I gather information from all different sources. And I'm very strong on driving innovation, creative destruction, and making sure we have a learning organization and an innovative one.

• 8:56Stephen J. Dubner?

  Koch Industries has been a gargantuan business success, but that's not what made Charles Koch famous. That happened much more recently, when he intensified his funding of political and social causes and political campaigns. Because he has funded almost exclusively Republican candidates and causes typically associated with Republicans, he is, at least in the eyes of most Democrats, an obvious enemy, a George Soros of the right. But he and his brother David have become more than just an enemy. They're seen as a bete noire, plying the radical right with so-called dark money. That, in fact, is the name of the journalist Jane Mayer's expose on the Koch brothers.

• 9:40Speaker 06

  They've gathered around them a group of 400 to 450 other phenomenally rich and influential American conservatives, and it's given them the equivalent of kind of a private, plutocratic political party.

• 9:56Stephen J. Dubner?

  So let's try to untangle the rhetoric and the reality, and try to figure out if Charles Koch's views are as doctrinaire as they're sometimes portrayed, or perhaps a bit more nuanced. To understand his views on politics and society and business probably helps to understand where they come from, starting with his father. Fred Koch had studied engineering at MIT.

• 10:23Speaker 02

  And he was tough. He was Dutch and his favorite saying is, "You can tell the Dutch, but you can't tell them much."

• 10:29Stephen J. Dubner?

  In the 1920s, Fred Koch had a small oil refining firm that he was trying to grow into a big one. He aggressively challenged the industry leader, which in turn sued Koch for copying its technology. Eventually, he would lose in court. In the meantime, he looked for business overseas, and he made his first millions building oil refining facilities in Stalin's Soviet Union, which he hated. The statism and collectivism, the cronyism and corruption. "What I saw in Russia," Fred Koch later wrote, "convinced me that communism was the most evil force the world has ever seen, and I must do everything in my power to fight it."

• 11:13Stephen J. Dubner?

  Back home, he helped start the John Birch Society, which took anti-communism to the point of nativism and racism. Koch also learned that the lawsuit he had lost had been rigged. The opponent bought off a judge. From this one pair of events in Fred Koch's life, getting shut down by a crooked competitor and working under the direction of a communist dictator, you can see the entire blueprint for Charles Koch's view of the world. The enemies? Cronyism, special interests, and intrusive government. The solutions?

• 11:50Speaker 02

  What my vision for a good society is what we call a free and open society. Liberated people can do amazing things. They're productive, innovative, and entrepreneurial. And people who are subjugated, who are intimidated, controlled, or dependent tend not to be.

• 12:10Stephen J. Dubner?

  Charles Koch hadn't planned on joining his father's business.

• 12:14Speaker 02

  So he was always tough on me as a kid, so I figured I didn't need to go back through that again.

• 12:20Stephen J. Dubner?

  Like his father, Charles studied engineering at MIT.

• 12:23Speaker 02

  After I finished at MIT, I went to work for Arthur D. Little at Consulting. Firm and so after I'd been there two years or so, my father called me and wanted me to join the firm and I turned him down. So then-

• 12:37Stephen J. Dubner?

  You were not crazy about going back to Wichita at that point, I gather, yes?

• 12:40Speaker 02

  Right, and I was learning a lot and having a great time, playing rugby and being, living in Boston. I mean, a lot of great girl's schools and wonderful girls to date back there. So I wasn't too eager to come back. So then he called me and he said, "Son", he said, "My health is poor." His blood pressure was 230 over 120, if you can imagine. They just didn't have the drugs then, of course, to treat it. And he said, "I don't have long to live and either you come back to run the company or I'm going to sell it."

• 13:18Stephen J. Dubner?

  Coke agreed to come back to Wichita to take over a small equipment division called Coke Engineering.

• 13:24Speaker 02

  And so that worked great. So then he turned over the other areas to me. And, but he lived longer than he thought. He lived six years and I got to work with him for six years.

• 13:37Stephen J. Dubner?

  After his father died, Coke planned the firm's future.

• 13:40Speaker 02

  So I wanted to build the businesses we had. And then my view as it still is, is that the way to succeed is to understand what capabilities you have to create superior value, find the best opportunities for them, and then improve, constantly improve those capabilities, add new ones, which will open new opportunities for you. So that's been our, our vision and our approach ever since. So we've just kept building capabilities, adding new ones, finding new opportunities, which gave us additional capabilities and so on.

• 14:17Stephen J. Dubner?

  I see that when I look at Coke Industries' employee satisfaction ratings, which you can look up these days, the firm does quite well. But in terms of the CEO ratings, that's you, you do really well. You've got a 92% approval rating. Now, I have no idea who's writing these. Maybe this is you and your wife writing all the reviews.

• 14:37Speaker 02

  No, I haven't. This is the first I've heard of it. Well, good. I wouldn't rate myself quite so high, but I'm glad somebody has that belief.

• 14:47Stephen J. Dubner?

  So if someone in business, starting out, asks you for some structural, basic advice of running a firm, managing people, juggling it all, what would you tell them?

• 14:59Speaker 02

  Well, the first thing is to understand what your innate abilities are and what you have a passion for and you're really willing to work hard at. And then think through how that translates into how you create value for others, because that's going to determine how successful you are and what kind of life you have, how fulfilled you are. And so, in an organization, you need to create value, of course, first of all, for your customers. Then you need to create value for your employees and partners, and then you need to create value for society at large.

• 15:42Stephen J. Dubner?

  What excites you about the business still? What keeps you coming in? You're in your early 80s. What keeps you coming into the office every day? You're one of the 10 richest people on the planet, so presumably you don't need more money.

• 15:57Speaker 02

  Well, I mean, I love it. What I love is innovation, finding new ways to create value, improving. I mean, I believe everything we're doing can be done much better and will be over time. So that's what keeps me turned on. Plus, helping our people transform themselves, become lifelong learners, and constantly learning how to create more value.

• 16:29Stephen J. Dubner?

  If you've been listening to Freakonomics Radio for a while, Koch's management philosophy may sound familiar. It's built on a lifetime of reading economics and other social sciences.

• 16:40Speaker 02

  Starting at MIT, I became fascinated with scientific progress, the philosophy of science, the scientific method. And then I became fascinated with social progress as well as scientific. And so I started studying economics, psychology, sociology, and general philosophy. And then applying the principles I learned in the business. And that's what ultimately led to our management philosophy, which is what we call market-based management.

• 17:16Stephen J. Dubner?

  For someone who's never heard of it, let's just start with your brief description of market-based management.

• 17:22Speaker 02

  Okay, market-based management has five dimensions: vision, virtue and talents, knowledge processes, decision rights and incentives. And when we put that together in a package, an integrated package, it gives leaders and everybody in the company a toolkit to solve problems and capture opportunities. A critical part of our management philosophy is building what we call a challenge culture. And we find that's one of the biggest problems in acquisitions we make. And many of them, if you challenge your boss, it really hurts your career.

• 18:01Speaker 02

  Here, if you don't challenge your boss, not to show how smart you are or be clever, but because you see a problem in what's being done, or you have a better idea, you believe, if you don't challenge, you're not really doing your job. I mean, if you're here and as a leader at any level, and your people aren't challenging you, you're obviously not a good leader. Because they're intimidated, or you haven't encouraged them, you haven't rewarded them, they're afraid they'll be put down or look stupid.

• 18:36Stephen J. Dubner?

  Do you ever worry that strong decision rights will tip into, not quite anarchy, but you know, a too decentralized management mechanism where individual managers may have such autonomy or such decision rights, at least such strong decision rights, that they will turn into mini dictators?

• 18:56Speaker 02

  Right, that is absolutely a danger. And so what we look at, as you see in many companies, they'll get centralized and they'll find that's not working, so they get decentralized. The way we look at it is certain things need to be centralized. That is, the people at the center have better knowledge of, let's say, the effect of something on the other businesses, or how that fits the overall strategy, or market trends than the people at the plant. But there are other things that the people at the plant have better knowledge. So it's the division of labor by comparative advantage.

• 19:39Speaker 02

  And so we are very centralized on some things and very decentralized on others. And is it perfect? And does it always work great? No. But it's a constant balance and reworking and trial and error.

• 19:53Stephen J. Dubner?

  I'd like to talk about incentives for a little bit because, as you and I know, that's a cornerstone of, you know, economic thinking. So because of the way that incentives work at your firm, a given employee can start making more money than his or her manager. I'm curious how people respond to that. Does that create turmoil? How do you address that?

• 20:15Speaker 02

  Well, of course, I'm not into their psyche, but let me just say it works great. I mean, it's, I mean, does it, like at basketball, does the coach quit because LeBron James makes more than he, he said, LeBron, go for it because you're making, you're making me look good. So keep it up and I hope you make five times what I do. And that's the kind of culture we try to build here.

• 20:38Stephen J. Dubner?

  So from what you're telling me now, and from what I've read, it sounds as if market-based management, the operating system of your business, is pretty similar to what you would like to be, you personally, Charles Koch, would like to be, the operating system for society at large, a kind of structured, principled environment that encourages self-determination and so on. But, but surely it's a lot harder to, you know, create or impose this kind of framework on society than on a private firm, yes?

• 21:10Speaker 02

  Well, I, I mean, I know what you're driving at, so the answer is yes, but not structured. I want a system of spontaneous, what I want, my ideal.

• 21:23Speaker 02

  If the world were ready for it is to have, truly have a society that represented the principles in the Declaration of Independence. That is, everyone is created equal with certain inalienable rights. And governments are instituted to secure those rights. And so then I look at the four core institutions in society. That is, education, communities, business, and government. And determine, okay, what is the ideal for each of these types of institutions that will help move us in that direction?

• 22:03Stephen J. Dubner?

  So, back in the 1960s, long before you were involved politically as you are now, you argued that the role of government in the capitalist system at least should be, quote, "only to keep a check on those who might attempt to interfere with the laws of supply and demand." So, I'm curious to hear, you know, how deeply you truly believe that then, that the role should be that limited, and how you feel about it now?

• 22:28Speaker 02

  Right. Well, I've matured a little bit, being 81, you'd hope, finally. So I look at government. And so I've studied, okay, what is government? And I like Max Weber's definition of government the best, or it's most helpful to me. That is, government is the social institution with a legal monopoly on force in a given geographic area. So the nature of government is force. And so I believe that government should act when force works better than voluntary cooperation and competition.

• 23:13Speaker 02

  And so the starting point on things it does is use force when force is inherent in it, like to protect the country from foreign invasion. A police try to protect people from being robbed and killed. But there needs to be a social safety net. So then the question is, what is the optimum social safety net and how would that work?

• 23:37Stephen J. Dubner?

  I have to say, and I say this with the utmost respect, you're a total nerd, aren't you?

• 23:43Speaker 02

  No, I'm a fun-loving guy. Hey, I was a rugby player, are you kidding me? But I am, yeah, I'm a nerd.

• 23:51Stephen J. Dubner?

  Now, for many, many years, you avoided politics and then you stopped avoiding it. So why? What changed?

• 23:59Speaker 02

  Well, it was during the Bush administration. I started in this in giving kids scholarships who were interested in self-transformation and self-development along the lines we've been talking. And then supporting professors as they heard about what I was interested in and so on. And then got into, okay, we need to flesh out the policy implications of these ideas. And then get into, okay, now we have a lot of people who are interested in them. We need to help them mobilize to get this stuff done. And then George Bush, 43, was elected.

• 24:43Speaker 02

  And it looked like he was going to advance some of these ideas.

• 24:49Speaker 02

  And then he went the other way. And under him, government, the federal government grew 50% more than it did under Clinton. And roughly three times the number of restrictive regulations were passed under him. And we got in disastrous wars and just one thing after the other. So I said, well, I mean, we've got to have people who don't just campaign on these.

• 25:19Stephen J. Dubner?

  Freakonomics Radio is sponsored by Granola. You know that moment when a meeting ends and someone says, let's circle back on this next week and everyone nods, but no one writes it down? Then next week rolls around and it's radio silence? That's why Granola exists. Granola is an AI-powered notepad built for the way real people actually meet. You take rough notes like you normally would, and in the background, Granola securely transcribes the meeting. Then it turns everything into clean, structured, actually useful notes when the meeting ends. And the best part? Granola works through your device's audio, which means it integrates seamlessly into the video conferencing tools you already use. No setup, no awkward bots. It's just your normal meeting with super. If meetings are eating up your day, granola is a no-brainer. You can try it totally free.

• 26:03Stephen J. Dubner?

  Just head to granola.ai/freakonomics. That's granola.ai/freakonomics to get your time back. Try it for free at granola.ai/freakonomics.

• 26:21Stephen J. Dubner?

  Freakonomics Radio is sponsored by PNC Bank. Boring, great word, bad rep. Yet, time and time again, here at Freakonomics, we find that when something culture-changing happens, boring things like calculations and careful planning are usually behind it. Which begs the question, why not apply it to other aspects of life? Like banking, for example. Well, PNC Bank did, since its inception, proving time and again that the best banking strategy isn't the exciting type, but the steady, reliable, definitely-not-YOLO type. PNC Bank, brilliantly boring since 1865. Brilliantly boring since 1865 is a registered mark of the PNC Financial Services Group, Inc. PNC Bank, National Association, Member FDIC.

• 27:09Stephen J. Dubner?

  Freakonomics Radio is sponsored by hotels.com. Hotels.com helps you find and book the right stay for work faster. With business preferences, save your travel must-haves, like gym access or breakfast, just once, then get tailored results whenever you search for work travel. Plus, with a free membership, you can save up to 20% on hotels and earn rewards on every stay for future travel. Book now at hotels.com. Visit hotels.com for details.

• 27:40Speaker 02

  ...ideas, but who really believe them. And then we'll support those who advance these ideas. And that's how it got started.

• 27:56Stephen J. Dubner?

  Coming up on Freakonomics Radio, once it got started, the reach got broader and broader.

• 28:02Speaker 02

  And so we had a number of successes, a lot of failures with the Obama administration.

• 28:10Stephen J. Dubner?

  That's coming up, right after this break.

• 28:20Speaker 07

  Freakonomics Radio is supported by Leitner Headsets. You're listening to the number one business podcast, so your office should be using the number one business headsets. At Leitner Headsets, we're freaks for sound quality and comfort. Leitner headsets will blow your mind with an insane five-year warranty, 60-day money-back guarantee, and free lifetime product support. It's the only headset that guarantees complete peace of mind. Visit headsets.com/freak to start your 60-day free trial.

• 28:53Stephen J. Dubner?

  Okay, good morning. It's Stephen Dubner. Charles, how are you?

• 28:55Speaker 02

  Hey, great. How are you doing, Stephen?

• 28:59Stephen J. Dubner?

  We've been speaking with Charles Koch, CEO of Koch Industries, but much more famously, one of the men behind a massive funding operation designed to blow up what Koch sees as the political status quo. Let me ask you this, and I don't mean to sound skeptical or snarky, but why do you care personally so much about shaping society at large? You know, most people, I'm guessing 99.5% of the people listening to us talk, don't know anyone that's anywhere near as wealthy and as accomplished and powerful as you. And I think a natural inclination is to say, well, that person just wants to exert the

• 29:41Stephen J. Dubner?

  power for ego gratification, or for further enjoyment, or maybe for further magnifying, you know, his own wealth and power. So persuade me that those are not the motivations, and that your kind of desired social engineering is for the greater good.

• 30:01Speaker 02

  We fought a revolution to get rid of royalty, and we don't need royalty here. It's seeping back in in different forms. But basically, I was blessed, starting at an early age, to have learned certain principles, concepts, and values that transformed my life and enabled me to accomplish more than I ever dreamed possible. So since that time, I wanted to give as many people the opportunity to do the same, that is, to develop their full potential and become lifelong learners and lead successful, fulfilling lives. Now, when somebody gets that thought in their mind,

• 30:45Speaker 02

  and that's what they're thinking about every day, that affects their whole approach to life. So they think, okay, I want to do that in my family. I want to do that in my communities. And that's just, it changes their mental models. It changes the way their brain is hardwired. And that's what we find in all our work in education and everything. I have seen these ideas transform more people, thousands of people. And so they lead better lives. And then, as Frederick Douglass did, once he got these ideas, he didn't just fight to free other slaves. He fought for women's rights, for immigrants' rights,

• 31:29Speaker 02

  for persecuted religious minorities' rights. And that's what we see. So that's what I want. I want the people to be liberated. I don't want to control them.

• 31:41Stephen J. Dubner?

  But why do you care so much?

• 31:45Speaker 02

  Because it transformed my life. And so I just love to see it transform other people's lives. Because if you have a success and you feel good about it, then you want more of that. And that's what I get. I mean, you could say it's like a drug. But it's, I hope it's a drug that makes me work for good, not for him.

• 32:11Stephen J. Dubner?

  The list of charitable causes supported by Charles Koch and his brother David is long and diverse and would surely find approval with even their most devout political enemies. David is particularly well-known in New York for funding the arts and medical research. Among the Koch Industries beneficiaries are the United Negro College Fund, Project Jump Start, which provides construction training, and the Movement for Criminal Justice Reform.

• 32:37Speaker 02

  Well, I think, like everything else, we need a legal system that is just, where the punishment fits the crime. And we also need a system that if people make a mistake, learn from their mistake, they need to have a second chance rather than ruin their lives. Now, it is a tough sell because people believe, God, you're going to let all the criminals out. We're going to be less safe. And no, the idea is to make people most safe. When you have draconian penalties, penalties that don't fit the crime, then the police

• 33:20Speaker 02

  are about to arrest somebody for, let's say, selling marijuana, and you may have a gun in your car because you're afraid of being attacked. So what is somebody going to do when they're going to be arrested? I mean, they don't have the attitude that, gosh, okay, I'm going to get a penalty, but I'll be all right. It's going to ruin their lives. So what do they do? They fight back or run, and then they get shot? And the whole thing escalates.

• 33:49Stephen J. Dubner?

  This project aligned Koch with the Obama White House, a fact President Obama noted when he spoke to the NAACP in 2015 about sentencing reform.

• 34:00Speaker 04

  This is a cause that's bringing people in both houses of Congress together. It's created some unlikely bedfellows. You've got Van Jones and Newt Gingrich. You've got Americans for Tax Reform and the ACLU. You've got the NAACP and the Koch Brothers. No, you got to give them credit. You got to call it like you see it.

• 34:36Stephen J. Dubner?

  That said, in a 2016 New Yorker piece by Jane Mayer, the former Obama adviser David Axelrod is quoted as belittling the Koch's efforts. "It's all part of a very well-conceived strategy to change the image of the Koch Brothers as dark and plodding oilmen ideologues," he said.

• 34:56Stephen J. Dubner?

  The standard argument from the left is that whatever social good the Kochs may be doing, it's massively outweighed by their political support. For instance, critics say that some of the criminal justice reform legislation the Kochs support would also make it harder to punish corporations like theirs for environmental or safety violations. But also, there's just the sheer volume of money they disperse, much of it from anonymous donors, thus the dark money label that inevitably travels with the Koch Brothers label. For years, they've funded think tanks and university researchers who tend to explore their libertarian notions. They've contributed to the American Legislative Executive Council, which drafts model legislation for individual states on

• 35:41Stephen J. Dubner?

  issues like school choice and tax and regulatory reform. And the Kochs fund politicians through organs like Americans for Prosperity and the Freedom Partners Action Fund. They spent a reported $250 million during the 2016 election cycle, even though they famously didn't support either of the main presidential candidates, and they've declared their intention to spend between $300 and $400 million in 2018. Their political operation employs about 1,200 people in more than 100 offices across the country, which, as Politico noted, makes it far bigger than the Republican National Committee itself. So how and why

• 36:25Stephen J. Dubner?

  did Charles Koch come to be such a huge political player? As he tells it, the genesis goes back decades and is firmly rooted in ideological principles.

• 36:38Speaker 02

  I tried to read and meet people who would give me ideas, expose me to principles that I could apply in all aspects of my life: business, social community, and then in the societal realm.

• 36:55Speaker 02

  As I did this, it became clear to me that virtually every human being has the ability to learn, develop, contribute, and succeed if they're given the freedom and opportunity to do so. And then I learned that when this started, when ideas of individual rights and equal rights started to come into being in, like in Holland first, and spread to England and the United States, and even France and other countries, particularly in Europe, that it liberated the average person. And as they were liberated,

• 37:40Speaker 02

  then they started working to develop themselves, to better themselves. And in the process, they made themselves rich, rich relatively, and then made everybody else rich.

• 37:55Stephen J. Dubner?

  The first steps were giving out scholarships, setting up think tanks, and funding like-minded academics. But that wasn't fully satisfying.

• 38:04Speaker 02

  It became obvious that we had a society and a political system largely governed to satisfy special interests. And parties had formed around that, those special interests, which George Washington worried about. As you know, he warned us that if politics become an extension of parties, that we will lose a lot of the promise and hope for the country because parties become end in themselves in advancing them and their supporters and special interests.

• 38:48Speaker 02

  And my first real brush with this was, I think, in 1972, when Nixon was campaigning and he had a committee to reelect the president. And he sent him around to companies to strong-arm him for a million dollars or so, which was illegal, to support his campaign. And so they approached me, and I wouldn't have any part of it. And then my next politically-related involvement happened in the late 70s, as I saw this cronyism, this corporate welfare, really getting more and more entrenched

• 39:33Speaker 02

  and leading more and more to a two-tiered society.

• 39:36Stephen J. Dubner?

  By "two-tiered society," Koch means the political and other elites who try to shape society, and everyone else. Koch knows he's firmly in the top tier, but he still dislikes that blatant division. And so...

• 39:52Speaker 02

  I formed something called the Council for a Competitive Economy. And the idea was to build an organization of business leaders who would oppose all forms of subsidy and corporate welfare, even and especially when they benefited that company. And I got Milton Friedman to be chairman of my board of advisors. And I sent a letter to hundreds of businesspeople with his name. And I got a lot of answers back, but they were typically along the same theme. That is, that they agreed in principle that we need to get rid of all this special dealing

• 40:36Speaker 02

  and rigging the system, and everybody will be better off. But it doesn't work for their industry. They need to be protected, or they'll go out of business, and that will hurt the country. And this, over and over again. We said, my God, I approached Rich Fink, who was a professor at George Mason, to come and run this. Maybe he could make it successful. No, he said, you can't depend on business people. They're too short-term oriented, particularly public companies. And they're going for the quick buck rather than what's good for themselves and the country long term.

• 41:19Speaker 02

  We've got to go to the citizens who are suffering from this. So he joined me and we set up something called Citizens for a Sound Economy. And our first real success in that was in the Clinton years, we stopped the, or not by ourselves, but with others, stopped the BTU tax and Hillary Care.

• 41:44Stephen J. Dubner?

  The BTU tax sought to curb pollution from carbon-based fuels and other energy sources. Hillary Care was a proposal for universal health care promoted by then First Lady Hillary Clinton, a precursor to Obamacare, which Koch would also oppose. In any case, as Koch noted, he was among those who pushed to defeat the so-called Hillary Care and the BTU tax.

• 42:05Speaker 02

  And that changed the direction of the Clinton administration. And you remember, he said the era of big government was over. And then when Bush 43 won, we thought, oh, Mike, there might be some hope in having a principled administration, one who would take it in the direction we were urging. And boy, was that an eye-opener. Because in fact, although I think he met well, President Bush did the opposite. They increased the size of government 50% more than Clinton, passed almost three times the number of restrictive regulations, including things like McCain-Finegold, Sarbanes-Oxley.

• 42:56Speaker 02

  Then drug subsidies, No Child Left Behind, which in our view took education in the wrong direction, increase in steel tariffs, getting involved in counterproductive wars for the wrong reasons, even appointed Harriet Miers to be a Supreme Court Justice. Fortunately, we and others were able to stop that.

• 43:22Stephen J. Dubner?

  Miers had never been a judge. She was Bush's White House counsel, his former personal lawyer, and a family friend. To Koch, the fact that her name was even put forward showed how deeply Washington was ruled by cronyism.

• 43:37Speaker 02

  So then we got set up to become more effective, to elect better people, and to hold them accountable for what they ran on, and to constantly encourage them to move us toward a system of mutual benefit rather than increasingly toward a two-tiered society. And so we had a number of successes, a lot of failures with the Obama administration. But where we had the best successes were at the state level.

• 44:16Stephen J. Dubner?

  Now, your description of that involvement sounds, to my ear at least, as sincere and considered and informed. And yet, obviously, you're a smart enough guy to know, and you don't even have to be that smart to know, that your name alone, along with your brother David, that's the Koch Brothers, is, and I don't think I'm exaggerating here, essentially, a curse word in many precincts. And so, you know, a couple easy examples. Jane Mayer, the journalist, one of the leaders of the anti-Koch movement. In her book, Dark Money blames you for fueling, quote, "the rise of the radical right." Harry Reid, former Senate Majority Leader, said you were trying to buy America. There's the Un-Koch My Campus

• 45:00Stephen J. Dubner?

  movement to get rid of Koch money that goes to fund academic researchers. So how do you feel about having earned that reputation? You plainly didn't get involved in this stuff in order to become public enemy, number one.

• 45:15Speaker 02

  No, but like this.

• 45:21Speaker 02

  We're trying to go back to the principles on which this country was founded. That is, everyone is created equal with certain unalienable rights and governments are instituted to secure those rights and to liberate the people so we can have human flourishing in this country. And the only way we're going to do that is to take away the power from those who are rigging the system for special interests. Now, when you threaten special interests, you are public enemy number one. And so it's been nasty and unpleasant.

• 46:05Speaker 02

  And as a matter of fact, it's more, I knew it would be nasty and unpleasant. I didn't know it would be this dishonest, although I, from all my study of history and so on, I should have known. But this is threatening stuff. I haven't read Jane Meyer's book, but people have asked me about various pieces and there are some facts, right? Most of the facts that I'm familiar with are wrong. I mean, this is why you prefer to stay away from politics. It's such a nasty game.

• 46:36Stephen J. Dubner?

  In retrospect, Charles, do you regret getting involved with the political stuff?

• 46:40Speaker 02

  I think I was a little like Martin Luther on trial, where he said, "Here I stand, I can do no other."

• 46:48Stephen J. Dubner?

  I'm curious, do you vote regularly?

• 46:50Speaker 02

  Yes. Back in the day, I didn't. I was too disgusted with it. But, I mean, if I'm going to invest all this time and money in this area, I at least have to vote.

• 47:03Stephen J. Dubner?

  When's the last time you voted for a Democrat?

• 47:06Speaker 02

  Hmm, oh, probably 10 years, I guess.

• 47:11Stephen J. Dubner?

  Do you remember who it was?

• 47:12Speaker 02

  No, no, I don't. And we've supported a number in the past. I mean, I would, I'd support a Democrat just as soon as a Republican. I'm interested in the principles, in the policies, and I don't care what the label is. I care what the policies are. Are they going to help people improve their lives or make their lives worse?

• 47:40Stephen J. Dubner?

  But the fact is that the vast majority of candidates he's supported have been Republicans, many of whom have campaigned and governed on platforms that contradict Koch's more liberal-leaning initiatives. So you can see why critics are skeptical that his intentions are as pro-social as he might communicate. You can also see that Charles Koch has a lot to say, and he's not afraid to say it. In fact, he had far too much to say for one episode, so we will put out the rest in a special bonus episode. But you won't have to wait a full week for it, just 24 hours. You'll hear Koch argue that a lot of the legislation he's pushing for goes against his company's self-interest.

• 48:23Speaker 02

  There are roughly a trillion and a half special exemptions in the tax code, and we benefit tremendously from them. We'd get rid of all of them.

• 48:32Stephen J. Dubner?

  That's next time in a special bonus episode of Freakonomics Radio. Freakonomics Radio is produced by WNYC Studios and Dubner Productions. This episode was produced by Shelley Lewis. Our staff also includes Christopher Wirth, Merritt Jacob, Greg Rosalsky, Stephanie Tam, Eliza Lambert, Alison Hockenberry, Emma Morgenstern, Harry Huggins, and Brian Gutierrez. The music you hear throughout the episode was composed by Luis Guerra. We had technical assistance in Wichita from Torrin Anderson and John Cyfers. We also had helped this week from Sam Baer. Thanks for listening.

• 49:23Stephen J. Dubner?

  Freakonomics Radio is sponsored by Ozempic. Innovation happens through rethinking what's possible, and when it comes to GLP-1s, Ozempic pill does just that. Learn more about Ozempic semaglutide tablets, 4 and 9 milligrams, by calling 1-833-OZEMPIC or visit Ozempic.com to view the medication guide and ask your doctor what's possible with FDA-approved Ozempic pill.

• 49:54Stephen J. Dubner?

  Freakonomics Radio is sponsored by Southern Company. The world and its energy needs are always changing. Southern Company's commitment to meeting this demand stays the same. That's because Southern Company believes energy is more than a utility. It's what powers possibilities. So they are looking ahead and investing $80 billion in infrastructure upgrades and are committed to fueling growth in ways that benefit all customers so that reliable and affordable energy is accessible for generations to come. Go to southerncompany.com to learn more. Southern Company, building the future of energy.

• 50:32Speaker 08

  Hey, it's Kelly Ripa. And if you don't know, I have a podcast where I get to say whatever I want. Hold on, let me get a shovel and a body bag. I envision doing a podcast with the conversations that happen in my dressing room, off camera, where people feel free to talk. No hair, no makeup. This is my kind of job. Only Kelly Ripa can ask me these questions. I'm flipping the script and saying what's really on my mind.

• 50:56Speaker 09

  We're seeing a different side of you. It's a little bit more honest.

• 50:59Speaker 08

  When the cameras go off, the real fun begins. Get my hair done over here. Hey. This is an off-camera podcast, so it doesn't even matter. It's unfiltered conversations and unexpected confessions.

• 51:11Stephen J. Dubner?

  My mom says, Woody, I knew you're dead.

• 51:15Speaker 08

  Stop the press. I would like to volunteer to administer any and all DNA tests. Maybe that should be part of the show. Let's talk off-camera with me, Kelly Ripa. You just put that in my universe. Listen and follow wherever you get your podcasts.

• 51:32Speaker 09

  This episode is brought to you by Charles Schwab. Is there a right time to sell a stock? Are you taking the right risks with your portfolio? Financial decisions can be tricky, and often your own cognitive and emotional biases can lead you astray. Financial Decoder, an original podcast from Charles Schwab, can help. Join host Mark Reapy as he offers practical solutions to help overcome the cognitive and emotional biases that may affect your investing decisions. Listen at schwab.com/financialdecoder.