Feb 7, 2021
Last time I wrote was three months ago, but I have my New Years Resolution to write every week. So here’s a list of books that I have read in January and my own reviews along with snippets I found interesting from the books.
Kochland
Kochland is a fairly thick book outlining the ups and downs of Koch family and company. The author, Christoper Leonard, interviewed a lot of former or current employees to peek into the Koch Industries. Koch Industries is the largest private company in the United States in 2015. To give a sense of the capital the company holds, Charles and David Koch were both in the first 10 in Forbes Billionaires in 2018.
The story started from Fred Koch. Fred created the Wood River Oil and Refining Company in 1940. Fred is the father of four boys - Frederick R., Charles, David and Bill. Fred cared much about intelligence, hard work ethic, integrity and drive, and these shaped the Koch Industries in various ways. Not long after Fred passed away, Frederick R. and Bill created a stir in family drama and their stakes were bought out by Charles and David. Charles is an engineer. He loves coming up with a hypothesis, and then testing the hypothesis against the hard rocks of reality until it is proven true. He loathes to be under the lens and always wanted high levels of securities and privacy. David, on the other hand, loves being in the public under the spotlight. He goes to gallery openings and celebrations in New York.
Charles Koch becomes enamored with Austrian economists and philosophers like Ludwig von Mises and Friedrich Hayek. Hayek believes well-intentioned state actions ended up causing far more human suffering than the market-based ills that they were meant to correct. Here’s one of the examples listed in the book:
Policy of rent control, which was big in Hayek’s hometown of Vienna. Politicians put a cap on rent prices to help people who rented homes and apartments. But Hayek described a long list of unintended consequences. The controls made it unprofitable for landlords to reinvest their cash in money-losing apartments, for example, so those apartments devolved into squalor. Because there was no incentive to build new apartment buildings, housing shortages became perpetual. Big families were stuck in small apartments because they couldn’t afford to move out of their rent-controlled dwellings. Hayek said this proved a simple point: cutting one thread in the tapestry of a free market—even with the goal of helping people—only unraveled other parts of the tapestry.
Hayek is almost religious in the market that the market is more important, more beneficial and more democratic. Everyone's demand will enter the market with a price, and the market also tags a price on what they have to offer (like their labor). I have never really understood libertarian, but I resonate with this market philosophy to some degree:
Laws were static; the world was fluid. Only the market could respond to the ways the world rapidly changed, Hayek believed.
Charles too believed this. These thought stones have greatly shaped Charles's principles and strategy of the company. Later years, Charles Koch becomes a libertarian believing in capitalism and played a significant position in American politics.
Coming back to the Kochland, Koch Oil is the single largest purchaser of crude oil in 1989. The book started with a court case of Koch Industries involved in stealing crude oil. Gaugers, employees of Koch Industries, repetitively report taking less oil from tanks than they actually delivered. They were never "short"; they are pressured to be always "long". Some of these oil are retrieved from Native American regions and programs. "Cutting the top" means guagers and Koch Industries are getting significant free chunks of oil.
Charles Koch embraced continuous improvement philosophy developed by J. Edward Deming. Charles continues to expand the Koch empire. One practice was squeezing as much petrochemical out of the crude without wasting it in evaporation through technology invention. Koch Industries found way to process "sour" crude oil from Canada. Sour oil contains high amounts of sulfur which needs to be processed out of the oil to extract gasoline. In contrast, Texas or Saudi Arabia oil are "sweet" crude because they have minimal sulfur. Many oil refineries competed on getting sweet oil, while Koch bought Pine Bend and installed expensive equipment to process sour oil. As sour oil demand dropped, prices dropped, and Pine Bend became the cash cow of Koch providing early money to continually invest. By 1982, Koch Industries profitted 308 million. Charles strictly invest with cash and not with loans. Building up cash gives Koch the ability to catch opportunities.
Charles is a philosopher and absolute authority in the company. Opportunism is one of the key principles he installed in the company. Every employee is an entrepreneur, they need to keep their eyes open for new deals on the horizon. Continuous Improvement is also applied throughout the company. Charles creates Market - Based Management, MSM, which he believes to ultimate solution of running a prosperous business. MSM is a mental model of how Koch Industries operate.
Koch Industries continue to expand on oil refineries and pipelines. Koch Industries also participated in the fracking boom. The Koch Industries shadedly play in environment laws, through lobbyists and senator elections, etc.; All to make sure the company grow to prosper. Koch Industries had its way of breaking down worker strikes, labor unions and exploiting workers benefits and pays. In the past decades, Koch Industries expanded to the industry of nitro-fertilizer and agriculture. Koch Industries also started trading commodity future operations. In 2005, Koch acquired papermaker company, Georgia - Pacific. The expansion didn't stop but multiplied more. In 2012, they bought Guardian, a glassmaker company. In 2013, they bought molex manufacturing electronic chips and sensors, and also acquired American Greetings and took it private. The legacy of Koch Industries continues in the broad horizon.
Koch's fight against climate change, calling it untrue, isn't new, but previous the battle was on government spending researches and regulations. I think we're witnessing an inflection point as renewable energy cost, such as solar power panels, is cheap enough to be widely used in 2020. The battle will come forward into the market. It would be very interesting to follow up and see how a market and capitalist believer Koch will act.
7 Habits of Effective People
At the beginning of the year, I thought I transformed transcendently and spiritually, I attribute all the internal and external changes to the book of 7 Habits of Effective People. After reading the book, I also started handwriting thoughts and inspirations on a notebook. The experience brought me back to the student days. The same principles bang my head a couple times until they settle in dust and deep within me.
Humility is the mother of all virtues. Humility says we are not in control. Principles are in control, therefore, we submit ourselves to principles.
The book lays out the process of curating principles and guidelines of what should become principles and what should not. Principles are the north star that guides us through darkness in the wild.
Humans are born with dependence. We cannot live without our providers feeding us and bringing us up. But to find ourselves and set sail to a life we want, we must first gain independence. The author suggests to follow the 3 habits. First, be proactive to act and not act upon. This is a first step to liberty by knowing that we have freewill. Second, begin with the end in mind. If I have thought to achieve something, I need to align my daily routines and habits to act accordingly. Third, put first things first. Too many things need to be done, but that's not possible. Let’s only focus on the important things that need to be done first. Focus on important and urgent work, as well as non-urgent and important work. Deprioritize work that seems urgent but less important in nature. Following the three rules, we are able to gain independence of an individual.
Independence might be enough if we live alone, but a vast majority of us don't. We are social beings. In order to achieve what we want, we need to be interdependence. A prerequisite of becoming interdependence is to be independence. Everyone of us is a small node in this interconnected web of relationships. Character is the foundation and anchor. We must have strength and capacity to not been overkilled or influenced too much. With good anchors, we can then work together to achieve public victory. Here are three habits that enables to do so. First, think win-win, set up an abundance mentality. There are plenty of resources and opportunities, no one needs to lose for us to win. Second, seek to understand. Every individual or group should be cared and listened. Third, synergy. Build a ship with principle-centered leadership. "If you want to go fast, go alone. If you want to go far, go together." The sum is always greater than an individual.
The last habit: sharpen the saw. All of the six previously mentioned habits need to be continuously attended and improved. With all habits sharpened, we can solidify our characters and principles to guide us through this life. Highly recommend this book. Stephen paints out life examples and brushes out possibilities in details. The book is quite interactive; readers can participate and join along to find out the best chosen path. You only live once.
The Making of a Manager
Written by Julie Zhou, the Facebook VP of Product Design who shared her fears and growth as a manager. A manager's main job is to get high multiplier effect on collective outcomes. In the continuous facing challenges, what are the things managers should be looking out for? How can a manager become a good leader? Most people hate processes, but they are sometimes important. How can we identify and set up a process that benefits the team? What are the strategies to maximize the team outcome? Julie's words are honest and share her experiences and approaches to hiring, defining process, setting clear expectations and giving feedbacks. This is a good book particularly for new managers. The book includes a lot of commonly used phrases or sentence construction examples. Also, an interesting categorization that I didn't think about before:
Apprentice: Team is growing, need a new manager to report to the current manager
Pioneer: Founding member of a group
New Boss: Coming in to manage an established team
Successor: Manager is leaving, need a new manager to take over
Overall, this is a book with a lot of hype and I had high expectations for. I felt a lot of information is repetition from what I already know working at the same company, so I didn't draw as much value. Nevertheless, it is a good book for anyone who's interested in becoming better at leading something bigger than oneself.
Shoe Dog
Phil Knight, the author and the founder of Nike wrote this memoir of his journey in the recent days. Phil is a huge fan of track and field, running and winning. After graduating from Business School in Stanford, Phil traveled the world and stopped by Japan to meet representatives from Onitsuka Tiger. In 1964, Phil had no materialized company, so he borrowed 50 dollars from his dad and made up a company, called the Blue Ribbon and started contracts for importing Tiger sneakers. Why Blue Ribbon? These were the awards he hanged in his room assembling all the victories he won on track. Great running sneakers were revolutionary at the time. Phil, often called Buck in the book, had admiration towards Bill Bowerman who was a cofounder of Blue Rubbin . Bill is a track and field coach who is obsessed with cutting shoes up and experimenting with different soles. As the business relationships with Onitsuka deteriorate, Nike was born with a new and different branding and shoes manufactured and designed by Phil's team. Nike is the Greek goddess of victory, and Swoosh is the sound of motion. In 1972, Phil and Bill started the Nike together and went through all sorts of battlegrounds without bullet in business.
Here are a few quotes that stood out to me:
Woodwell's mother, the mother of an early employee in the company, lended eight thousand dollars and asked "If you can’t trust the company your son works for, who can you trust?" Have faith in yourself and have faith in faith is an attitude that brings assertion and leaves no hesitation in living. Don’t stop is the motto.
Hard work is critical, a good team is essential, brains and determination are invaluable, but luck may decide the outcome. Some people might not call it luck. They might call it Tao, or Logos, or Jñāna, or Dharma. Or Spirit. Or God." Put it this way. The harder you work, the better your Tao.
The entire story and playback of Buck’s life struck me heavily. I remember when Buck came home from traveling the world, his mother welcomes him home and gave a long searching look "You seem more... worldly". Many things and concepts exist different forms in various cultures and but they tell all the same. The vaster we see, the more we reset back to the beginner's mind, and see many possibilities. It is the Zen mind, the pure start, and it is Day One. With endless possibilities,
Let everyone else call your idea crazy . . . just keep going. Don’t stop. Don’t even think about stopping until you get there, and don’t give much thought to where “there” is. Whatever comes, just don’t stop.