Discovery Newsletter: Perspective, Charles Koch

September 1, 2015

If there is such a thing as good profit, does that mean there is also bad profit?  Absolutely.

As the Oct. 13 publication date for “Good Profit” draws near, I’m often asked about my reasons for writing the book.  Many people — especially Koch employees — want to know how it will be different from “The Science of Success,” published eight years ago.

While it’s true that both of these books have the same subject, Market-Based Management®, they are very different in several important ways.  

For starters, this new book was written with a broader audience in mind.  “The Science of Success” started as an employee handbook, while “Good Profit” was written for a general audience as well as employees.  By all accounts, “Good Profit” is much more readable than my first book — even though it is more than twice as long.  

It’s also more personal, with a great deal of family history, background information and candid reflection.  I can thank my wife, several company leaders and my editors for encouraging me to write about those things more personally, and in greater detail.

In addition to being more current, “Good Profit” offers much greater depth and detail than “The Science of Success.”  I’ve also made a point of trying to provide more and better guidance about how to apply MBM®.

What has remained constant throughout both books is our commitment to applying MBM across Koch Industries.  My goal is also unchanged: I want to enable any business or organization — nonprofits included — to create more value in society.  MBM is a proven approach that makes that possible.

The title

Not surprisingly, some of the questions I’m asked revolve around the book’s title: “Good Profit.”  Does that mean there is also such a thing as bad profit?  Absolutely.

Good profit occurs when we help create long-term value for others in a principled way.  This is the kind of profit that benefits society.  I believe the only reason for any business to exist is to create good profit.

Unfortunately, bad profit has become much more common.

Bad profit is generated by businesses that rely on corporate welfare, special treatment, short-sighted opportunism or outright fraud to prosper.  

A favored few may benefit this way, but society as a whole suffers — especially the poor.  

Any business that chooses bad profit rather than good deserves to be put out of business.  Just as important, any company that wishes to generate good profit must be willing to embrace — not resist — what Joseph Schumpeter called “the perennial gale of creative destruction.” 

Consider all that has changed at Koch since my first book was published eight years ago.

Since 2007 we have not only weathered the Great Recession and global political upheaval, we have entered entirely new (for us) industries and invested more than $42 billion in growth, acquisitions and improvements.  

Since then we have more than doubled the book value of the company — a remarkable achievement for a company our size.

During those eight years we have also improved our Vision and our entire approach to recruitment and management, internships, self-insurance, compensation systems, military outreach, opportunity origination networks, methods for achieving environmental and safety excellence, and MBM programs.  We have also reached out with our first-ever national ad campaign.

Thank you

In my acknowledgements for “Good Profit” (which is dedicated to my wife, Liz), I thank our employees for making all that possible, and for helping to build Koch Industries into what it is today.  

In particular, I thank those employees who have helped develop MBM into the effective framework that has made Koch so successful.  (The many examples of success mentioned in the book are proof positive that MBM works independently of yours truly.) 

In my conclusion, I mention the fact that I was named after my father’s mentor, Charles de Ganahl.  He was a highly principled entrepreneur who gave Fred Koch a tremendous opportunity, even though Fred was only 24 years old at the time.  

My father believed in working hard so he could make a real contribution, and thus have a life of meaning.  In a letter he wrote to his sons he said, “I should regret very much to have you miss the glorious feeling of accomplishment.”

I share his belief in the importance of accomplishment and the fulfillment it makes possible.  It is why I wrote this new book.

My hope is that “Good Profit” will enable everyone who reads it — and who applies its lessons — to enjoy a better, more fulfilling life.

 

Proceeds from the sale of “Good Profit” are being donated to the Youth Entrepreneurs Foundation.