The Wisdom of Charles Koch

Posted on September 18, 2014 by Robert Ringer


Here’s a great excerpt from a book I’m reading that I think you’ll want to pay close attention to:

This brief company history may leave the impression that our experience has been one of ever-improving results, with one success after another, each building on the one before. Nothing could be further from the truth. Progress, whether in business, an economy or science, comes through experimentation and failure. Given that a market economy is an experimental discovery process, business failures are inevitable and any attempt to eliminate them only insures overall failure. The key is to recognize when we are experimenting and limit the bet accordingly.

The reason you should think about the above words long and hard is because they were written by a man who has built his business into the second largest (some say the largest) and most profitable privately held company in America. The company I’m talking about is Koch Industries, which most people have never even heard of. The company has annual revenues of $115 billion —more than most giant public companies that are household names.

I suppose at one time, I, too, was one of those people who assumed that a huge corporation such as Koch Industries had experienced nothing but success, with each success “building on the one before.” After all, how many failures can you possibly have on your way to building a company with $115 billion in revenues?

Answer: Plenty. In his book The Science of Success, Charles Koch describes one misstep after another that he and his team have made over the past forty years, mistakes that cost his company tens of millions of dollars. But mistakes and losses are part and parcel to the free-market, entrepreneurial model upon which Koch Industries has been built.

This entrepreneurial model requires Koch Industries to go into each new venture as an experiment. If the experiment appears to be working, the company increases its bet as it goes along. If it isn’t working, it cuts its losses and moves on.

Koch’s main point is that failure is not a bad thing. It’s actually is a good thing, so long as it does not become a self-fulfilling prophecy. Failure is, in fact, the supreme teacher, and action is the matriculation fee that allows you to enroll in the supreme teacher’s class.

Most people harbor such a fear of failure that they can’t bring themselves to supply the action needed to participate in the class. There can be many reasons for this fear, and one that I believe plays a more prominent role than most people might suspect is the stigma attached to failure.Society tends to treat failure with disdain, and most people harbor a great fear of being frowned upon by the conventional-wisdom types who make up the bulk of the business-world population.

I doubt that one in a hundred people believe that “business failures are inevitable, and any attempt to eliminate them only insures overall failure.” But these are not the words of a Harvard Business School professor. Again, they were written by Charles Koch himself, a forty-year veteran of the entrepreneurial wars, who sits at the top of the food chain.

It’s important to understand that Koch is not telling us that we might fail. He’s telling us that we must fail, and that if we try to eliminate failure, we are guaranteed to experience overall failure — as in long-term failure. Quite an interesting paradox.

The next time you feel a fear of failure coming over you, remember the words of Charles Koch and don’t allow the potential stigma of failure to cause you to be timid. When someone with Koch’s track record speaks, wise folks listen. How wrong can a guy worth $53 billion be?

Robert Ringer

Robert Ringer is an American icon whose unique insights into life have helped millions of readers worldwide. He is also the author of two New York Times #1 bestselling books, both of which have been listed by The New York Times among the 15 best-selling motivational books of all time.