A Liquid Framework – Sounds Impossible I Know

Written by Lance Larsen on December 2nd, 2009

Charles Koch has done what we as Koch Scholars have not yet begun to do this semester–systematize a way to think about how to apply the principles that we defend so vigorously every Wednesday night.  I don’t think that Koch has really created anything other than a finite approach to a problem that has an infinite number of angles, all of which are shifting and changing.  Often in our discussion we will approach what appears to me a moment of arrival, dare I say even agreement, only to find that the next person on the speaking list (usually Josh or Ben) has a irrefutable (and damning) example to the contrary.  What Koch has done, and it is really quite brilliant, is built a liquid framework for addressing the paradox of free principles.  The paradox of free principles is that they have to operate within rigid ones.  Koch does a very nice job of declaring what principles should be fixed (equally applied rule of law and well established and defended property rights), and offering way to approach everything else.  

One particularly impressive accomplishment of The Science of Success is that Charles Koch very effectively champions free market principles.  He explains them as he goes in such a way that virtually any reader would be able to comprehend them.  Then he puts them into the context of the business environment, solidifying their value to nearly any reader from any background.  

I don’t think that Koch has missed anything, but by no means do I think that The Science of Success is definitive or universal.  He has simply found the way to organize his business to support the principles that he has found to be profitable and sustainable.  A person with a different set of industries, or in a different situation all together would apply them differently.  

Value, value, value, that is what it’s all about!

 

Thanks to everyone for a great semester!  Especially Randy, Dr. Fawson, Diana, and Teri for all their efforts!

 

The Perfect Finale

Written by Aaron Davis on December 2nd, 2009

One of my biggest challenges throught the semester is that many of the readings seems to make a great deal of sense in theory, but I often times failed to see how the principles addressed could be applied in everyday settings.  “The Science of Success” seemed to summaraze many of the concepts addresses, and how they have been and are being applied in Koch Industries.  I don’t find the book to be lacking of more insights in the context of the foundational ideas established in Koch these past months. Charles Koch seems extremely skilled at evaluating the strength of his company and instituting a plan to best utilize those assets and talents at his disposal.

This book seems to be the perfect conclusion to the last few months because it exemplifies that knowledge is not an end but a means.  At best knowledge can only be the introduction.  Knowing something can only empower an individual as long as they are able to find the right way to apply the thing they know.  One thing I’ve gained over the semester is knowledge of how markets function, but it’s not enough to simply know how a free market works and operates.  If that’s the only step taken one might conclude that they are much more cruel and unforgiving than previously imagined, and therein lies the temptation to find ways to control or ‘tame’ the spontaneous order and creative destruction.  In this sense the free market becomes an obstacle to be navigated through.  KII’s approach has been exemplary.  Knowing became a tool for Koch, and rather than fighting against the current a system was organized that would move with the current.  MBM, the virtues sought out and talents fostered were a reaction to the demands of maintaining innovation and competitiveness.
 

Principles and Practice

Written by Marc Neilsen on December 2nd, 2009

I really enjoyed Charles Koch’s The Science of Success for a number of reasons, but the book’s most important strength was the unification of both principle and practice. Throughout the semester, we have poured over philosophical concepts and attempted to interpret their practical significance. What are the real world consequences of this idea? How can we integrate this theory into our own lives? This seemed to be one of the most important aspects of my Koch Scholars experience. After all, what is the point of knowing something if it doesn’t have any application?

The Science of Success integrates basic principles into a real world situation through the development of MBM (Market-Based Management). Of course MBM isn’t an automatic “silver bullet” to any problem in any society, but the fundamental ideals which shapes MBM can be understood and utilized by practically any society or organization.

Recently while in a class devoted to Middle Eastern politics, we were discussing the possibility of establishing free markets in the Middle East. As was realized in Iraq early on during the American occupation, capitalism as we understand it, often clashes with the local culture of another society. Therefore, attempts to truly liberalize Middle Eastern markets have been incredibly challenging. Nevertheless, what is often misunderstood is that the principles which contribute to our conception of capitalism, are almost universal. Self-interest and incentives are two tools, for example, which are commonly found in any society across the globe. The object is to utilize such principles in a cultural context (i.e. China’s slow move towards free markets).

The Science of Success seems to support such a notion. Principles should be universal and practically utilized. And whether it is the entrepreneur, the employer, the employee, the politician, or the every-day citizen, the bond between essential principles and their practice can lead to great accomplishments and lasting value.

 

Liberty Creates Greatness

Written by Brent Jacobsen on December 2nd, 2009

As a former business owner, I have read many books on how to make your business “successful”.  It’s disappointing to me now that Mr. Koch’s book was not one that I had previously come across.  As I got further into the book, what struck me most was that the main premise of the book didn’t center around “how to be successful”, rather how to create an environment where success is the natural outcome.

I don’t believe Mr. Koch misses anything in his book.  He discusses at length the main shortcoming of his methodology – the false convert.  His ideology can only be successful in an organization where the participants are “true believers” (please forgive my religious parallels, but I think they are very appropriate) and don’t just go about the motions, but actually believe in the ideology, and act accordingly.  This is the only way his approach can (and has) succeed(ed).

The “science of liberty” is absolutely fundamental to the “science of success”, but once again, only as a belief system.  Giving lip service to liberty only helps politicians, and only in the short term.  Long-term prosperity is the result of a system that cultivates the belief in liberty and trusts in the inherent potential and greatness of mankind to create a better society.

Charles Koch found that by following the same principles that created the greatest and wealthiest nation on earth, he could create one of the greatest and wealthiest companies on earth.  If those two examples alone aren’t powerful enough to convince people of the power of liberty…

 

Hammer Problems

Written by Ben Siler on December 2nd, 2009

I don’t think Koch himself would argue that he has “really created a generalized model of “success” that can be applied to societies, organizations and individuals.” He notes that generalized models come up against the hammer problem, which is that “to a person with only a hammer and no understanding, every problem looks like a nail” (39). It doesn’t seem that Koch is trying to provide a Guaranteed Recipe for Success®; rather, he’s trying to create general principles that can be applied to various situations. Of course, everyone has different types and levels of talent, and some people will probably never learn to apply Koch’s principles in a way that creates success, even if they really want to.

This likely failure of individuals raises an interesting question: what about the C employees? Koch seems certain that someone who can’t perform in his organization can find a better fit elsewhere (“Inability to create value at one company does not mean the same will be true elsewhere. Employees may be much more successful in another organization that has needs or a culture better suited to their talents and values”), and overall, firing the C employees will probably lead to a more productive society. It seems to me, however, that sometimes people may be less talented in general than others. I worry about these people if every company practices Koch-style pruning. On the other hand, few things are more frustrating than incompetent coworkers. Overall, the problem of C employees leads me to question whether Koch’s plan is really practical for a broad range of businesses. As Koch says, C employees “may be in the wrong role, meaning they could contribute at a B or even an A level if they were in a role that better leveraged their comparative advantages” (90). I doubt that all managers have the ability to perceive what roles fit what people best, or that all people act in the enlightened self-interest mode of rationality all the time. It seems that Koch has a good plan if you can rock it, but many people probably can’t.

-Ben

 

A Great Finish

Written by Krista Eames on December 2nd, 2009

Like many other scholars I too read this book over the summer, and it was funny to see how much more poignant his points were when I read them in context with all of the other readings. He did a beautiful job intermixing many of the core discussions focused on in our readings. On paper it looks like a great recipe for a happy productive organization.

One of my favorite aspects was the diversity and change mentioned in his hiring system, the way all of the workers and their positions will be under constant evaluation. This is an interesting tactic to keep your employees motivated and working to their potential. I just wonder what kind of person will ever be truly fulfilled by being the mail carrier. There are certain positions I feel that nobody has a talent for but still need to be filled. I also wonder how much of an uproar would be created when one of your employees believes they deserve a position where they have been constantly overlooked. By taking away the aspect of seniority I think you are also making promotion even harder for soft spoken or shy employees. It really puts an emphasis back on the necessity of really talented leaders, the true key to any organization.

I have never been part of a dynamic organization and it makes me curious at whether it would give me a sense of freedom or instability.

 

Universal liberty

Written by Josie Olsen on December 2nd, 2009

In The Science of Success, Charles Koch does an excellent job at providing a systematic view of MBM, the foundation of his industry. The book clearly and conisely teaches effective groundwork to be laid for any organization. Yet Charles Koch acknowledges that “every organization has its own culture,” (p 79) meaning every business and every country has too wide an array of variables to enforce a general guideline unless that general guideline was to in fact avoid formulaic status quos. Has Koch really created a generlized model? Perhaps to its greatest potential extent, yes. But to create a generalized model of “success” that can be applied to societies, organizations, and individuals is wishful thinking.

Take Koch’s own organization into account; his company promotes devolved decision making and entreprenuership.   However, when oil spills in six states in 2000 led to record civil fines, corporate headquarters seized direct control over their environmental policies rather than letting individual directors explore the market to find solutions and inspire innovation. This demonstrates that the principles put forth in his book cannot always be maintained, even in his own ideals through his company.  Organizations, countries, and people are distinctive. Universal liberty may not always be broadly applied.


 

Innovation is Key to Happiness

Written by Holly Anderson on December 1st, 2009

I appreciated Mr. Koch’s book because it laid out the principles of successful businesses in terms that we can all understand.  He uses examples through history to support his theories of economic freedom within a coorporation.  I enjoyed how Koch defined the science of liberty that it is more than just arguing about politics or views, that it is physical, tangible, and important for us to grasp.  An aspect that I liked about this course is that it taught us how to critically pull apart everything that we rely on in society.  Once we think we are safe in our biases and assumptions, we realize that we are not.  Often it feels as though the media is trying to ‘brainwash’ us to believe in a particular view.  We might be caught up in the aspect of “working for the man” in a giant coorporation someday, with little creativity.  It can be difficult to seize the large picture of true evolution of democracies when we are so involved in the details of politics and work.  To use an example from Tropical Nature, it can be hard to see the forest for the trees.  One of Koch’s principles that I particularly enjoyed is creativity and innovation.  Innovation is the key to happiness, and when we are stagnant is when unhappiness can come into our lives.  Aristotle came upon this same thought when he said that happiness comes from human action.  I think that Postrel and Koch are absolutely right in that we have to find the dynamism that will lead to the creation of value in our personal lives as well as society as a whole.

To expound on how important Koch’s view of innovation is, I want to continue with Ben’s example of the crystal.  The amazing thing about crystals is not only how exquisite they are, but that there are millions of ways for a crystal to form.  Take a snowflake for example.  Water molecules are able to bond together into intricate lattices that have millions of patterns and beautiful designs.  No two snowflakes are exactly the same.  Yet each water molecule is exactly where it should be to support the snowflake structure.  This has several implications in Charles Koch’s Science of Success.  Like a snowflake, a coorporation needs the contribution at the right time and place from each person’s talents. If the water molecule isn’t capable of supporting the lattice of snowflake, it will be incorporated into another snowflake.  There is a niche for every person and the ability to innovate makes it possible to create beauty and value, and I would even claim virtue in society.

I think one of the most valuable aspects that I have taken away from this course is that there is something deeper than just having a successful business in the science of liberty, it comes to the core of what makes us human.  How can we change so that we can align our choices with our new knowledge?  As Shakespeare said, “We know what we are, but know not what we may be.”

 

Practical Application

Written by Erika Morris on December 1st, 2009

By the end of the semester, I have started to catch myself picking out a common theme throughout the courses I am studying at Utah State. Terrorism can be linked to the amount of liberty a nation has, the reason the United States has expanded and prospered is because of how liberty effects the mind of its citizens, and how nations that lack liberty, fail in in both governmentally and economically. The Science of Success has allowed me to realize that free market principles can be applied in every situation, not just businesses.

What I especially loved about it was the idea that it all comes back to the individual, or the Science of Human Action. Charles Koch explains how people work, which in turn can help to facilitate the best kind o management in any type of organization, not just businesses and just non-profits. All in all, I can see how liberty and the ideals that Charles Koch advocates works in the real world. It really impressed me how much value is placed within each individual. He deals with the reality of diversity and how to harness individual innovation to create his system of Market Based Management. He teaches us how to value the ideas and talents of the individual. Sometimes it is hard not to think of our world as anonymous entities, whether they be businesses, organizations, or governments and forget that there is a common denominator in individual people through which the Science of Success can be applied.

 

Thank You Charles Koch

Written by Josh Light on December 1st, 2009

While working for ZAGG Inc., I made several suggestions to management concerning ways to solve problems in the company or to improve processes. I found thick resistance against many of my ideas, even though they were based upon free market ideals and economic incentives. Overtime I became discouraged and confused because of the cognitive dissonance I was experiencing between what I was told by management and what I was taught about economics. I even began to believe that maybe some of the concepts within economics could not be applied to real management situations.

I was greatly relieved to have discovered many of my suggestions being successfully practiced within Koch Industries. Charles Koch as created a management style that harnesses the power of the free market within a business (genius). This book brilliantly utilizes basic concepts of economics and successfully applies it to management.

Particular aspects of the book that I found especially helpful included how to price products (36,27), how to set priorities (69), the solution to creative destruction in an organization (78), principled entrepreneurship (79), hiring advice (86), partnership advice (92,93), the value of measuring (103), and page after page of management advice (35,36,39,80,133,135).

This book also introduced me to concepts I have never thought of before including the negative drawbacks to going public, the effects of budget caps, and having an exit mechanism for partnerships. I am so thankful to learn this advice through reading rather than experience.

I am honestly going to apply the concepts taught in this book for every business I start in the future. This book has changed my life. Thank you Mr. Koch.