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The Libertarian in Me
European Straits #137
David Koch passed away recently. You may know him as one of the two Koch brothers—that ominous duo of wealthy donors who have been such a mighty force in US conservative politics. They bankrolled the Tea Party and helped fund the effort that led to the Citizens United decision by the Supreme Court, one that effectively removed any practical limit to what wealthy donors and corporations can spend to try and influence electoral outcomes. They then used this unprecedented room to maneuver against the Obama administration, preventing Obama from delivering most of what he had promised.
Yet recently I’ve been struck by how incomplete this picture was. It happened in two steps. The first was my listening to a podcast featuring Marc Andreessen and Charles Koch (David's big brother) on The Business of Continual Change. It’s VERY interesting—and it barely covers politics! Instead, it’s all about Koch Industries, the company run by the brothers (mostly Charles, actually), how this organization became the second largest private company in the US, and the underlying ideas that made it all possible.
But one hook is never enough for me to decide to dig deeper into a given topic. I had to wait for something else to trigger my interest and lead me to read much more about those infamous Koch brothers, and that event was the passing away of David Koch. David’s death was predictably followed by many articles about the singular story of the Koch family (there are four brothers in total) and their endeavors in both business and politics. This is how I spotted the book Kochland, which I’m currently reading. And so it’s all led to a good opportunity for me to share a few insights about Charles Koch, what makes him tick, and how I (unexpectedly) relate to that 👇.
Meet my new friend Charles Koch
1/ There are few non-fiction books that I have actually read from the first to the last page, but Friedrich Hayek’s Law, Legislation and Liberty is one of them. The trivial reason was a school assignment: at Sciences Po, I had to write an essay about it for a class taught by the philosopher Luc Foisneau. And the year being 2000, you couldn’t find all those online resources that would have spared me the burden of actually reading the book. So I read the three thick volumes (in French), and I must say I was blown away! I came into it with a negative perception of Hayek, the intellectual father of neoliberalism and an idol of the conservative right. But I was deeply impressed by his erudition and the strength of his argument. In many respects, this book turned me into much more of a classical liberal.
2/ Later, I discovered that Hayek’s thinking could help back up the idea of the “multitude”, which is at the core of my work on understanding the digital economy. In 1945, he published his landmark article The Use of Knowledge in Society in The American Economic Review. As summed up on Wikipedia, Hayek’s argument is that “a centrally planned economy could never match the efficiency of the open market because what is known by a single agent is only a small fraction of the sum total of knowledge held by all members of society. A decentralized economy thus complements the dispersed nature of information spread throughout society.” And this, I must say, is very much in line with my deeply entrenched idea that in today’s economy there is more power outside than inside organizations. Only a multitude of networked individuals is able to make use of most available information and derive value from it.
3/ Friedrich Hayek is also a favorite of Charles Koch. Indeed, Koch is a staunch libertarian: for him, the only goal of the state should be to guarantee property rights, and all the rest is socialism (a conviction he inherited from his father). But when you ask him what books he recommends, he avoids the embarrassment of mentioning Ayn Rand and goes with impeccable intellectual references that include Austrian economists such as Hayek and Ludwig von Mises, and respected social scientists and philosophers such as Karl Popper and Thomas Kuhn. This, more than anything, is what caught my attention in that podcast last year. Such an intellectual heritage is not what you would expect from a conservative billionaire and Tea Party financier operating from Wichita, Kansas.
4/ And so I kind of like Charles Koch. He’s modest, low-key, and grounded. He’s intellectually curious. He has strong convictions and an impressive record as a business leader—which demonstrates both a taste for strategic thinking and a sense of pragmatic flexibility. “Permissionless innovation”, a concept he advocates, is echoed in my writings, notably this article: Regulating the Trial-and-Error Economy. What’s more, in recent years he has been pursuing goals that I regard much more favorably than his previous ones of destroying the Obama administration and crippling American democracy forever. Those include scaling back occupational licensing, opposing Donald Trump’s policies on immigration and trade, and working with George Soros to put an end to “endless war”.
5/ The question of climate change is an interesting illustration. If I’m to believe what he said in this interview, Charles Koch is not a climate denier. On the contrary, he acknowledges that global warming is indeed happening and that human activity plays a critical role in that regard. What he disagrees with is our collective response to this global challenge. To make a long story short: he doesn’t believe in nation states signing the Paris Agreement, governments imposing regulations to curb carbon emissions, and shaping a market to trade polluting rights. What he counts on instead is innovation: for him, it’s thanks to scientists and entrepreneurs that we will come up with a new mode of production and consumption that preserves our planet. My own position is somewhere in between, as can be seen or here. But considering all the positive things that are happening in the tech industry and the financial services industry in reaction to global warming, can you really say that Koch’s argument is flawed?
6/ Healthcare is a different matter. It’s probably the most broken part of the US economy these days, as well as one of the hottest topics on the campaign trail. But I have yet to find an interview in which Charles Koch is confronted with tough questions about this topic that literally dragged him into the political arena: Does it make economic sense that so many Americans can’t afford healthcare? Is it sustainable for healthcare to eat such a large proportion of the US economy? Doesn’t a decreasing life expectancy suggest that America is headed in the wrong direction? Were he faced with such questions, Koch would likely denounce the “cronyism” and “corporate welfare” that have rendered the US healthcare industry so predatory and ineffective. But at the same time, he would still insist that the government shouldn’t intervene in that field, and then would hastily move to some other topic.
7/ Another question I’d like to pose Charles Koch regards the contextual rationality of his ideas. I just came out as a classical liberal bending toward libertarianism. But there’s also a Marxist side in me, as I’m a big fan of the idea of “historical materialism”: I think that history is more the result of material conditions and power relations than of ideas. In other words, I think that ideas rise and fall depending on the techno-economic conditions of the day. The end of the 19th century was the age of steel and heavy engineering, and classical liberalism was the perfect ideology for the time: this is why this period was a boon for laissez-faire. Then it all stopped working (in 1929 to be precise), and suddenly the idea of state intervention, which was far from new, became relevant again. Eventually the state ceased to deliver in the specific techno-economic context of the 1970s, which provided Hayek and his disciples with an opportunity to make their ideas thrive. And so Charles Koch’s edge is merely a coincidence. It’s just that with his libertarian ideology and infinite wealth, he was in the right place at the right time.
8/ But now that ideological edge is disappearing. While Charles Koch may appeal to me and the libertarian fringe in Silicon Valley, his core ideas are only endorsed by a tiny minority. Earlier this year I was in the US listening to Jerry Taylor, the CEO of the left-leaning libertarian Niskanen Center, objecting to the idea that the Koch brothers were powerful. They may be immensely rich and well connected, Jerry said, but they’re also fundamentally weak, which is why they had to seal this unholy alliance with bigots, racists, and religious fanatics ready to excite the worst instincts in a disgruntled American electorate.
9/ It’s ironic, because the whole situation is Hayek coming back with a vengeance. You can’t plan a libertarian takeover of the US political system any more than you can plan a policy to solve any social problem from the top down. In many respects, Koch’s fraying of the political market that is US democracy has been as flawed as the government interference with the market that he so vehemently denounces. His reward is Donald Trump, an avowed enemy, just like the reward of state overreach in central planning is always the wiping out of economic dynamism and innovation. Instead of helping elect bigots and crazies, Koch would probably have been better off letting the voters decide for themselves. And his reputation will be determined not just by who he is but by the very bad company he’s been keeping in conservative politics.
10/ What I genuinely admire, in the end, is what Charles Koch has made of Koch Industries. I have a trusted technique to learn about complex business topics: I buy what my cofounder Oussama Ammar calls a ‘communist’ book. What I like is that under the pretext of a harsh critique of capitalism, such a book will get to the bottom of what exactly the business world is about. Reading ‘communist’ books and articles is how I first learned about tax havens, private equity, and financial services.
To be fair, Kochland is hardly a ‘communist’ book, as the author, Christopher Leonard, is a respected business journalist. The book itself is mostly about how Koch designed his personal approach to running a business, and how this has made it possible to grow this giant conglomerate at the crossroads of energy, trading, heavy engineering, and consumer goods. But I know from this podcast that Leonard is still rather critical of the Koch business empire. And so I expect to learn a lot about its inner workings, and I’ll make sure to share more in future issues 🤗.
📖 My wife Laetitia’s Du Labeur à l’ouvrage will be released in exactly two weeks. We’re hosting an event at The Family in Paris (in French 🇫🇷) to discuss the history of work and the bright future of craftsmanship. If you’re around on September 18th, you can register here: Passer du labeur à l’ouvrage avec Laetitia Vitaud.
🇩🇪 The Family is launching a series of hands-on workshops in Berlin to take advantage of all the operational startup knowledge that the city has to offer. First up is SEO, where a few hours in the room with the right people can make all the difference. Early-bird tickets are available through the end of the week, a deal you can take advantage of right here: SEO: HANDS ON WORKSHOP w/ Nitin Manchanda, Global Head of SEO at Omio.
👩 The second session of Goldup Paris is starting at the end of the month, helping another batch of women to launch their own online businesses. If you know someone who is just aching to take the leap toward becoming her own boss, do send her the link: www.goldup.co.
Here’s more about the Koch family, Koch Industries, and the ideas that underlie it all:
Hayek: The Back Story (Jennifer Schuessler, The New York Times, July 2010)
Hayek, Friedman, and the Illusions of Conservative Economics (Robert M. Solow, The New Republic, November 2012)
Koch vs. Koch: The Brutal Battle That Tore Apart America’s Most Powerful Family (Daniel Schulman, Mother Jones, May 2014)
How Viennese Culture Shapes Austrian Economics (Erwin Dekker, The Vienna Circle, July 2016)
How the West (and the Rest) Got Rich (Deirdre N. McCloskey, The Wall Street Journal, May 2017)
Why Hate the Koch Brothers? (Part 2) (podcast—Stephen J. Dubner, Freakonomics Radio, June 2017)
How Libertarian Democracy Skepticism Infected the American Right (Will Wilkinson, Niskanen Center, November 2017)
The Business of Continual Change (podcast—Charles Koch and Marc Andreessen, a16z, February 2018)
The Bad Idea That Keeps on Giving (Scott Timberg, The Los Angeles Review of Books, July 2018)
The Alternative to Ideology (Jerry Taylor, Niskanen Center, October 2018)
The Next Koch Doesn’t Like Politics (Maggie Severns, Politico, December 2018)
Koch Industries Looks a Lot Like Amazon (Matt Stoller, BIG, August 2019)
How David Koch’s 1980 Fantasy Became America’s Current Reality (Adam Eichen, The New Republic, August 2019)
Oligarch of the Month: Charles Koch (Alexander Sammon, The New Republic, August 2019)
Warm regards (from Paris, France),