Discovery

october 2010 THE QUARTERLY NEWSLETTER OF KOCH COMPANIES The future of economic freedom On Nov. 2, the will hold The challenge entitled to one’s own opinions, but not an important mid-term election. to one’s own facts. Unfortunately, these values and prin- At stake will be control of the U.S. Con- cipled point of view are now being And the facts are that the overwhelm- gress, 39 state governorships and thou- strongly opposed by many politicians ing majority of the American people sands of other state and local offices. (and their media allies) who favor ever- will be much worse off if government High unemployment, record deficits, a increasing government. overspending is allowed to bankrupt the country. sluggish economy and a swelling federal Government – like fire, water, chemicals government have become flash point and most everything – is productive at Fateful warning issues for millions of concerned Ameri- some level and destructive at others. When was inaugu- cans of every political persuasion. In the United States, government has rated President of the United States For the nearly 50,000 Koch company now grown to such a level that it is in 1801, he warned about a particularly employees in the United States, this choking American entrepreneurship destructive way of thinking. election is an opportunity to help de- and hurting the nation’s international It is wrong, he said, to punish someone cide the future of economic freedom. competitiveness. for working harder or being more suc- Heavy hitter Even worse, recent government actions cessful than someone else. According to the International Mon- are threatening to The American people will be He warned against etary Fund, the United States accounts bankrupt the country. “wasting the labors for about one-fourth of the world’s total This can only stifle much worse off if government of the people under output of goods and services, and one- economic growth and overspending is allowed to the pretense of fifth of the world’s purchasing power. job creation, which in bankrupt the country. taking care of them” Like it or not, what’s bad for the United turn will significantly and taking from some to States – including misguided federal pol- reduce the standard of living give to others “who have not exercised icies that undermine economic freedom of American families. equal industry and skill.” – is usually bad for the rest of the world. To preserve the nation’s economic More than 200 years later, the destruc- What has proven to be best for all soci- viability and individual freedoms, this tion of economic freedom that Jeffer- eties is economic freedom. explosive growth must be reversed. son warned against is being vigorously There are, of course, plenty of politi- promoted by this administration and Citizens on every continent enjoy many elected officials. more prosperity, cleaner environments, cians and critics who feel otherwise. longer lives and higher literacy rates in Many of them have been quite vocal in In the United States, the best antidote economically free societies. their attacks on and its to this kind of over-reaching govern- ment is the power of the ballot box. That’s why, for more than 40 years, Koch owners, as well as other Koch compa- Industries has openly and consistently nies and their employees. That was true in 1801, and is just as true today. supported the principles of economic However, as New York Senator Daniel www.kochfacts.com freedom and market-based policies. Patrick Moynihan famously said, one is http://kcief.khc.local/

this issue… The role of pg 4 Water: a liquid asset pg 6 The battle for America’s future pg 7 Perspective: pg 8 Postal Pipeline

I was just flipping through my latest edi- tion of Discovery magazine when – Wow! – an article about Koch Knight’s 100th anniversary! I don’t know why, but I just never expected it. I’ve had a smile on my face ever since. Here’s to 100 more! Greg Weakland Manager, manufacturing operations Koch Knight East Canton, Ohio

Matador Cattle Company’s ranch has won two significant environmental awards in the past six months.

The Perspective column on the last page Congratulations on your award. You of the July issue cited a column in the have certainly earned it. January 2010 edition by Charles Koch. Jeff Goodwin I wanted to read it, but had trouble ac- Rangeland Management Specialist cessing the link to earlier newsletters. Grazing Land Conservation Initiative Can you help? U.S. Department of Agriculture Scott Price Cleburne, Texas Muskogee, Okla. Charles, the New Yorker article about Perspective editorials (and entire issues of Discovery) Koch is the most unrealistic description are available online at www.kochind.com. Just click of you and your company I can imagine. Koch Knight employees celebrated the 100th on Newsroom, then Publications. At the bottom of the The environment you’ve created for your anniversary of their company on July 10. Discovery section on the Publications page is a link to employees, this community and America previous issues dating back to January 2007. reflects the highest standards possible. My compliments to everyone at Koch These three groups have been rewarded for an outstanding company newsletter. I by your efforts to advance economic free- picked up the July issue of Discovery on a It is my pleasure to inform you that the dom and the limited role of government recent visit to Georgia-Pacific’s facility in Matador Ranch has been selected as in our society. Crossett, Ark. the 2010 recipient of the Outstanding Rangeland Stewardship Award from the My wife and I thank you for what you I had heard that Koch Industries was a Texas Section of the Society for Range are doing for all Americans. proud, successful and conservative com- Management Texas and Southwestern Bob Buford pany. It is refreshing to read a company Cattle Raiser Association. Wichita, Kan. newsletter that amplifies sound, conser- vative principles. The award will be presented at TSSRM’s Letters and other submissions become the property of Koch annual meeting in Odessa, Texas, in Industries, Inc., and may be reproduced in whole or in part, Best of luck to you and your organization. October and recognized next March at including your name, for any purpose and in any manner. Letters may be edited for length or clarity. Matt Halloran the TSCRA meeting. Regional sales manager This award will also be nominated for October 2010 | Volume 16 | Number 4 Long Reach/Allied Systems, Co. Discovery the 2011 National Cattleman’s Beef , Texas Editorial Board Questions? Comments? Association’s Regional Environmental Philip Ellender Contact: Rod Learned Rich Fink 316.828.6136 Stewardship Award. Jeff Gentry [email protected] Dale Gibbens I am a GP employee at the Muskogee If selected as the regional winner, your Mary Beth Jarvis Publication Design: Mill, a towel and tissue facility. Charles Koch Deanna Crockett nomination will compete nationwide Jim Mahoney Koch Creative Group I have just read Discovery for the first time, for NCBA’s National Environmental Dave Robertson and found it interesting and informative. Stewardship Award. www.kochind.com ©2010, Koch Industries, Inc. Koch is an EOE. M/F/D/V 2 International News

Kingston - An MBM® session in Ontario drew a Corpus Christi - These sulfur pellets are destined for markets Shanghai - High school Junior Achievement members visited capacity crowd. in Africa, Asia and South America. ’s offices on “Shadow Day.”

Canada – INVISTA’s largest site (in terms Sulfur on a 16-acre site next to Flint is located. They were joined by 16 corpo- of employees) is not in Delaware, Texas, Hills Resources’ Corpus Christi, Texas, rate volunteers. the Carolinas or even China. That honor refinery complex. Students were given a brief introduction goes to INVISTA’s Kingston, Ontario, The location makes great business sense to the company and a tour of the office facility, with about 900 employees. for two reasons: before shadowing INVISTA employees Kingston is not only INVISTA’s largest First, FHR’s refinery ends up with tons for half a day. site, it is the largest airbag yarn manufac- of sulfur as a byproduct of refining One of the highlights of the office tour turing facility in the world. crude oil. Lots of customers want that was a 10-minute video conference with On June 25, INVISTA’s Kingston leader- sulfur for making phosphate or employees at INVISTA’s office in -Ge ship team co-sponsored a Market-Based sulfuric acid. neva, Switzerland, six time zones away. Management® workshop in conjunction Second, and just as important, the port INVISTA’s Shanghai volunteers made with St. Lawrence College Business of Corpus Christi gives Koch Sulfur several detailed presentations, helping Development. Products Co. a perfect staging area for the students understand how the busi- That day-long session, which was open delivery to customers worldwide. ness operates, who its customers are and to the public, drew a capacity crowd of “We’ve been marketing sulfur for more what a “real world” job is like. more than 130 attendees. than 15 years,” said Douglas Towns, At the end of the half-day session, the Among those attending were govern- general manager of global sulfur mar- students returned the favor by making ment employees, business leaders, keting, “but almost all of that has been a presentation summarizing the les- entrepreneurs and employees of not-for- molten sulfur.” sons and insights they had gained while profit organizations. Molten sulfur can’t be loaded onto big shadowing. Attendees were continually challenged cargo ships, only short-haul barges. But “Junior Achievement’s staff told us this to think of ways they could apply the prilled sulfur is easily loaded onto large, was one of the best Job Shadow Days principles and dimensions of MBM in ocean-going vessels. Once loaded, they’ve seen so far,” said Anita Cai, their own roles and organizations. prilled sulfur can be shipped anywhere INVISTA’s China communication and Several of the senior civil servants who in the world. public affairs manager. attended the workshop wasted no time “Our first load of prilled sulfur just “We could see that the students really in doing just that. shipped out for South America,” said learned something about our company They made it a point to hold a follow-up Towns. “Africa and Asia are next.” and had some thoughts on their career session at Kingston City Hall, where China – The idea of having young people development.” they discussed how to apply what they “shadow” an adult worker on the job is Cai attributes the overall success of the had learned to their government agency. an idea that has gone global. event to the knowledge and initiative of Texas – Last year, the U.S. Patent and On August 13, more than two dozen INVISTA’s volunteers. They not only Trademark Office issued a patent for a Chinese students visited INVISTA’s prepared the corporate presentations, new method of making prilled – or pel- Shanghai offices as part of Junior but helped co-workers with ideas for letized – sulfur. Achievement’s Job Shadow Day. facilitating conversations. That new technology – capable of pro- The 25 students were all from Xiang “Our volunteers are great. They really ducing 2,000 metric tons of pellets per Ming High School in the Luwan district, created an opportunity for us to learn day – is now up and running for Koch the same district where INVISTA’s office from each other and have fun together.” 3 What’s a business to do? We live in an era when many people – In producing all these and many other Biting the hand including policymakers and media ce- products and services, Koch companies In a system of economic freedom, a com- lebrities – view and corpora- also strive to use less resources. pany will generate long-term profits only tions with disdain or intense suspicion. Those resources (economists call them if it uses resources in a way that consum- Their way of thinking begs a simple inputs) can include labor, raw materials, ers value more than alternative uses. question: What is the primary role of and capital. Large or small, a company will not stay business? For example, Georgia-Pacific operates in business for long if it is not truly Is it to create jobs and provide benefits? a pulp mill (see story on page 6) that creating value. Unfortunately, the same Help advance a social agenda? Or just has greatly reduced the amount of water cannot be said for governments. to make as much money as possible, by needed to make the pulp that goes into exploiting customers and employees? disposable diapers and other products. Most governments consume massive amounts of resources – primarily labor As a matter of principle, Koch compa- In doing so, GP Cellulose has freed up and capital – much of which doesn’t nies believe there is only one reason for more groundwater – a very important create value. any business to exist: creating value. resource – for other uses. Was it worth more than $200 million of “Value creation,” says Charles Koch, U.S. taxpayers’ money to build an air- “involves making people’s lives better. Value Creation port in Johnstown, Pa., that services just “It means contributing to prosperity in MBM® Guiding Principle 3 three commercial flights per day? society. If a company’s not doing that Create real, long-term value by Although it was never built, would the – enhancing the well-being of society – federal government have created real, then it needs to go out of business. the economic means. Understand, develop and apply MBM to achieve long-term value by spending nearly twice “We all tend to pursue our own interests, superior results. Eliminate waste. that much for the infamous “bridge to but in a true market economy we can nowhere” in Alaska? only prosper long-term by providing “It is essential that use of resources is others with what they value.” What’s more, efficient use of ground- directed by consumers, rather than History and sound theory have both water has helped prevent expansion of a politically,” says Charles Koch. shown that the only way to consistently saltwater plume in the aquifer that could “When resources are directed for politi- create value for society is to faithfully foul public drinking water supplies. cal ends, the result is misallocation.” follow a set of reality-based principles. Without profits, it wouldn’t have been What about jobs? For Koch companies, those are the possible to invest the $400 million 10 MBM® Guiding Principles, which needed to improve efficiency – thereby Job creation is one of today’s hottest topics. include integrity, compliance, value creating more value – at that pulp mill. Governments of many nations – liberal, creation, humility and respect. Similar stories can be told across many conservative and even Communist – are Principled approach other Koch companies. under enormous pressure to “do some- Koch employees are among the world’s At Flint Hills Resources, more than thing” about high unemployment and most efficient at making products and $100 million in investments (made pos- lagging job growth. providing services that customers value sible by profits) allowed the Pine Bend In reality, it is businesses of all sizes in more highly than their alternatives. Refinery to produce ultra-low sulfur the private sector, not the government, Those products build and heat homes, gasoline years before it was mandated by that tend to produce the sorts of jobs protect the environment, help grow the federal government. that create real, long-term value. food, fuel cars and planes, purify water, That product – called Blue Planet – was Government interventions – particular- help prevent disease, improve clothing highly valued by Minnesotans concerned ly controls, subsidies, barriers to entry, and make vehicles safer. about air quality. tariffs and bailouts – misapply resources, 4 thwarting the efficient production of Good idea? Alternatives what people value. Government-mandated transfers from In , Charles Koch An economist would say such actions re- one group to another don’t solve the wrote: “Societies that value freedom and place activities that convert resources to problems of lower productivity and prosperity protect their citizens’ rights higher-value products with activities that higher unemployment. to free speech, which greatly facilitates convert them to lower-value products. In fact, they make those problems worse. the discovery and the dissemination of knowledge.” What we see in many na- “A real and lasting contribution to society If the government insists that tions today is just the opposite. someone should be paid $50 requires the creation of real, long-term value.” per hour in wages and benefits, Citizens who are openly critical of the - Charles Koch but that person only creates European Union bureaucracy in Brussels $30 worth of value, no one will or the out-of-control government of the Think about that for a moment. prosper for long. United States are being shouted down If a business activity is really creating by politicians, government officials and value, should it need to be subsidized? In a scenario such as this, as businesses their media and other allies. lose money because of the government’s Similarly, if a business is destroying policy, employees will end up losing their Too many government elites think they rather than creating value, shouldn’t it be jobs and fewer (if any) new employees know what’s best for citizens and ignore allowed to go out of business, rather than will be hired. the wishes of the citizens themselves. be subsidized or protected? Consequently, the result of what sounded Those in power tend to want to control Productivity good – making a guaranteed $50 per hour more and more, all in the name of making things “fair.” To do so, they pile on more Productivity is more than a business – will not be prosperity, it will be higher rules, more regulations, more restrictions, buzzword. It is a key driver of success for unemployment. more programs and more costs. all of society. Anything that undermines the mobility The more productive we are in enhancing of labor, such as policies that make it As Charles Koch has noted, this kind of the value of resources, the better off virtu- more expensive and difficult to change thinking is a recipe for disaster – both for ally everyone is going to be. where people are employed, also in- a company and for a government. creases unemployment. By contrast, anything that interferes with “Over-specifying and enforcing particu- productivity is going to make people less In Europe, where stringent labor laws lars undermines prosperity,” wrote Koch. well off, especially the poor, who are least make it difficult and expensive to termi- “It also facilitates corruption and abuse capable of weathering economic shocks. nate someone – even for cause – this has of power, subservience and stagnation.” It’s important to realize what makes us become especially troublesome. After many years of disastrous policy better off. It’s not just how much money Similar policies that distort the labor decisions in the United States, it will be we have, but the availability of the goods market – such as minimum wage laws interesting to see who voters support at and services we value. and mandated benefits – contribute to the ballot box this November. In the old , lots of people unemployment. Will it be those candidates who believe had rubles to spend, but there was very Policies that make it difficult to get per- that more government is the answer, and little of value to buy. Government mits to build plants and equipment that that government – rather than consum- policies resulted in chronic shortages of are more efficient lower productivity and ers – should decide which businesses food, clothing and shelter. reduce wages. succeed or fail? Similarly, in any nation where govern- All these obstacles interfere with the Or will it be those candidates who be- ment policies systematically destroy ability to create valued products and lieve the true role of business is to create value, shortages of valued goods and services, adversely affecting consumers, value for society by serving customers, services should be expected. employees and employers. not politicians? http://kcief.khc.local/ 5 Water: a liquid asset

Every Koch company – large or small – is Water, water everywhere H2O and RO dependent on water. Georgia-Pacific, which uses the most Koch Membrane Systems has invested Georgia-Pacific needs it for pulp-and water of any Koch company, has spent years of research and tens of millions of paper-making processes. several years focusing on resource preser- dollars in developing technology designed vation and reducing its water to produce cleaner, safer water. consumption. Earlier this year, KMS was named the in- That focus has yielded some ternational Water Technology Company notable results. GP now of the Year. uses 9 percent less water in its paper-making operations than it did 10 years ago. Perhaps its most impressive success story comes from the GP Cellulose pulp mill in Brunswick, Ga. This mill is the A KMS world’s largest producer of fluff MegaMagnum® pulp, used in making diapers installation. Georgia-Pacific’s Toledo, Ore., containerboard pulp and paper mill. and other hygiene products. The Brunswick facility uses groundwater Koch Membrane Systems has installed INVISTA couldn’t make nylon, polyester to process a daily average of 700 trucks of its patented MegaMagnum® reverse or without it. yellow pine and pine chips into fluff pulp. osmosis water filtration systems at loca- Flint Hills Resources uses it to make the About 70 percent of its electricity used in tions as diverse as Queensland, Australia, steam that powers several processing units. the production process is self-generated. and Waupun, Wisc. Koch Fertilizer and Koch Minerals rely Following Koch Industries’ acquisition of The membranes in these systems can on it for transporting products. the mill in 2004, more than $400 million process millions of gallons of water per Koch Membrane Systems was created to was invested to make the facility more day, allowing more and more water to be purify and desalinate it. efficient and more competitive. safely reused or recycled. KS&T’s Rotterdam refinery wouldn’t Although the Brunswick mill has Fluid mechanics exist without its harbor access. permits to withdraw up to 49 million gallons of water per day, improvements When KII co-founder Fred C. Koch And Matador Cattle Co. needs it for are dropping the total amount of water wrote his senior thesis at M.I.T. in 1922, hydrating cattle – and thirsty cowboys. needed by almost half. he proposed a process for reducing Water footprints wastewater flows from a Bangor paper Prize-winning performance mill into Maine’s Penobscot River. Tim Go, managing director of Koch In- Georgia-Pacific has won several awards Koch designed a system for using spent dustries’ operations excellence team, pays for its water conservation efforts at other close attention to water usage. black ash, a papermaking byproduct sites, including an Environmental Water typically discarded with wastewater, “Last year, we organized our first-ever Protection Award for its Cedar Springs, as a fuel. KII-wide water team with seven differ- Ga., containerboard facility. His design not ent Koch companies represented,” Go In Victoria, Texas, INVISTA’s award- said. “One objective was to conduct an only lowered fuel winning Wetland Environmental Science costs, but reduced informal survey of water usage across all Education Encounter has given thou- of our U.S. facilities. the amount of sands of students hands-on experience effluent released “We wanted to get an idea of how much with water conservation projects and into the river by water Koch companies bring in, how other wetlands-related experiments. several tons much we consume and how much we Flint Hills Resources’ per day. Fred Koch’s 1922 senior thesis showed return or discharge.” has won multiple Wastewater Treatment As it has for the how to reduce wastewater discharges. The goal is to get an understanding of Operator awards from the 88 years since then, Koch Industries’ total water “footprint.” Control Agency. Koch Industries believes that careful use In the process of studying water use, FHR’s Fort Worth, Texas, terminal has of resources – including water – is not several impressive success stories also been honored with a Star Award by only good news for the environment, but have emerged. the Fort Worth Water Department. good business sense. 6 Looking Back

1900 1953 1961 Charles Koch named new 1973 Chemical Koch Chemical Co. reach- Fred is born in The Rock Island refinery Charles Koch returns to chairman and CEO Purchase of Mid-Sask- Technology es a milestone: one billion Quanah, TX in Duncan, OK is Wichita to work for Koch atchewan pipeline group is pounds of paraxlyene sold to Sunray DX Engineering and Rock 1968 system formed, with production in one year 1918 Island Company is renamed Koch Fred attends Rice Koch Industries, Inc. in Workers strike at Pine Engineering KII’s efforts help defeat University in Houston, TX A Century Fred’s honor Bend refinery as its largest proposed BTU tax unit 1922 1994 of Significant FertiNitro Plant Fred graduates fails in his Venezuela from the expansion attempt to Massachusetts Fred Koch, O.H. Ingram business by buying the of Koch’s Launch of FertiNitro 1928 take control Institute of and I. A. O’Shaughnessy Rock Island Oil and Singapore project in Venezuela, and W-K sells its first of Koch Technology form the Wood River Oil Refining Co. in Duncan, office Koch’s Performance Roads cracking unit to Industries in Cam- a refinery in and Refining Co. OK concept bridge, MA Koch Engineering becomes Duncan, OK 1981 with a ISO 9001-certified 1998 Purchase degree in 1929 Joint venture forming KoSa, Chemical 1954 Koch International, SpA is Bill Hanna leads Koch’s 1974 of Corpus 1995 Noteworthy Winkler-Koch Construction on KII followed by an Wood River Koch Engineering divides, formed in Italy entry into the Formation of Christi refinery from Sun pioneer Engineering Headquarters Tower acquisition making it a and its customers Tank Truck with Fred Koch keeping the liq- Murhead Engineering Oil leads to the formation J. Howard Marshall II— 1989 world leader in polyester unite to fight 1947 equipment division, and uids (NGL) Co. of , with of Koch Chemical Co. a Great Northern Oil 1924 Rock Island acquires production lawsuits filed by business Fred moves to Harry Litwin taking the Mohawk Petroleum’s Clark Murhead as a founder, KII shareholder major oil companies engineering division to partner 1984 First formal communica- and board member — England to work for crude oil trucking Acquisition of Purina Mills who accuse tion of KII’s Mission, Charles de Ganahl Fred Chase Koch form Litwin Engineering business 1969 Introduction of a passes away W-K Acquisition of Sterling Varner is company-wide Philosophy, and as chief engineer of Age 8 1941 1948 Acquisition of Fluid Systems and its 25 years after the Winkler- named president of Principles his refinery on the Wood River’s refinery in Wood River Co. builds a controlling Continuous Introduction of Koch’s customers Koch legal battle began, interest in the Koch industries Improvement Arctic Premium Diesel Isle of Grain (later Hartford, IL begins products pipeline to Bill Koch loses in court of patent Fred Koch wins a final Great Northern initiative Construction owned by BP) operation Rockford, IL (again) over his 1983 infringe- settlement Oil Company, begins on 525,000 1996 buyout settlement ment Sterling Varner sq. ft. office tower 1925 1942 1949 later renamed 1986 KII launches its first web- 1956 Koch Refining 1975 Acquisition of the in Wichita site, kochind.com, and Fred returns to the U.S., 1932 Wood River’s Exploration Wood River Co. acquires 1999 Vance gas stations in Koch experiments with the Company Annual revenues jump C. Reiss Coal its first Intranet, and joins the firm which Fred marries Mary and Production division is Official launch of manufacture of fiberglass from $1 billion in 1970 to Company 1990 D-Net later becomes established Chicago and St. Louis PF.Net, a fiber-optic Robinson of City pipes and cooling towers Koch enters the over $6 billion KOCHPAC - Koch’s politi- Winkler-Koch Bill Hanna pipeline venture international 1987 cal action committee - is Koch enters joint Engineering Co. 1933 1943 1950 The Battle – by Arthur C. Brooks, presi- 1959 trading business 1976 organized to facilitate venture involving Construction of a catalytic The Hartford refinery is Bill Hanna becomes KII’s Joe Moeller is Shut out of the U.S. and Wood River Oil and Koch Carbon Inc. is employee involvement in Dow Chemical’s 1927 cracking unit at Wood sold to Sinclair Oil president named president western European markets Refining Co. changes its 1970 formed to market pet coke the political process ProMix fractiona- Winkler-Koch River refinery to produce and COO of Koch due to protracted litiga- name to Rock Island Oil from Pine Bend and other tor near develops a high-octane 1951 Industries, Inc. tion, Winkler-Koch builds and Refining Co. joins Koch refineries Acquisition of Brown Napoleonville, LA novel thermal for the war effort Purchase of Beaverhead cracking units in the USSR Charles Koch, Above Engineering Fintube and Tru-Tec cracking and Eastern Europe ranch in David Koch, Right Update of KII’s knowl- Purchase of Sinclair’s 35% sales team in 1979 1997 Joe Moeller process 1944 edge-based Vision, interest in Great Northern New York Acquisition of 50% inter- 1991 Glitsch and Delhi Gas dent – American Enterprise Institute. The U.S. Supreme Court emphasizing trading 1952 1935 Oil Company, which owned 1963 est in Chrysler Realty in The concepts of Market- acquisitions upholds earlier verdicts in Koch Engineering’s capabilities and value- Charles de Ganahl Koch is the Pine Bend refinery David Koch receives his Construction partnership with George Based Management™ are favor of Winkler-Koch in Flexitray design revolu- added products and born in Wichita, KS second engineering degree begins on NGL Ablah officially communicated Koch’s first “public” vehicle: their patent defense tionizes distillation services Charles Koch receives the from MIT fractionator in a limited partnership against major competitors technology 1940 third of his three engineer- Medford, OK Koch is formed to pipeline in Canada John Zink’s “invisible” flares David Hamilton and ing degrees from MIT 1964 supply asphalt materials to 1945 Purchase of William Ingram Koch Koch Canada constructs 1972 the paving industry 1988 Koch buys out Lewis Matador ranch are born first segment of the Bow Acquisition Construction begins on Winkler and establishes in Texas River pipeline system of control- 1980 Texas pipeline, running Koch Engineering with What will the United States of America ling interest Koch Sulfur Products from Corpus Christi to Acquisition of Unifin Harry Litwin as a partner 1966 in Abcor Inc. Co. is formed to Dallas/Ft. Worth International, Cardinal Pipelines Charles Koch becomes (now known market molten sulfur Pumps and Exchangers, 1946 president of Rock Island as Koch from Pine Bend and 1989 and Romicon Thermal Wood River Co. enters Koch Engineering Membrane other sources Purchase of John Zink Co. Cracking the crude oil gathering 1950’s 1967 Systems) from Lone Star Technologies 1993 Unit Company co-founder Fred Publication of first MBM Medford, Oklahoma look like in the future? 1927 Chase Koch passes away employee handbook Will it continue to be a land of entrepre- neurs, individual opportunity and limited government? Discovery process Or will it become a European-style social Fifteen years ago, Koch Industries Discovery-Net democracy with swelling bureaucracies, launched two new internal communica- When D-Net was launched on June 1, income redistribution and state-controlled tion tools – Discovery newsletter and the 1995, it consisted of a home page with corporations? Discovery-Net intranet. links to four business-owned sites. Brooks believes this is a The word “discovery” was emphasized Its audience was limited to the handful of fundamental question because of Koch’s vision: “To become people with Web browsers on their PCs. that has to be answered. a company dedicated to discovery – a In the words of one employee, it was a “These competing company where employees are encour- aged and motivated to look for and seize “kludge” (computer slang for a hastily visions are not reconcil- opportunities to improve our business.” and badly assembled collection of parts). able,” writes Brooks. Even so, businesses and employees saw “We must choose.” Page-turner the value in this employee-only intranet. Brooks believes the Discovery debuted Within three years D-Net was providing recent economic crisis in April 1995 as a an on-ramp to 129 business sites and re- created an element of six-page publication. ceiving more than 1 million hits per day. panic that has been manipulated by advo- That first issue Delinea, a Koch venture that focused on cates of bigger government. included stories web development, redesigned the D-Net “The proponents of statism are not evil,” about the purchases home page in 2000. It looked a lot better, writes Brooks, “but they are dead wrong of a Corpus Christi but the search function didn’t work well. about what’s best.” refinery from Kerr Koch Business Solutions spent several McGee and a South It is free enterprise, he writes, that “brings First issue of Discovery. months this past summer re-engineering Texas pipeline D-Net to make it more helpful and much the most life satisfaction to the most system from Exxon. people” and explains “our nation’s past more accessible. success and the promise of better things In 1999, Discovery expanded to its cur- The biggest change is that to come.” rent eight-page format and the first Year Koch company employees In Review feature was published. The at any business – including All Koch company employees After criticizing both Republicans and January 2000 issue included a 100-year INVISTA and Georgia- can now access D-Net. Democrats for poor policy decisions in “Century of Discovery” timeline. Pacific – can now access recent years, Brooks offers this solution: Issues of Discovery began circulating D-Net from their workstations. vote for those candidates, regardless of electronically in 2006 and are accessible Plans for additional improvements – party affiliation, who are willing to take a by anyone at kochind.com as well as including a much better search function principled stand in favor of free enterprise. internal, employee-only sites. – are already in the works. “What truly matters is principle, not Many employees have asked why Koch Although both Discovery and D-Net have political power.” goes to the expense of printing Discovery. undergone some recent changes, their The simplest answer is because the essential purpose remains the same – to “Entrepreneurship was and is the purest editorial board believes, in a world over- promote knowledge-sharing among all expression of America’s free enterprise culture Koch company employees.

True whelmed with electronic messaging, a

and the essence of the American Dream.” printed copy of Discovery is more likely to http://dnet.khc.local be read, remembered and shared. http://www.kochind.com/newsroom/discovery.aspx Too - Arthur C. Brooks 7 Charles G. Koch Perspective Chairman and CEO, Koch Industries, Inc.

I am often asked which U.S. presidents “I want taxes to be less,” said Coolidge, Great Depression had arrived. pursued the best and worst economic “that the people may have more.” Hoover is rightfully blamed for much of policies. My answers may surprise you. Coolidge signed into law Revenue Acts the economic calamity that left millions of In evaluating a President, I believe it is that lowered income tax rates from 73 Americans unemployed and penniless. essential to look past his popularity, party percent to 24 percent. He, together with But it is wrong to say he caused the Great affiliation and family background. Harding, also cut federal expenditures Depression by following free-market prin- Instead, our focus should be on the effects in half. ciples. Hoover did just the opposite. He of his economic policies. Results, not “Anybody can reduce taxes,” Coolidge undermined economic freedom. intentions, are what matter most. said, “but it is not so easy to stand in the Those mistakes were then compounded by During the twentieth century, there were gap and resist the passage of increasing Franklin Delano Roosevelt’s “New Deal,” several presidential standouts – both good appropriation bills which would make tax which prolonged the Great Depression. reduction impossible.” and bad. I want to discuss one of each. Rex Tugwell, an architect of FDR’s policies, In both cases, their policies changed the Where were the results of these policies? wrote: “We didn’t admit it at the time, but direction of the entire nation, affecting the It is no coincidence that the Harding/ practically the whole New Deal was ex- lives of millions of Americans. Coolidge era was one of the most prosper- trapolated from programs Hoover started.” Silent Cal ous in U.S. history. Gross National Prod- uct, wages, profits, productivity and the Election time Calvin Coolidge was Vice President overall standard of living rose substantially. The United States is not electing a presi- under Warren G. Harding, who became Although he was quite popular and faced dent this year, but hundreds of other im- President in 1921. no term limits, Coolidge refused to run portant offices will be on the ballot Nov. 2. At that time, the United States was in a for re-election in 1928. Today, it is rare to When evaluating a candidate for public deep depression. Unemployment was at find any politician who wishes to self-limit office, I ask a simple question:Does this 20 percent, taxes were high and federal his time in office. candidate support economic freedom? debt was ballooning. Cal’s successor Economic freedom does not “belong” to Harding insisted on cutting taxes, reducing any political party. After all, both Coolidge When Coolidge decided to step down, the national debt and cutting the federal and Hoover were Republicans. budget (the opposite of what his predeces- Herbert Hoover – who was Secretary Candidates of any party who believe we sor, Woodrow Wilson, had done). of Commerce for both Harding and Coolidge – secured their party’s nomina- need bigger government, more regula- Following Harding’s tion and went on to win the presidency. tions, higher taxes, increased spending and sudden death in 1923, borrowing, and more centralized decision- Hoover served just one term in office. Coolidge wisely chose making are threats to economic freedom. not only to maintain During those four years he essentially Like Hoover, their policies leave all of us – many of those policies, reversed the course of federal policy. especially the poor – much worse off. but to extend them. Hoover pushed for higher taxes and farm Candidates who support economic free- In his first address to subsidies, and proposed costly pension dom realize our government is already too Congress, Coolidge entitlements. He also signed the infa- big and intrusive, and is spending, borrow- called for further tax mous Smoot-Hawley tariff bill, a protec- cuts, fewer subsidies tionist policy that helped cause global ing, taxing and controlling too much. and avoidance of for- economic depression. They support a strong and efficient eign entanglements. Under Hoover, federal spending roughly government, but one that operates within “Perhaps the most doubled and personal income tax rates strict Constitutional limits and in the best important work that this session of the jumped from 25 percent to 63 percent. long-term interests of society. Congress can do,” Coolidge said, “is to He raised corporate taxes, too, and If you are concerned about creating jobs, continue a policy of economy and fur- doubled the estate tax. growing our economy and enhancing ther reduce the cost of government.” Hoover also pressured business leaders to our quality of life, then you need to be Coolidge had a deep understanding of keep wages artificially high, contributing concerned about electing candidates that the need to limit government growth. to massive unemployment. support economic freedom. His belief in property rights was reflected By the time he left office, the U.S. This is true everywhere and at all times, not in his commitment to cutting taxes. economy was in a shambles and the just in the United States this November. www.kochind.com/viewpoint/ 8